Key takeaways

  • Credit card processing fees are the costs businesses incur for accepting card payments.
  • These fees include interchange fees paid to the issuing bank, assessment fees paid to card networks, and processor markup fees.
  • Merchants typically pay total processing fees ranging from 1.5% to 3.5% per transaction.
  • Businesses should strive to lower credit card processing fees to improve profit margins, reduce operational costs, and enhance overall financial efficiency.

Whether you run a small online store, an established neighborhood shop, or a large enterprise, credit card processing fees are an unavoidable part of doing business. Understanding credit card processing fees and how to minimize them is essential to maintaining a healthy profit margin.

This guide covers everything you need to know about credit card processing fees, helping you understand what they are and how they work.

What are credit card processing fees?

Credit card processing fees are the costs businesses incur when accepting credit or debit card payments. These fees are charged by the entities involved in processing the transaction, including the payment processor, card networks, and issuing banks. At their core, credit card processing fees are the price you pay for the convenience and security of accepting card payments. 

These fees can be broken down into three main components:

Interchange fees

Interchange fees are the largest portion of credit card processing costs. They are paid to the bank that issued the customer’s credit card and are meant to cover the risks associated with the transaction, such as fraud protection and payment guarantee. These fees vary depending on several factors, including:

  • Type of card: Credit, debit, rewards.
  • Payment method: Swipe, PIN, EMV, NFC.
  • Type of transaction: Online, in-person, keyed-in.
  • Industry: High-risk industries, retail, fuel stations, healthcare, nonprofits.

Assessment fees

Assessment fees are charged by card networks—such as Visa, MasterCard, Discover, and American Express—to cover the cost of maintaining the card network infrastructure and processing transactions. Unlike interchange fees, which go to the issuing bank, assessment fees are paid directly to the card networks. These fees are typically a small percentage of the transaction amount and are non-negotiable.

We cover typical interchange and assessment fees from the major card networks below. 

Payment processor fees

Processor markup fees are the fees your payment processor adds to facilitate the transaction. These fees can vary significantly depending on the processor and its pricing model. Some merchant service providers work with different payment processors and different pricing models.

Common pricing models include:

Interchange-plus pricing is often considered the most transparent and cost-effective model for businesses, especially those with higher transaction volumes. With this pricing model, you pay the actual interchange fee set by the card networks plus a fixed markup determined by your payment processor. While the interchange fee is non-negotiable, the processor’s markup may often be negotiated, especially if you are processing large volumes of transactions.

Some payment processors that use an interchange-plus pricing model are Helcim, Payment Depot, and Dharma Merchant Services.

Flat-rate pricing is the most straightforward and most predictable pricing model, often favored by small businesses and startups. With flat-rate pricing, the processor charges a single, consistent fee for all transactions, regardless of the card type or payment method. This fee usually combines the interchange fee, assessment fee, and processor markup into one rate.

Square, Stripe, and PayPal are among the most popular payment processors that use a flat-rate pricing model.

Tiered pricing is a more complex model where transactions are categorized into different tiers—typically qualified, mid-qualified, and non-qualified—with each tier having its own rate. The processor decides which transactions fall into which tier, often based on factors like the card type, transaction method, and risk level.

Some providers that use a tiered-pricing model are Global Payments Integrated and TSYS.

Subscription-model pricing, also known as membership or wholesale pricing, is a popular pricing structure among businesses with high transaction volumes. In this model, businesses pay a fixed monthly fee in exchange for access to the payment processor’s services at a low, flat, per-transaction rate. 

Stax offers subscription or membership pricing.

Learn more about the pricing for our picks for the best credit card processing companies.

Major credit card interchange and assessment fees

While specific fees differ depending on the nature of the business, card and transaction type, and payment channel, here is a general overview of typical interchange and assessment fees for the major credit card networks Visa, Mastercard, Discover, and American Express.

Credit card network

Interchange fees

Assessment fees

Credit cards

Debit cards

Credit/debit cards

Visa1

1.29% + $0.10 to 2.80% + $0.10

0.05% + $0.22 to 2.45% + $0.10

0.14%

Mastercard2

1.65% + $0.10 to 2.70% + $0.10

0.05% + $0.22 + 1.76% + $0.22

0.14% to 0.15%

Discover

1.56% + $0.10 to 2.40% + $0.10

0.05% + $0.22 to 1.75% + $0.20

0.13%

American Express3

1.45% + $0.10 to 3.15% + $0.10

N/A

0.165%

1 Visa USA Interchange Fees
2 Mastercard US Interchange Fees
3 American Express Interchange Fees

The specific fees applied to a transaction depend on whether the transaction happened with the card present, online, or keyed in. In-person transactions always incur much lower fees than transactions where the card is not physically present with the merchant at the time of sale. Charging a sale using a card reader is always best, as this helps you take advantage of lower processing fees associated with card-present transactions. 

