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Understanding the difference between Bundled and Pass-Through Merchant Arrangements.


Being a business owner is an extremely stressful and busy job. Business owners have to manage or at least be aware of several complicated features of their business including sales, payroll, taxes, inventory, employees, accounting, state and local laws and much more.

Often with so many other important things on a business owner’s mind, the last thing they are thinking about is whether the structure of their credit card processing fees costs them money, However, understanding the way in which your business’s payment processing fees are structured and when that fee structure could be costing you money needs to be on every business owner’s radar. Understanding the difference between the main processing fee arrangements can be helpful in tackling this issue.


There are two main merchant arrangements, bundled fee arrangements and pass through fee arrangement. A bundled fee rate is the combination of a credit card transaction fee and processing fee into a single flat percentage. The benefit of a bundles rate is that it simple to understand as it simplifies the transaction. The drawback to this model is that the fee is based on average ticket price which can be problematic for merchants that have a large range of prices because merchants will end paying much more to process credit card payments for larger ticket items. Bundled fee arrangements are better for businesses with lower ticket items like fast food restaurants.

With a pass-through fee arrangement, the processor reports and assesses all fees separately including the assessment fee, interchange fee, and processor fee. The benefit of this model is that the merchants can see exactly what fees they are paying and to whom. The drawback to the pass-through model for merchants is that individual fees can be increased separately as well. For businesses with larger tickets items pass-through fee arrangements is often the more financially advantageous fee model over the bundled fee arrangement

Business owners need to be educated on what is the best payment structure for their business. By talking with their credit card processor and ensuring the fees are structured in a manner that fits their business needs.

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