The Complete Guide to Credit Card Processing Rates & Fees
Credit card processing fees are extensive, complicated, and can be overwhelming. Nevertheless, you have to pay them if you want to process credit cards through your business. Rather than paying these charges blindly, you might as well make an effort to understand them. That way, you can dispute any costs you think are unfair or get a better understanding of your true overhead. Hopefully, this guide will help you do just that.
This is quite the jigsaw puzzle of a topic, with each piece requiring some understanding of the other interlocking pieces. For this reason, we’d encourage you to read this guide all the way through to view the completed puzzle in all its glory. By the same token, if you need to jump to a particular section to get clarification on a specific concept or fee, you’re welcome to find that first, and then go back to fill in the gaps as needed.
If you’re pressed for time and trust our judgment here at Merchant Maverick, then I suggest you take a look at our top-rated credit card processors. They all offer very fair and competitive rates and don’t charge any bogus fees. If you prefer to learn about this stuff yourself, then read on!
Table of Contents
- Credit Card Processing Rates
- Types Of Merchant Account Fees
- Parties Involved
- Card Payment Transaction Flow
- Wholesale Vs. Markup Merchant Account Fees
- The Importance of Interchange
- Payment Processing Pricing Models
- Breakdown Of All Credit Card Processing Fees
- Finding the Lowest Credit Card Processing Rates & Fees
- FAQ For Credit & Debit Card Processing Cost
Credit Card Processing Rates
Most merchants know the processing rate(s) they were quoted when they signed up for an account, or have at least seen rates advertised by various processors. So, why does one processor offer a rate of 0.20% + $0.10, while another promotes 2.9% + $0.30? That’s a big difference! The simplest answer is this:
Some quoted rates are only a processor’s markup over the wholesale cost of transactions, while others are a blend of the wholesale cost and the processor’s rate markup.
You’ll learn more about wholesale costs and markups later in this guide, as well as how different pricing models have evolved to cover both categories of cost. For now, check out the table below for example rates from the four main pricing models, along with what’s happening to the wholesale cost behind each transaction.
Sample Quoted Payment Processing Rates
|Pricing Model||Wholesale Rate|
0.25% + $0.10
$0.10 (+ $99/mo membership)
Qualified: 1.79% + $0.10
(Mid-Qualified: 2.19% + $0.15)
(Non-Qualified: 2.99% + $0.20)
2.90% + $0.30 online
Of course, your processing rate is just one component of your overall cost. You must consider the entire package of rates and fees with your provider, which we’ll help you understand as we go along.
Types Of Merchant Account Fees
Next, let’s look at the general types of rates and fees you’ll see on a merchant fee schedule or processing statement. We’ll get into detailed examples of each type of fee in another section.
These fees are assessed every time you run a transaction (like your processing rate we’ve just discussed). They usually represent the biggest cost of operating a merchant account. Transactional fees come in two forms: 1) percentages (e.g., 2.19%, 0.25%), or 2) per-item dollar amounts (e.g., $0.20, $0.0195). Often, both forms are charged on a given transaction.
In addition to transactional fees, you may be charged some predictable, flat fees as well. They vary by name, value, and applicability, but at least some of them will show up on your monthly statements.
Scheduled fees are always charged, but incidental fees only appear per occurrence. When a chargeback occurs, for instance, you are charged a chargeback fee. Some months you will (hopefully!) not have any chargebacks, so the fee will not be charged.
Before you can understand card processing fees, you also need to know about the parties involved in the industry. Consider these the financial “middlemen” between a customer and merchant. They include:
- Credit Card Associations: These are obviously the companies that create the credit cards, like Visa, MasterCard, and American Express. These are the guys that set the rules.
- Credit Card Issuing Banks: These are the financial institutions that issue the credit cards, like Chase, Citi, and Wells Fargo. Some card associations take on the role of a bank as well, developing and issuing their own cards. Examples include Discover and American Express.
- Credit Card Processors: Also known as Acquiring Banks or just Acquirers, these institutions act as messengers between merchants and credit card associations. They pass batch information and authorization requests along so that merchants can complete transactions in their businesses. A merchant may encounter several acquirers for one transaction–one that creates monthly statements, one that handles technical support, and one that issues money to a bank account.
