If you’re a bricks and mortar shop owner you will probably have a credit card terminal in your store which you use throughout the day to charge your customer’s cards for the amount they spend. At the end of the day you will set the machine to collect together, or batch, all the transactions for the day, which it then sends over the phone line to the bank where you keep your merchant account. As with any service, banks charge a fee for this event, called a batch fee.
With newer systems, batching should happen automatically but either way you need to make sure you batch your transactions at least once a day otherwise you will pay higher fees to Visa or MasterCard, because the likelihood that the cardholder’s account may not have enough funds available increases over time. However if you don’t have any transactions to batch you won’t pay a batching fee.
Your bank will tell you that the batching fee is to pay for the software gateway that makes the batching process work, but it is questionable whether it really is a costly affair to them, or not. Internet sellers are fortunate in the fact that online credit card transactions don’t get batched, so online retailers don’t pay batching fees.
As a retailer it can become rather difficult for you to assess how much in credit card fees you pay whenever you let a customer pay using their card. This makes it difficult to set profit margins on products and it may even be unfair to expect shoppers that pay cash to pay the same price as those who pay using their card. One way to compensate for all these fees is by adding a percentage surcharge to credit card payments, to encourage shoppers to pay in cash. Paying by card is becoming so commonplace that now that you can hardly expect card holders to pay extra, so this probably isn’t an option.
The good news is that batch fees are on the way out. Communications technology has advanced to the extent that credit and debit card transactions now occur in real time; you no longer have to wait until the end of the day to run all the transactions.
This phenomenon first appeared as internet shopping become more popular. When a customer buys goods or services from an online shop and pays with a credit or debit card, the transactions is completed instantly, online business owners do not have to take any action whatsoever to make sure credit card transactions goes through successfully.
Large retailers these days have electronic systems that are incredibly interconnected. Not only is the credit card terminal linked to the checkout till at point of sale, but credit card terminals are now also directly connected to banking networks, so instead of having to dial a number to connect to the bank, the credit card terminal just talks to the bank’s network, to which it is already connected. This can even occur with wireless terminals through the mobile phone network. As you can see, batch fees, if you are still paying them, is a nuisance that is soon to disappear.