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Credit card processing fees typically cost a business 1.5% to 3.5% of each transaction’s total. For example, you’d pay $1.50 to $3.50 in credit card fees for a sale of $100.
How much you’re actually charged depends on factors like the card type and whether the transaction was made in-person or online. Ultimately, the best credit card processing company for you will offer fees that are manageable based on your business’s sales trends and volume.
Here's how credit card processing fees work and how your business can lower its rates.
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Credit card processing fees are charges that merchants pay credit card companies and payment service providers to authorize and complete card transactions.
The credit card processing fees paid on each transaction — also known as your merchant discount rate — are split among the financial institutions that enable these payments. They include the following fees:
Interchange fees
Interchange fees make up the largest portion of the merchant discount rate that goes to the issuing bank, which manages the credit card used to make the payment. Examples of credit card issuer banks include Chase, Citi and Bank of America.
Assessment fees
These fees are directed toward the card networks, such as Visa, Mastercard, Discover and American Express, and help pay for their operating costs. The networks are also responsible for setting them.
Payment processor fees
These costs go to the processor, which is the company that manages the logistics of getting card payments processed for your business. Processors include Square, Stax and Helcim.
Your payment processor will either draft your credit card processing fees from your bank account in one lump sum at the end of each month or reduce the amount of each deposit by the amount of the fees due.
Like other processing fees, card network charges can change due to variables like transaction or business type. The following table shows average interchange and assessment fees for major credit card networks based on estimates from the payment processor Payment Depot.
Card network | Interchange fees | Assessment fees |
|---|---|---|
American Express | 2.3%-3.5% | 0.165% |
Discover | 1.55%-2.5% | 0.14% |
Mastercard | 1.5%-2.6% | 0.1375% |
Visa | 1.4%-2.5% | 0.14% |
Learn more about how credit card transactions are processed
Take a behind-the-scenes look at what happens each time you swipe a credit card, as both a merchant and consumer.
How credit card processing fees work largely depends on the pricing structure a payment processor uses. These generally fall into the following categories:
Flat-rate, or blended, pricing
Under this pricing structure, you pay a percentage of the transaction total plus a flat fee. For instance, the rate might be 2.6% plus 10 cents for in-person transactions. Square fees, Stripe fees and PayPal fees all fit into this model.
Blended pricing is straightforward and predictable; however, it can also be more expensive overall than the other pricing structures.
Tiered pricing
This is based on three tiers: qualified (debit cards and cards without rewards programs), mid-qualified (cards with certain rewards programs) and non-qualified (corporate cards and cards with generous rewards programs). Rates are lowest for qualified cards and highest for non-qualified cards.
Like flat-rate pricing, tiered pricing is represented as a percentage plus a flat fee. With this pricing structure, your processing fees will vary based on the kind of card you accept. It's usually a little less expensive than flat-rate pricing, but it is higher than interchange-plus pricing.
Interchange-plus pricing
Interchange-plus pricing is often the least expensive option. However, it also has the greatest amount of variability since interchange rates change based on several factors, including:
- Card network. Visa's rates are different from Mastercard's.
- Type of card used. Rewards credit cards cost more to process than non-rewards credit cards, for instance.
- How the card is processed. In-person, card-present transactions are usually less expensive than accepting payments online or manually keying in the credit card information.
This pricing structure consists of the interchange rate charged by the credit card network plus a defined markup, or transaction fee, which goes to the processing company. Like flat-rate and tiered pricing, you will pay a percentage plus a fee per transaction. This is the pricing structure used by Helcim, Dharma and Payment Depot.
Membership-based pricing
Some providers also offer membership-based pricing, which could be the least expensive processing option for some high-volume businesses. Under the membership-based pricing model, processors do not take a percentage of your sales. Instead, they earn the bulk of their revenue by charging monthly or annual membership fees, sometimes with fixed per-transaction fees. Stax, for example, charges fees starting at $99 per month plus 8 cents per in-person transaction plus the interchange fee.
Use this credit card processing fee calculator to see how monthly payment processing costs will vary based on transaction rates and how you accept credit card payments. If you have a payment processor in mind, enter the provider's rates in the calculator — or an estimate of average rates for interchange-plus pricing — to estimate how much the service will cost each month.
Here are the most common types of transactions to consider:
- In-person. A customer pays in person and swipes, taps or inserts a credit card.
- Card-not-present. A customer pays by credit card online or a business manually enters credit card information to charge the customer remotely.
Here's how you can save money on credit card processing fees.
Pass credit card fees to consumers
Small businesses can pass credit card fees to customers by implementing a cash discount program or credit card surcharge. With a cash discount program, customers receive a small discount for choosing to pay with cash instead of card. Credit card surcharges are similar in that the business tacks an extra fee on purchases made with a card.
In both cases, businesses need to follow specific rules and regulations. For example, credit card surcharge programs aren’t legal in Connecticut, Massachusetts and Puerto Rico. Additionally, remember to consider your customer base and how you’ll roll out the program.
Sidestep avoidable fees
It's best to work with a processor that doesn't charge statement fees, minimum monthly processing fees, PCI compliance fees or terminal lease fees. But if that's not an option, and you see these fees on your statement, pick up the phone and ask if any of those charges can be waived or avoided in the future.
Keep your chargeback rate low
Your chargeback rate is the percentage of transactions disputed by customers — for instance, because of unauthorized card use, billing errors or unresolved disputes about the quality of the items purchased. Chargeback fees can be costly, often $20 to $100 per dispute on top of refunding the complete transaction, and high rates of chargebacks can cause providers to increase your transaction fees.
Minimize chargebacks by using contactless and chip card readers to reduce your liability in case of credit card fraud, and by offering return policies, good customer service and quick responses to any customer complaints.
Skip flat-rate pricing
Many businesses — especially new businesses — process credit card payments through processors like PayPal, Square or Stripe. These are often the fastest to set up when your business is young. But generally, this means you will be on a flat-rate pricing structure, usually the most expensive option. A processor that offers interchange-plus pricing or membership-based pricing could save you money.
» MORE: Best small-business apps
Collect quotes
Collect quotes from multiple processors. If you find more favorable pricing elsewhere, take the quote to your current processor. The company might match the offer or provide lower rates. If that doesn't happen, the quotes can help you decide whether the savings are substantial enough to justify moving to a different processor.
Switch processors
Switching payment processors can be a hassle. However, an increase in your business’s profitability can make the hassle worthwhile. If all attempts to negotiate with your current payment processor fail, switch processors. With a high-volume business, for instance, membership-based pricing might be the most cost-effective option.
Ready to choose a payment processing company?
Explore NerdWallet’s collection of top credit card processing companies and compare your estimated monthly costs for each.
Frequently Asked Questions
The typical fee for credit card processing ranges from 1.5% to 3.5% of the total transaction.
Merchants typically pay credit card processing fees, though these fees are an operating cost and thus can affect how merchants price their goods and services.
Processing fees for credit cards are distributed to the card’s issuing bank (interchange fee), the credit card network (assessment fee) and the processor that facilitates the payments process for your business (payment processor fee).
Credit card processing fees encompass three types of fees (interchange, assessment and payment processing) that get distributed to three separate financial institutions (issuing bank for the card, credit card network and payment processor) involved in facilitating the card payment process. All of these fees together, therefore, can add up to a decent percentage of the total sales transaction.
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