Credit Card Payments Systems

IWB Payments offers a smart solution starting at a total cost of only 6.9% - 7.9% of charge volume.
I would say that it is quite expensive. We only pay 2,15% max :rolleyes:

2.15% is a discount rate that is possible for "card-present" merchants only who have their own merchant account and credit card machine. This rate, however, is never achievable if you accept cards from international cardholders, where an "unqualified" rate is almost always charged, and can be almost double. This rate also does not include the cost of the payment gateway, merchant bank fees and reporting, AVS address verification service, etc. This is why these are called "fragmented" costs, since they're reported in bits and pieces, and are rarely transparent. So the total cost is rarely below 5%. Beyond this, merchants need to have good credit, and located in regions which can access good credit card processing.

IWB Payments offers a solution to hostels virtually anywhere in the world. In many countries, it's next to impossible for a hostel to get their own credit card processing. In other countries, it's prohibitively expensive. IWB Payments offers an alternative which is convenient and easier to use. Also, many hostels use HostelTraveler.com (Instant World Booking) for their website's booking engine, and they like the convenience of having all their booking and payment solutions with one provider. There are no other hostel provider that offer this combination of services.

I checked my agreement with bank. We pay 2.15% at most for foreign creditcards, even less for local, no extra fees for terminal or processing. Did not have to prove anything to the bank. So yeah, your rates seem pretty high.
On the other hand I don't say that it is the case everywhere in the world

I pay 2.9% for all of my transactions, and $30 a month for the gateway. Your rates seem pretty high.

Thanks for the dialogue. This is an interesting discussion.
Let's say a hostel has $5000 in credit card proceeds monthly. Your hostel may be $10,000 or even $50,000 in credit card receipts monthly ... we don't know. But, just to pick $5000 as an example. Let's also assume the average discount rate is 2.9%, and gateway fees are $30 / month.

If you are using AVS (address verification), which is a must for fraud prevention, this costs $0.25 per transaction. There are other authorization fees of up to $0.05 per transaction. So, by definition there is a fixed cost of between $0.25 and $0.30 per transaction above the discount rate.

Have you ever had to refund a guest's payment for any reason? You may not be aware that when you refund a customer's payment for any reason, the discount and authorization fees you paid are kept by your credit card company. This is an additional cost of accepting cards. Let's assume you refund only 1.5% of total credit card proceeds.

Using these parameters and the cost you quoted for discount rate and gateway, your actual cost is already as high as 4.2% of credit card proceeds.

Of course, if you do more than $5000 per month in credit cards, the cost is a bit lower. But consider a small operation that is mainly cash, but accepts maybe $2000 in credit cards per month. Their cost is over 5%.

These costs of course do not include the new international charges Visa and Mastercard are levying on international cardholders (these are not included in your quoted discount rate). And, for this cost do you get to accept American Express? What about reserves? Does your credit card company withhold a certain minimum reserve amount before they pay you the proceeds? These are all real issues for hostels, and all add to your cost base.

It is true that IWB Payments (HostelTraveler.com) comes at a higher cost than card-present solutions (i.e., not internet-based transactions). But you don't get integration capability for your website for 2-3% either. Instant World Booking also offers complementary services for full integration of credit-card-capable bookings on a hostel's own website. Accepting credit card bookings on their website is a must for hostels who want to grow their online business.

I thought this was interesting. For people to use the IWB payments, they would have to have internet, which means that they can get access to a providor if they want to. Therefore, it kind of seems unreasonable to think that someone would use a service with such high rates.

There are many locations where access to credit card processing or collection of proceeds internaionally is limited by various reasons, even by law. Morocco and Romania are examples.

Thanks for the information. In keeping with the interests of this forum, why not share what provider you use, since this information would certainly be useful to other hostels. Also why not share the link to your payment page integrated on your website, so readers can view the level of integration in relation to the cost.

HostelTraveler.com will be happy to critique alternative services against our own and list both pros and cons. As we already mentioned, IWB Payents is not the cheapest service available, but offers some unique conveniences.

I think an important outcome of this discussion, and for anyone who reads it, is to raise awareness that the total cost of credit card acceptance is not always transparent.