For businesses looking to optimize their payment processing setup, selecting an efficient mobile credit card processor or a simple credit card payment app can be a great start. Mobile card readers offer flexibility for in-person transactions while potentially reducing processing fees. To find the best mobile credit card processor suited for your needs, check out our comprehensive guide on the best mobile credit card processors.

How to calculate your credit card fees

Calculating your credit card processing fees is essential for understanding the true cost of accepting card payments and managing your business’s profitability. Although processing fees can seem complex, breaking them down into their individual components makes it easier to calculate the total fees you’ll pay on each transaction.

1. Determine the transaction value and processing rate

Credit card processing fees are applied to the total transaction value. When you’ve determined the transaction value, confirm your processing rate. This will depend on the pricing model used by your payment processor. Your processing rate is usually a percentage plus a fixed amount.

2. Compute for the transaction fee

Calculate the cost of processing the card payment by multiplying the transaction amount by the percentage rate and then adding the fixed amount.

3. Add up all the transaction fees to get your monthly transaction volume

To compute your monthly credit card processing fees, calculate the processing fee for each transaction and add up all the processing fees.

How to lower your credit card processing fees

Credit card processing fees can significantly impact your bottom line, but there are ways to help you reduce these costs. Here are some strategies you can implement to help lower your credit card processing fees:

  • Negotiate with your payment processor: Negotiating with your payment processor is one of the most direct ways to lower your processing fees. If you process a high volume of transactions, you have the leverage to request lower rates.
  • Switch to a more cost-effective pricing model: Evaluate your current pricing model to see if it’s the best fit for your business. Check for other options that offer lower processing fees. An interchange-plus pricing model may be more cost-effective than flat-rate or tiered pricing models. Read our guide on the cheapest credit card processors.
  • Encourage debit card use: Debit card transactions typically have lower interchange rates than credit cards, especially PIN-based transactions. 
  • Use secure payment methods: Transactions processed with EMV chip technology or contactless payments (NFC) often have lower rates than manually keyed-in or swipe transactions.
  • Avoid high-risk transaction types: Online or manually entered transactions often have higher fees due to increased fraud risk. Encouraging in-person payments when possible can reduce these costs.
  • Minimize chargebacks and fraud: Chargebacks and fraud increase the overall cost of processing payments. Implementing robust fraud prevention measures can help lower these risks and associated fees.
  • Batch your transactions: Some processors offer lower rates for batch processing, where multiple transactions are submitted simultaneously for settlement. By batching your transactions at the end of each business day, you can potentially reduce fees associated with individual transaction settlements.
  • Use surcharging: Surcharging allows you to pass the cost of credit card processing fees onto your customers by adding a small fee to credit card transactions. This method can help offset your processing costs. Before implementing surcharging, ensure you comply with local laws and are transparent with your customers about any additional fees.
  • Encourage ACH payments: Automated Clearing House (ACH) payments are a low-cost alternative to credit card transactions. ACH transactions typically have flat fees, which are often much lower than credit card processing fees. To increase adoption, offer incentives or discounts to customers who choose ACH payments.

Frequently asked questions (FAQs)

The maximum credit card processing fee typically ranges from 3% to 5% per transaction, depending on factors like the card type, industry, and pricing model. However, fees may occasionally exceed this range in some high-risk industries or with premium cards.

The merchant is responsible for paying the credit card processing fees, which are typically deducted from the transaction amount before the funds are deposited into the merchant’s account.

Yes, it is legal to pass credit card fees to customers in many places, but it depends on state laws and card network rules. Merchants must clearly disclose the surcharge and cannot exceed the cost of processing the transaction.

Credit card processing fees are high because they cover various costs, including fraud prevention, payment network maintenance, and the risk associated with lending. Additionally, fees vary based on factors like card type, transaction method, and industry risk.

Andrea Herrera Avatar
Andrea Herrera
Staff Writer
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Andrea is a retail expert writer at Fit Small Business, contributing to the payments section. Before joining Fit Small Business, she was an actuarial specialist and freelance writer. She also has experience helping online businesses with order and payment processing. Andrea has more than 11 years of experience writing online content on various topics ranging from marketing to business.