- Merchant Account Providers: These are companies that manage credit card processing (e.g., sales, support, etc.), usually through the help of an acquirer. They could be financial institutions, independent sales organizations, or double-duty acquirers, depending on the situation.
- Payment Gateways: These are special portals that route transactions to an acquirer, usually in the case of an online shopping cart.
Card Payment Transaction Flow
In any given transaction, the above-mentioned parties play a role. Here’s a graphic to help you visualize the flow of a typical credit card transaction. (Note: Credit Card Processors and Merchant Account Providers usually fill overlapping roles within a transaction, so that’s why you only see “Credit Card Processor” listed below.)
It’s also worth noting that because American Express acts as both the credit card association and the credit card-issuing bank, the Amex fee setup and terminology is a bit different. However, the OptBlue program has brought Amex closer in line with the other associations in recent years in terms of both functionality and pricing. Check out our article on Amex rates and fees for more information.
Wholesale Vs. Markup Merchant Account Fees
The terms “wholesale” and “markup” get thrown around a lot in the processing industry, so it’s easy to become confused about which fees really fall into which category. At its core, however, the distinction isn’t too difficult to grasp. The two main considerations are: 1) which of the parties we’ve discussed above ultimately collects the fee, and 2) how fixed the cost is across the industry. Here’s all you really need to know:
- Go to the Credit Card-Issuing Banks (Interchange Fees) and the Credit Card Associations (Card Association Fees)
- Fixed amounts regardless of which processor you use
- Go your Credit Card Processor and Payment Gateway, plus any other add-on equipment or software providers
- Different amounts from processor to processor
As the merchant, you’re the lucky one who ultimately covers all these costs. Meanwhile, your credit card processor (more specifically, your Merchant Account Provider) sits right at the middle of the fee collecting-and-directing process. This company decides how to pay the necessary wholesale costs for running your account — while also adding markups to cover its own costs, paying other third-party service providers associated with your account, and even making a profit itself. A very important job, indeed!
With the right processor, markup fees will be modest. With the wrong processor, you’re in trouble. What’s worse is that some processors make it as difficult as possible to know how much markup you’re paying by using bewildering terms and pricing models that would baffle even the most experienced business owner. For now, just remember that markup fees are different from processor to processor and are what you should be comparing when preparing to open a new merchant account. Meanwhile, don’t try to shop around for lower wholesale fees or rates from various credit card processors.
The Importance of Interchange
While we’ve already seen that there are quite a few parties and fee types involved in the processing industry, most pricing discussions hinge on one particular category of cost: interchange. This is mostly due to the fact that this one type of wholesale fee makes up the majority of the cost of processing cards. Card association fees — the other main wholesale cost — make up a non-trivial chunk as well, but it’s not nearly as large as the interchange chunk.
Each card and transaction type has a specific interchange fee set by the corresponding card association, and that fee is ultimately collected by the card-issuing bank. The table below summarizes just a few examples, but there are hundreds of interchange classifications across the card brands. Visit the Visa and MasterCard websites for full lists.
Common Interchange Rate Examples
1.51% + $0.10
1.80% + $0.10
Signature/Traditional Rewards Credit
1.65% + $0.10
1.95% + $0.10
Preferred Rewards Credit
2.10% + $0.10
2.10% + $0.10 / 2.40% + $0.10
Small Bank (Exempt) Debit
0.80% + $0.15
1.65% + $0.15
Big Bank (Regulated) Debit
0.05% + $0.22
0.05% + $0.22
Due to this central role interchange fees play in the processing industry, the pricing models used by card processors are primarily based on how interchange fees are handled. Before we go any further, take a moment to compare those big bank debit interchange rates in the table above to the rate of 2.9% + $0.30 or even 2.75% charged by some flat-rate processors. You can start to see the pitfalls of a pricing model that lumps multiple (or all) card and transaction types together and then slaps on one blanket rate to cover them all. Of course, there are pros and cons to each pricing model for different businesses types, but you should definitely be aware of the wide variety of base costs behind the different card and transaction types.
Now, let’s take a look at the four main pricing models in more detail.
