Credit Card Processing FeesShould You Be Paying Less Per Transaction?

March 27, 2023 | 13 min read

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Credit Card Processing Fees

In a Nutshell

While no one really loves forking over money to make money, it’s important to know which credit card processing fees are relevant to your business and how much you can expect to pay per transaction. This article will go over these fees in greater detail, from how they break down and who assesses them, to how you can ultimately reduce them.

Crucial Information & Tips to Reduce Your Credit Card Processing Fees

No one wants to pay credit card processing fees. However, the small fee you pay to process each credit or debit card transaction plays a key role in maintaining payment infrastructure.

Processing fees are the price you pay to run credit and debit cards on your platform. Exact amounts can vary according to transaction amount, transaction type, and the number of transactions you run each day.

Which credit card processing fees are relevant to your business? And, how can you triangulate to keep costs as low as possible? Let’s find out.

What are Credit Card Processing Fees?

Credit Card Processing Fee

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Credit card processing fees are the costs that merchants pay to process card transactions. These fees cover the operational and technological expenses associated with processing payments, including the transfer of funds between the cardholder's bank (issuing bank) and the merchant's bank (acquiring bank).

Credit card processing is a service. Like all services, fees exist to cover the costs associated with facilitating that service.

When a customer uses a credit card for a purchase, several parties are involved in the transaction, including the card issuer, the processor, and the acquiring bank, among others. Each party contributes to the secure and efficient processing of the transaction, and they all incur costs to do so.

Credit card processing fees help to cover these costs and ensure that each party is fairly compensated for their role in maintaining system integrity.

Who Sets Your Card Processing Fees?

In short: merchants bear the direct cost of these fees. 

Credit card processing fees that a merchant pays per transaction can be divided into two groupings: the “merchant discount rate,” and processor fees. The merchant discount rate is a combination of interchange fees and assessment fees:

Credit Card Processing Fees

Interchange Fees

These fees are set by the card networks, but are allocated to the issuing bank. Interchange fees may vary based on factors like card type, transaction method, and merchant industry. This usually represents the largest portion of the discount rate.

Credit Card Processing Fees

Assessment Fees

These fees are charged by the card networks (e.g., Visa, Mastercard) for the use of their infrastructure and services. Assessment fees are typically a small percentage of the overall transaction amount.

To illustrate how these work: say you have a customer that uses a Chase Visa card to pay for an order. The interchange fee would go to Chase Bank, and the assessment fee would go to Visa.

In contrast to the fees outlined above, you also have fees assessed by your payment processor and your acquiring bank:

Credit Card Processing Fees

Processor Fees

These fees are set and charged by the payment processor for their role in facilitating the transaction. Processor fees can include a percentage of the transaction amount, a fixed per-transaction fee, and/or a monthly fee.

Credit Card Processing Fees

Acquirer Fees

Your acquiring bank may also assess fees for their services, such as account maintenance fees or additional transaction fees.

Common Question Who Has to Pay Processing Fees?

The merchant is responsible for paying card processing fees. They can pass these costs along to customers in the form of higher prices or added surcharges, making goods and services more expensive for customers. Imposing fees on customers is increasingly rare, though, as cards become the default preferred payment method.

How Much Do Credit Card Processing Fees Cost?

It varies, depending on the fee in question, and which party is assessing it. To simplify, let’s focus on interchange and assessment fees for a moment.

Interchange fees are typically a percentage of the purchase price, plus a fixed amount; for example, a flat $0.15 per transaction. Keep in mind that every entity involved in that transaction may affect that interchange fee. For instance, the card network, processing method, card issuer, and merchant category code (MCC) each impact the total interchange fee.

The following table is an example of how interchange fees break down across some of the largest card networks (as of this writing):

Payment NetworkLow Interchange Fee RangeHigh Interchange Fee Range
Visa1.15% + $0.053.15% + $0.10
Mastercard1.25% + $0.053.15% + $0.10
Discover1.45% + $0.053.05% + $0.10
American Express1.35% + $0.103% + $0.10

Assessment fees are generally much smaller than interchange fees. They also vary according to the network and other factors. Assessment fees stack up to around 0.15% of each transaction. 

