How Much Are Online Payment Processing Fees?

When you’re looking to start accepting credit cards online, you have a lot of factors to consider before you can get started. From determining the features you’ll need to learning how different pricing schemes might affect your bottom line, there’s a lot that goes into understanding internet merchant accounts.

In this piece, we’ll be examining online payment processing fees and the different cost models offered by providers in this field. We’ll also delve into the question of whether free online credit card processing truly exists.

Equipped with this knowledge, you’ll be ready to make an informed decision when choosing from the best online payment processing providers.

What Are The Costs Of Credit Card Processing Online?

When choosing an online credit card processor, just as when you set up credit card payments for a small business of any kind, you need to understand the different pricing models offered by payment processors.

These pricing models include the flat-rate pricing model preferred by third-party processors, interchange-plus pricing (our preferred pricing model), and membership pricing.

Here’s a comparison chart that details the differences between these models.

Additionally, older providers and high-risk specialists may offer a pricing model known as tiered pricing, but we warn against it because it disadvantages merchants. High-risk merchants may have no other option if they want to accept credit cards online, however.

One caveat: Some merchant account providers offer multiple pricing schemes, so you may be able to choose between two—or even all three—of the above pricing types when setting up your account.

For most small businesses, using a third-party processor with flat-rate pricing (such as Square or PayPal) may be more affordable than using a full-service online merchant account. Of course, this entails a greater risk of having your account frozen or terminated, which is, in itself, a very costly thing to happen to any business.

One factor affecting what your internet merchant account will charge you is the fact that CNP (card-not-present) transactions, including online purchases, cost more to process than in-person transactions. That’s because the chance of chargebacks and fraud is higher with transactions where the card is not present. This is factored into the cost of processing each payment.

Depending on your processor and your feature needs, other fees you may (or may not) have to pay include:

• Monthly and/or annual account fees
• PCI compliance fees
• Payment gateway fees
• Fees for ACH acceptance and/or other alternative payment methods
• AVS checks and other fraud monitoring fees
• Monthly minimum (we typically recommend not using processors that charge a monthly minimum)

Our guide to merchant account & credit card transaction fees is essential reading if you want a deeper look at the complex and relatively opaque world of online payment processing fees.

Can I Get Free Online Payment Processing?

If you’ve been checking out different online payment processors, you’ve probably seen some providers claiming to offer “free” credit card processing. If you’re skeptical of these claims, well, you’re right to be.

Let’s explore what they mean.

When a processor advertises “free” credit card processing, that normally means that it is offering a surcharging or cash discounting program (the latter doesn’t work online since you can’t accept cash payments online). While our credit card surcharging guide is a helpful resource for understanding these programs, let’s discuss what surcharging means for online sellers in particular.

Online Credit Card Surcharging

Surcharging programs pass on the cost of credit card processing to your customers, so while these credit card payments may be free to you, these transaction fees are simply being paid by your customers.

Naturally, your customers may not appreciate this practice (and yes, legally, you have to disclose that you are doing this), so it’s possible that signing up for “free” online credit card processing could actually cost you revenue, ironically enough.

What’s more, as Visa’s surcharging guide for merchants states, you cannot assess a surcharge on debit card transactions or prepaid card transactions. Only credit card transactions can have a surcharge added.

Even then, credit card surcharging is currently illegal in Connecticut, Massachusetts, and Puerto Rico. Other states and jurisdictions have anti-surcharging laws on the books that are currently unenforceable due to recent court decisions. Plus, surcharging is not permitted for most international transactions.

The takeaway? When you see “free” online payment processing being offered, consider the caveats and drawbacks before pulling the trigger.

Final Thoughts On Online Payment Processing Fees

When it comes to processing payments online, there is no such thing as a free lunch — transaction fees will be assessed. We hope that this guide has given you some understanding of the types of fees you’ll have to pay and the different pricing models used by merchant service providers to charge you for the cost of taking payments online.

No matter which pricing type suits your business, one of our favorite credit card processors should offer a package that suits your business size and type.