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What Is a Processing Fee?

By Whitney Leigh White
Updated May 16, 2024
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When a person obtains a loan, a credit card, or hires someone to perform some type of service, most times, the person is charged a processing fee. There are many different types of fees, but most are used to pay for paperwork services or other kinds of miscellaneous charges. A fee is usually paid for at the time a person applies for a loan, credit card, or hires someone to perform a service. Even if the person ends up not being approved for the loan or credit card, in most cases, the fee is non-refundable.

A person that applies for a mortgage loan will typically pay processing fees in addition to an application fee. The fee is paid to the person or company that is processing the loan. There are valid reasons as to why a mortgage lender charges this type of fee, especially since much paperwork must be read through, notarized, and verified during the mortgage loan process, but sometimes a mortgage broker charges an unreasonably high fee amount. $500 US Dollars (USD) is the most a person should pay for a mortgage processing fee; however, $300 USD is the most common amount paid. Many times, a mortgage loan fee is perceived as a junk fee; however, due to the extreme amount of work that goes into processing a mortgage, this can be a skewed perception.

Like mortgage loans, auto loans are also accompanied with processing fees. The fees are usually used to pay for identifying trade-in payoffs, verifying personal information, and notary services. Large portions of time, auto loan fees are also used to track lost titles.

Credit card processing fees come in all sorts of amounts. During the application process of a credit card, a person will usually pay a processing an application fee. Credit card fees are also paid for by companies that accept credit card payments. Some retailers will not accept certain types of credit cards because the fee associated with accepting them is too high, which causes the retailer to make little or no profit when accepting the card as payment. Not only are fees associated with credit cards, but they are also linked with debit and prepaid cards.

There are a large number of companies that provide outsourced services. These services often include performing payroll tasks, website design activities, and more. Most companies that perform these services for people or businesses will charge a processing fee. Different outsourcing companies will charge their own fee amounts, so the cost of this type of fee will vary from one company to another.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
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