Payment Processing Pricing Models
When it comes to selling merchant accounts, there are four popular methods of pricing: interchange-plus, subscription/membership, tiered pricing, and flat-rate. If you already have an account but don’t know your pricing model, you can identify which one you have by looking for key indicators on your statements.
Remember that the main distinction to be aware of in pricing models is what happens to interchange fees — are they itemized and charged completely separately from the processor’s markup (“pass-through” or “cost-plus” pricing), or are they blended in with the rate markup (blended pricing)? Take a look:
Pricing Model Overview
|Interchange Fees||Model Type||Generally Best For|
Separate from markup
Separate from markup
Blended with markup
Blended with markup
For most merchants, we recommend signing up for one of the pass-through models. Otherwise, you won’t be able to see the true difference between wholesale rates and processor markups.
With that overview, let’s examine the more nuanced differences between each model:
This is the most transparent pricing model with the most understandable terms and fees. Interchange-plus itemizes wholesale fees and markups and clearly lists them on your monthly statement. This may make your statement a bit more difficult to read overall, but it’s worth it since you’ll know the precise difference between your wholesale fees and rate markups. Interchange-plus rate markups typically consist of both a percentage markup and a per-transaction fee markup, both of which are applied to all your transactions.
This is a newer pricing system, but it’s catching on. It’s similar to interchange-plus in that the wholesale cost of each transaction is charged separately from the markup. The difference is that you do not pay any percentage markup on transactions, just a small per-transaction fee. Then, an additional markup is charged as a flat monthly subscription fee. For merchants with large transactions especially, this kind of pricing can save a lot of money without decreasing transparency. Check out Fattmerchant (see our review) for a great example of this kind of pricing.
If you aren’t lucky enough to be on interchange-plus or subscription pricing, chances are you’re tied up in a tiered or ‘bundled’ pricing model. Even with the increased popularity of the above “cost-plus” models, the majority of business owners are on a tiered plan. Tiered statements may appear simpler at first, but in reality, this model makes it difficult to thoroughly understand your rates and fees.
Tiered pricing plans categorize credit card transactions into three categories: qualified, mid-qualified and non-qualified. Generally, qualified rates are the lowest, and the transaction rates increase for mid-qualified and are highest for non-qualified transactions. Qualified transactions must meet all of the processor’s criteria for processing, such as a swipe/dip in-person with a batch settlement the same day. Failure to meet one or more standards may result in a ‘downgrade’ to mid-qualified or non-qualified tiers.
Some dubious processors take advantage of this more opaque pricing plan to charge merchants excessive markups. You may end up paying a lot more than you want to with little way of determining exactly what you are paying for. This is because processors often fail to disclose which tiers the merchant’s transactions are falling into, making it nearly impossible to determine the true markup rates over interchange.
This is like tiered pricing, but without the tiers. Instead, all transaction cost the exact same percentage and transaction fee, regardless of the wholesale cost. All costs are blended together to create one consistent rate and fee. This tends to make the transaction cost very high, especially for debit transactions. But since processors using blended rates (like Stripe and PayPal) usually do not charge a monthly fee, this pricing model often makes sense for low-volume businesses.
Breakdown Of All Credit Card Processing Fees
We’re finally ready to tackle some individual fees! The list we’ve compiled is a general reference for the most common fees out there in the processing world, along with their typical price ranges . Your pricing model and your specific processor dictate which of the individual fees come through to you on your account. If you’ve got every single one, there’s a problem!
As we dive into the details, don’t lose sight of these big picture concepts regarding wholesale and markup costs:
- A markup is anything beyond the established wholesale fees from either the card associations or the card-issuing banks.
- Wholesale fees from the card-issuing banks come in only one form: interchange fees — all of which are transactional. Card association fees, on the other hand, can be transactional, scheduled, or incidental.
- Many markup fees are negotiable, while wholesale fees are not.
- A wholesale fee can be passed through to you by your Merchant Account Provider “at cost,” marked up by your provider, or absorbed into the overall cost of running your account in another way. The same goes for costs associated with other add-on service providers — passing the fee straight through, marking it up, or absorbing the cost into another blanket fee are all possibilities.
- Don’t get too hung up on your processing rates or any one particular fee. You must consider the entire markup amount by looking at all the rates and fees on your account in order to accurately assess your cost.
