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 actually pay depends on factors like the card type and whether the transaction was made in person or online. Ultimately, you want a service that minimizes fees for your business’s sales trends and volume.
Here's how credit card processing fees work and how your business can lower its rates.
What are credit card processing fees?
Businesses must pay credit card processing fees to complete card transactions. Costs depend on multiple underlying factors, like if a customer made the purchase in person. The financial institutions involved influence pricing, too. These usually include credit card companies, issuing banks and payment processors.
Here’s a breakdown of the charges that make up credit card processing fees:
Interchange fees
Interchange fees make up a large portion of payment processing costs. They go to the issuing bank, which manages the credit card used to pay. Examples of credit card issuer banks include Chase, Citi and Bank of America.
Assessment fees
These go to the card networks (e.g., Visa, Mastercard, Discover, American Express) to help pay for operating costs. The networks are responsible for setting these fees.
Payment processor fees
These costs go to the processor. This is the company that manages payment processing logistics. Some examples include Square, Stax and Helcim. There's sometimes room to negotiate these fees, depending on the processor.
» MORE: Ready to shop? Compare our picks for the best credit card processing companies
How much do credit card processing fees cost?
Credit card processing fees vary based on a few factors:
- Transaction type (e.g., online versus in-person).
- The customer's credit card company.
- The markup your payment processor charges.
Flat-rate payment processing companies combine interchange fees, assessment fees and markups into a set amount (e.g., 2.6% plus 10 cents). Interchange-plus processors charge a consistent markup (e.g., 0.4% plus 8 cents). But unlike flat-rate options, they pass varying interchange fees to the merchant.
Here's a rundown of what you can expect to pay with different processors.
| Processor | Pricing structure | Payment processing fees |
|---|---|---|
| Flat rate. |
| |
| Flat rate. |
| |
| Flat rate. |
| |
| Interchange plus. |
| |
| Interchange plus and subscription based. |
| |
| Flat rate. |
|
Types of credit card processing fee structures
Credit card processing fees 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. But it can also be more expensive overall than the other pricing structures.
Tiered pricing
This structure is based on three tiers:
- Qualified (debit cards and cards without rewards programs).
- Mid-qualified (cards with certain rewards programs).
- 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 can be higher than interchange-plus pricing.
Interchange-plus pricing
Interchange-plus pricing is often the least expensive option for high-volume businesses. However, it also has the greatest variability.
Interchange rates change based on the following factors:
- Card network (e.g., American Express is usually the most expensive).
- Type of card used (e.g., rewards cards usually cost more to process than non-rewards cards).
- Type of transaction (e.g., online transactions are often more expensive than in-person ones).
This pricing structure is made up of the card network's interchange rate plus a defined markup. This markup, or transaction fee, goes to the processing company. Like flat-rate and tiered pricing, you will pay a percentage plus a fee per transaction. Companies like Helcim and Payment Depot use this pricing structure.
Subscription-based pricing
Subscription pricing can be a cost-effective option for high-volume businesses. That's because processors don't take a percentage of your sales. Instead, they charge a monthly or annual subscription fee plus a fixed per-transaction fee. Subscription fees for Stax, for example, start at $99 per month. It also charges 8 cents per in-person transaction on top of interchange.
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💬 From our Nerds: Weighing interchange-plus vs. flat-rate options
"When I helped choose a processor for my husband's brewery, I was initially going to choose a flat-rate processor for convenience's sake. But what if he could save more money with an interchange-plus one?
"I used the calculator on this page (see below) to compare fees across both types of processors. It turns out that flat-rate pricing might be just as economical — if not less expensive — for businesses with lower average transaction amounts (e.g., under $50) and doing less than $8,000 in card transactions per month. Doing that same kind of math can help you make an informed decision for your own business.”
— Hillary Crawford, lead writer covering small business
How to calculate your credit card fees
Use this calculator to see how monthly processing costs will vary based on transaction rates and how you accept credit card payments (e.g., online versus In person).
If you have a payment processor in mind, enter the provider's rates in the calculator. Or, you can estimate average rates for interchange-plus pricing. This will help you gauge how much the service will cost each month.
How to offset your credit card processing fees
Here's how you can save money on credit card processing fees.
Pass credit card fees to consumers
Cash discounts and credit card surcharges can help you pass credit card fees to customers. Cash discount programs give customers a small discount for paying with cash instead of card. Credit card surcharges add 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. Also remember to consider your customer base and how you’ll roll out the program.
Sidestep avoidable fees
Your processor shouldn't charge fees for not meeting the minimum monthly processing amount. Processors should also skip PCI compliance and termination fees. If that's not the case, ask your processor if they can waive those charges or if you can avoid them in the future.
Keep your chargeback rate low
Your chargeback rate is the percentage of transactions that customers dispute. This could be because of unauthorized card use, billing errors or disagreements over item quality.
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.
You can minimize chargebacks by using contactless and chip card readers. This can reduce your liability in case of credit card fraud. Return policies, good customer service and quick responses to customer complaints help, too.
Collect quotes
Collect quotes from multiple processors. If you find better pricing elsewhere, take the quote to your current processor. The company might match the offer or provide lower rates. Otherwise, quotes can help you decide whether it's worth switching processors.
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
What is the typical fee for credit card processing?
The typical fee for credit card processing ranges from 1.5% to 3.5% of the total transaction.
Who pays credit card processing fees?
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.
Who gets the processing fees for credit cards?
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).
Why are card processing fees so high?
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.