Typical assessment fees break down like this:

Payment NetworkAverage Assessment Fee
American Express0.15%
Mastercard0.1375% for transactions under $1,000; 0.01% for transactions of $1,000 or more

With these interchange and assessment fees in mind, you can typically expect to pay from 1.5% to 5% of the transaction total in credit card processing fees.

To illustrate how these fees are assessed in total, refer to the following table. Remember that these figures serve as a general example and are subject to change at the card network’s discretion:

Payment NetworkLow Interchange Fee RangeHigh Interchange Fee Range
Visa1.29% + $0.052.54% + $0.10
Mastercard1.29% + $0.052.64% + $0.10
Discover1.48% + $0.052.53% + $0.10
American Express1.58% + $0.103.45% + $0.10

Remember, you then have to account for per-transaction fees assessed by your processor and acquirer. This could add another percentage point or two onto the credit card processing fee total.

Remember, you then have to account for per-transaction fees assessed by your processor and acquirer. This could add another percentage point or two onto the credit card processing fee total.

Other Factors Impacting Credit Card Processing Fees

We now have a better understanding of how interchange and assessment fees affect your revenue. So, let’s dig into some additional circumstances and how they might impact your total fees. 

Remember, all total fees will combine interchange and assessment fees, no matter which processor you choose. From there, several factors influence your overall payout, including:

Your Payment Processor

Payment processors take on the majority of the exchange process for you, including haggling with the credit card networks. They will likely pay your credit card processing fees directly, and expect you to simply remunerate them via processing fees.

Industry & Vertical

Some product categories pose greater risks than others. For instance, if you run a travel business, health and beauty supply, or a gas station, you might be considered a “high-risk” merchant. This would mean you’d naturally pay higher credit card processing fees per transaction and higher monthly processing fees as well.

Business Size

The volume of credit card transactions you process can also impact your credit card processing fees. If your business processes over 20k per month, like a supermarket, you may be offered a lower per-transaction rate.

Card Type

The card used plays a big role in how much you will be expected to pay. Each card network has its own way of doing things, and that includes how much they charge to process credit and debit card transactions. For instance, Visa, Mastercard, Amex, and Discover all charge different assessment rates for credit cards. Additionally, debit cards and prepaid cards typically have lower fees than credit cards.


The environment in which you accept and process payments also influence the fees you will ultimately pay per transaction. For instance, card-not-present (CNP) transactions pose a greater risk, as it is easier to verify and authenticate consumers that are standing right in front of you rather than accept payment online. So, if you mainly do business online, your credit card processing fees will be higher than those paid by brick-and mortar-sellers.

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Real-World Credit Card Processing Fee Models

As mentioned above, interchange and assessment fees aren’t exactly negotiable with banks and card networks. However, merchants can negotiate fees at the processing level.

Payment processors feature their own methods and rates, from which merchants can choose what works best for their business. Beyond this, there are also many payment processors and fee tiers to choose from. 

To illustrate, here are a few examples of common fees structures used by processors:

Interchange-Plus Processing

This pricing method includes the interchange rate plus a markup, which can either be a fixed amount or percentage-based.

  • PRO: This method can be less costly than the others, especially for businesses that process a large number of transactions.
  • CON: Interchange rates can vary from transaction to transaction, making it difficult to predict costs month to month.
Example: PayJunction assesses a fee that is equal to the interchange fee, plus 0.75% + $0.07 per transaction.

Flat-Rate Processing

Flat-rate pricing ensures a single rate for all transactions through a given method, regardless of interchange rates and fees. This would mean you’d pay a set percentage on top of your transaction rate; for example, 3% of the total plus $0.25 for every transaction.

  • PRO: Flat rates aren’t subject to fluctuation. You know what you’re getting into.
  • CON: It could be more expensive than the other tiers if a company processes many transactions annually.
Example: PayPal assesses a fee of 2.60% + $0.10 per card-present transaction. For card-not-present sales, that fee increases to 2.90% + $0.30 per transaction, or 3.5% + $0.15 per each manual entry.