We’ve included a summary table for each general category of fee (transactional, scheduled, incidental), followed by detailed text descriptions if you want to learn more about a particular charge. Let’s get to it!
Transactional Card Payment Fees
|Typical Price Range||Wholesale||Markup|
varies, tables are published
varies, see our list
Processor's Rate Markup
varies, may be blended w/interchange
- Interchange Fees: These are the fees the card-issuing banks charge for each transaction, and they represent the largest expense merchants (should) pay per sale and per month. Interchange fees typically consist of a percentage of each transaction accompanied by a flat per transaction fee (e.g., 2.10% + $0.10). The exact cost per transaction depends primarily on the type of card (e.g., rewards, corporate, personal, etc.) and the way it’s processed (e.g, swiped/dipped, keyed). The card associations set these fees for the banks, and Visa and MasterCard publish the interchange fees online. Discover and American Express require permission from your acquirer to access their equivalent fees.
- Assessments: These are the fees the card associations collect for each transaction, and make up a smaller portion of your total card processing costs than interchange fees. The primary type of card association fees are called assessments, and are based on a percentage of the total transaction volume for the month. Depending on the card association, the main assessments currently range between 0.12%-0.15%, while an additional assessment percentage is charged on international transaction volume. Meanwhile, one or more small, flat per-transaction fees are also charged across your whole processing volume. These have different names depending on the association — APF (Visa), NABU (MasterCard), and Data Usage Fees (Discover) are the main ones. Visa & MasterCard don’t publish assessment fees at all, Amex publishes a few, and Discover restricts access. Therefore, we recommend using our full list for reference.
- Processor’s Rate Markup: All processors add some type of markup to the wholesale interchange rates of processing transactions. The markup may be blended with interchange, or kept separate. With interchange-plus, for example, your processor will quote you something like 0.25% + $0.10. THAT is their markup over interchange — the amount they will add to the wholesale interchange rates. But, if you’re on a tiered pricing plan, you’ll get a quote with Qualified, Mid-Qualified, and Non-Qualified rates. Those quotes have the markup baked right into the rate, thus making it more difficult to tell what the processors true margin is. See the Pricing Model section for more info.
Scheduled Card Payment Fees
|Typical Price Range||Wholesale||Markup|
Fixed Acquirer Network Fee (FANF)
varies, published by Visa
MasterCard Merchant Location Fee
$15/yr or $3/yr
PIN Debit Network Fee
Online Reporting Fee
Monthly Minimum Fee
POS Software Fee
Payment Gateway Fee
$5-25/mo (+ trans. fee)
PCI Compliance Fee
IRS Reporting Fee
- Fixed Acquirer Network Fee: Otherwise known as the FANF, this is a card association fee from Visa. While the exact amount varies widely based on your business type and monthly volume, it’s still is a predictable, flat fee. Your processor decides how to pass this along to you, but it’s typically assessed once per quarter.
- Merchant Location Fee: MasterCard charges $15 per merchant location annually if you’re using a traditional processor ($3 per location annually for payment facilitators like Square.) This is the wholesale amount, but how and when your processor charges you will vary.
- PIN Debit Network Fee: PIN debit, which not all businesses accept, operates on separate (but associated) networks to Visa and MasterCard (e.g., Maestro, Accel). Some of the main networks currently charge an annual network access fee of $12-$14/year to the processor for each merchant using the network. Depending on exactly how many networks are at play, this typically totals between $50-$62/year. If you accept PIN debit, you may see this fee passed through to you.
- Monthly Fee: These are service fees charged each month, usually for the purpose of covering call center costs. Ironically, most of the phone calls that come in are the result of mistakes made by the merchant account providers, making them the cause of their own fees. If you’re looking for the lowest monthly fee possible (a good idea if you have a low volume) take a look at Payline Data. They have a plan for just $5 per month. Also, note that if you’re on a subscription pricing plan, your monthly fee will be much higher. This is to help cover the markup over interchange that you’d otherwise be paying as a percentage of transaction volume on other plans.
- Annual Fee: These are fees charged every year to cover the basic use of a provider’s services. This is generally a bogus fee unless you are paying it instead of a monthly fee.
