As time goes by, more people are opting for contactless payments to cash and cheques because they are more advantageous.
For starters, carrying cash with you is risky; you can be mugged or even lose it in other ways. Apart from that, when using cash and cheque to pay, you have to wait in line to complete your purchase. That can be so inconvenient, especially if the queues are too long. These are things you don’t have to worry about with contactless payments.
Your money stays in an online account, so it’s safe, and the transactions are instant, so you won’t have to wait for so long to complete your purchase. You can see why it’s essential for all merchants to offer contactless payments to their customers. There are several ways you can achieve that, and a card swipe service is one of them.
– So what is a card swipe service?
A card swipe service is a payment option that allows customers to pay for their purchases by swiping their debit or credit cards through a swiping machine. But that comes at a cost. Your customer has to pay some amount of money for swiping their card, and you, the merchant, have to pay for accepting the payment. These charges will vary depending on the type of card used and the payment provider.
The big question is how high or how low are these swiping machine charges? And are they worth it?
Read this article to the end to find out.
– Types of Swiping Machine Fees and Charges
If you are planning to implement a payment gateway with EMI options, there are several different types of costs you might have to incur. As stated above, these costs may vary from one transaction to another, depending on the type of card, your payment provider, among other things.
That said; the average amount for swiping machine charges 1.3% and 3.5%. The different types of charges include
1. Merchant Discount Rate (MDR)
MDR is the fee a merchant pays to enable or process card payments. Usually, this ranges between 1% and 3% of the total transaction amount. That means, if you accept a card payment worth INR 20,000, you will have to pay between INR 200 and INR 600. You can negotiate the rate with your service provider before implementing card swiping payments to minimize the cost.
2. Switching Fee
If you own a card, debit, or credit, you might have noticed that they are from several different bodies such as AMEX, Master Card, VISA, etc. You also know that to access these cards, you would have to go through a bank like ICICI, AXIS, SBI, HDFC, and so on. For every card swipe payment, approximately 0.15% – 1% goes to the card-issuing bodies from the banks. That’s what we call a routing fee or switching fee.
3. Interchange Fee
When you swipe a card, some of your money goes from your card’s issuing bank to the merchant’s bank or acquiring bank. And card issuing bodies like Master Card and Visa are the ones who facilitate the process. The issuing banks make their profit by charging some amount of money to the acquiring banks. That’s what we call an interchange fee which comprises a fixed amount plus a percentage of the overall transaction, usually 1.81% for credit cards and 0.3% for debit cards.
The purpose of the interchange fee is to minimize the credit risk and the cost that comes with it. The higher it is, the higher the interchange fee. And that explains why the fee is much lower for debit cards than credit cards; because they are less risky.
Are you planning to buy a swiping machine? Well, there are several questions you need to ask yourself first before you invest? What are the swiping machine charges? How high are they? What about the gain or loss? And most importantly, is it worth it?
The truth is, using a payment gateway with debit card EMI options can be very costly sometimes. But not at all times. It will all depend on your choices.
Make sure you do it right to get the maximum benefits