Tiered-Rate Processing

Tiered pricing combines both interchange-plus and flat-rate pricing by sorting rates into grouped categories. To illustrate this, let’s say that you might pay 2% plus $0.15 for debit transactions and 3% plus $0.10 for credit card transactions. These rates and fees are variable, following a predetermined ruleset.

  • PRO: Tiered pricing offers predictability combined with competitive pricing.
  • CON: If you process a large number of payments overall, the costs associated with a tiered pricing scale could be very high.
Example: Veem assesses fees at 2.9% per transaction or 1% of total transaction amount for US transactions, and 3.9% per transaction or 1% of total transaction amount for international transactions.


Subscription payment processing models are membership-based. Essentially, you pay a monthly fee to the payment processor and receive rates based on your selected (or earnings warranted) tier. You may have noticed that this payment model is very similar to the interchange plus model, although the rates and monthly fees tend to be much higher in exchange for lower per-transaction fees.

Subscription models are best suited for businesses with higher sales rates (of generally $10k and up per month).

  • PRO: There are no earning caps for subscription-based processing, nor are there usually any excessive chargeback penalties or limitations.
  • CON: Compared to the other tiers, subscription processing models can be much more expensive.
Example: Payment Depot offers Starter (up to $125k per year) pricing at $59 per month + interchange + $0.15 per transaction , while Starter Plus (over $125k per year) runs at $79 per month + interchange + $0.10 per transaction.

Don’t Forget About Equipment Costs!
Keep in mind every one of the companies above (regardless of pricing model) will require you to obtain proprietary equipment for their brand. These costs can fluctuate drastically from one end of the payment spectrum to another.

Some payment providers offer basic mobile readers for free (like Square), while others run around $50. If you need in-store terminals, however, equipment costs can run anywhere from $50-1000. Whichever model and provider you choose, don’t forget to factor these costs into your bottom line.

Easy Tips to Lower Your Credit Card Processing Fees

Your processing fees are only negotiable up to a certain point. However, if your goal is to reduce the overall cost of processing, there are some simple ways to do this which can also help reduce your exposure to fraud and chargebacks in the long run.

Compare Service Providers

As mentioned above, you can’t lower your interchange and assessment fees, but you might be able to decrease your total processing overhead by shopping around for payment processors. You want to focus on the products and services that suit your business best while taking your fraud and chargeback rate into account.

Incentivize In-Person Sales

Card-not-present transactions are responsible for up to 80% of all reported fraud. Part of shopping around for better-suited service providers and better rates will depend on your overall fraud rate. Although CNP transactions will continue to be a force for any multichannel business, including additional incentives for in-store shoppers could help lower your exposure to CNP fraud.

Implement Fraud Best Practices

To prevent your business from being shifted into higher-risk pricing tiers (when possible), you must limit your exposure to criminal fraud. While there is no such thing as a “one-size fits all” solution to fraud nowadays, you can dramatically reduce your overall risk with a combination of effective fraud tools at checkout.

None of these tools are 100% effective on their own. But, when used in tandem with each other, many attacks can be halted before the transaction finalizes.

Controlling loss is crucial here. You’ll be penalized for excessive chargebacks, so it’s vital that you prioritize this issue. To fight both criminal fraud and illegitimate chargebacks, you’ll need a comprehensive fraud management strategy that addresses both concerns at once. 

Thankfully, this isn’t something you have to do alone. With over a decade of industry-leading experience in the realm of fraud mitigation and chargeback management, Chargebacks911® is here to help your business meet incoming challenges and exceed revenue limitations. Give us a call and get started today.


Why am I being charged a processing fee?

While no merchant is a huge fan of credit card processing fees, they do play a fundamental role in the payment process. The fees are used to pay for the infrastructure and technology that allows funds and transaction data to be processed and transmitted from one party to the next in the transaction process.

Are processing fees legal?

Yes. Credit card processing is a service. Like all services, fees exist to cover the costs associated with facilitating that service.

Who pays processing fees?

Merchants are the primary party responsible for paying processing fees.

How do I get rid of processing fees?

You can’t “get rid of” processing fees. However, you can limit your processing fees by decreasing your exposure to fraud and chargebacks, shopping around for the best payment processor in your transaction tier, and limiting the number of small-dollar transactions you run each day.

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