- Statement Fee: These are fees charged to cover printing and mailing costs for credit card statements. Some merchants bypass these costs by using electronic bill statements, but others pay as much as $15 a month for miscellaneous processing costs.
- Online Reporting Fee: These are alternatives to statement fees, charged to merchants who choose to view their statements online. Most providers will not charge this kind of fee, and those that do often lump it together with others.
- Monthly Minimum Fee: These are fees charged to merchants who do not reach a certain transaction total for the month or year. The minimums will vary by provider, but most of them are around $50,000 a year of volume and a $25/month minimum fee. This is another fee that is not charged by some of the better providers like Dharma Merchant Services.
- Terminal Fee: These are charged to merchants who have physical stores, where cards are directly swiped/dipped. If you run a business online, you will not have to worry about this. Some providers try to lock merchants into terminal leases, but as we’ve mentioned before, don’t lease a terminal. Most of our favorite providers will encourage you to buy your machine outright for a low one-time fee. This can save literally thousands of dollars in the long-run. For an example of this, check out Fattmerchant.
- POS Software Fee: If you purchase POS software through your processor, this fee will cover that. In some cases, a basic POS software is included with retail merchant accounts at no additional charge beyond the main monthly service fee.
- Payment Gateway Fee: These are similar to terminal fees, but they are applied to ecommerce businesses instead. Some processors have in-house payment gateways that are free of charge (CDGcommerce). Otherwise, gateways usually come with a monthly fee (and occasionally a per-transaction fee as well).
- PCI Fees: These are fees paid to your processor either for noncompliance or compliance with standards set by the Payment Card Industry. In the case of non-compliance, you have to pay because your business is not upholding PCI standards, which could cost you even more money in the long run. In the case of compliance, you have to pay the merchant account provider (monthly or annually) to make sure you remain in line with the regulations at all times. Unfortunately, some providers charge for this service without actually providing it, so you need to make sure you are being cared for at all times.
- IRS Report Fee: These are fees that merchant account providers charge in exchange for reporting transaction information to the IRS (1099-K).
|Typical Price Range||Wholesale||Markup|
Processing Integrity Fees
varies, see our list
Early Termination Fee (ETF)
Account Closure Fee
Address Verification Service (AVS)
Voice Authorization Fee
Retrieval Request Fee
Non-Sufficient Funds Fee (NSF)
PCI Non-Compliance Fee
- Processing Integrity Fees: Whereas the main fees from the card associations are assessed on all your transactions, some are only charged as a penalty when you have not met the requirements for authorizing and/or settling transactions properly. These card brand fees typically include “integrity” or “misuse” as part of the fee name. They resemble transactional fees, because they are just a few cents per instance (Amex’s is a percentage), and are often grouped together on a statement with the rest of the more regular transactional fees. It’s common to incur a handful of these charges each month, but watch out if they become excessive. Again, see our full card brand fee list for assistance in identifying these fees.
- Application / Setup Fee: Most good providers don’t charge a setup or application fee, with the exception of certain high-risk account providers. Look for a provider that doesn’t charge this, or negotiate its removal.
- Early Termination Fee (ETF): This is pretty self-explanatory. It is a fee that is charged if you cancel your contract early, and one you definitely want to avoid.
- Account Closure Fee: Different and much lower than an ETF, this is charged no matter when your account is closed.
- Address Verification Service (AVS): If you have an ecommerce or telephone order business, beware of the AVS fee. It will be charged on every single transaction. For retail businesses that occasionally key-in card information, you don’t need to worry about it as much.
- Voice Authorization Fee (VAF): Rarely, you may be required to call a toll-free number in order to verify certain information before a transaction is authorized. This doesn’t occur often, so don’t worry about it too much.
- Retrieval Request Fee: Every time a customer initiates a dispute on a charge from your business, it sets into motion the chargeback protocol. This retrieval request is the first step. The fee covers any expense related to the retrieval request.
- Chargeback Fee: After the retrieval request, the actual chargeback may occur depending on the circumstances. If it does, expect another fee on top of losing the money from the sale.
- Batch Fee: Every time you submit a batch of transactions, a batch fee (or batch header) is charged. It only happens once or twice a day, so don’t worry too much about an extra dime or two.
- NSF Fee: If you don’t have enough funds in your bank account to cover your merchant account expenses, you will be assessed an NSF (non-sufficient funds) fee.
- PCI-Non Compliance Fee: This fee will start kicking in monthly if you don’t meet PCI standards.
Finding the Lowest Credit Card Processing Rates & Fees
We wish there was a simple solution here, but the truth is that it depends on several factors. No two business situations are exactly alike. But we can give you some guidance with a few real-world examples.
Take a look at these three common credit card processing quote types:
|Test Case #1||Test Case #2||Test Case #3|
|POS and Other Features Included||Yes||Yes||Yes|
|Retail Rates (Markup)||0.00% + $0.08 markup||0.30% + $0.10 markup||2.75% total|
|Monthly Fee (Markup)||$99||$0||$0|
|Markup on 200 x $100 transactions in a month||$115||$80||About $354|
|Markup on 50 x $1,000 transactions in a month||$103||$155||About $660|
|Markup on 500 x $15 transactions in a month||$139||$72||About $23|
|Best Choice For||Mid/large transaction size, Mid/high monthly volume||Mid/low transaction size, Any monthly volume||Small transactions, Low monthly volume|
As you can see, the best pricing option for you will depend on your total volume and average transaction size. You have to do the math for your unique situation every time. But you can use our “best for” guidance above to get on the right track.
Every credit card and merchant account provider has a different set of costs associated with its services. Some of them are unavoidable, but others can be negotiated. We recommend pass-through pricing (interchange-plus or subscription) to most merchants. Remember that many of the typical scheduled and incidental fees — not just your processing rates — are negotiable. If you process a lot of transactions, don’t be afraid to bargain with your processor. With that in mind, there are several processors out there that are very transparent with their fees and are more than happy to give you interchange-plus credit card processing fees. The majority of our highest rated processors do just that.
FAQ For Credit & Debit Card Processing Cost
Can my customers cover processing fees in the form of a surcharge?
Along with general pros and cons of this strategy, there are strict rules governing surcharging customers that you must know, and it’s also a state-by-state issue. Check out our article on surcharging for the full scoop.
I have (business type) with ($ processing volume). Which of your top-rated processors will give me the best pricing?
We’d first suggest that you consult our test case examples in the above section to get you into the right ballpark of processors that are best suited to your needs. Total volume and business type (risk level) are important considerations, but other factors include your average transaction size, method of processing (card-present vs. not present), and any add-on services you might need. Our post on how much you should be paying helps break down these considerations, and our cost analysis workbook walks you through a compete apples-to-apples comparison between providers using your specific numbers. In the end, there’s no getting around the fact that you have to do the math for your own situation.
I process (monthly volume) and my processing rates are (%). Am I paying too much?
First, make sure to calculate your effective rate, which includes ALL the total fees you pay in a given month, divided by your total sales volume. This is the important percentage you need to know, since every processor’s rates and fees work differently. Once you know this overall percentage, check out our complete guide to analyzing your processing statement to discern if you’re paying too much for your specific situation (and if so, why!).
A processor offered me direct / better wholesale rates. Is this possible?
The short answer is: no, this isn’t possible. Wholesale rates are fixed and non-negotiable across the industry, and there will always be some kind of markup involved.
However, many processors play with the terminology to their own marketing advantage. When processors tout “direct” wholesale rates or say they can “eliminate the middlemen,” they’re often just obscuring the way their own markup is charged. All processors add a markup in some form — it just depends on the pricing model and the individual processor’s method of implementing fees. Sometimes, all the processor is saying is that some form of “pass-through” pricing (like interchange-plus or membership) is offered, in which pure wholesale costs are passed directly on to you. That’s great! But, it’s nothing extra special — there’s still a markup coming!
“Better” wholesale rates is a slightly more nuanced topic. While wholesale costs themselves are indeed totally fixed, certain businesses (especially B2B) can refine their processing procedures to ensure their transactions fall into target interchange categories. This is referred to as “interchange optimization” and is beyond the scope of this guide, but you can talk to individual processors to learn how they handle this issue. Do note that there is little motivation for a processor to help you optimize interchange if you’re on a tiered pricing plan.