Understanding the costs behind accepting card payments can help you manage your budget and improve your bottom line. This guide breaks down the common fees you’ll encounter and offers practical tips to keep them under control.
What Are Credit Card Processing Fees?
Whenever a customer pays with a credit or debit card, several parties handle the transaction: the card network (Visa, Mastercard, etc.), the issuing bank (the customer’s bank), and the acquiring bank (your payment processor). Each takes a cut for their role, resulting in fees that are typically passed on to merchants.
Main Types of Fees
1. Interchange Fees
Interchange fees are set by card networks and paid to issuing banks. They often form the largest portion of your processing costs. Rates vary by card type, transaction size, and industry. For example, rewards cards usually carry higher interchange rates than basic debit cards. To see how this applies to your business, check out this overview of credit card processing.
2. Assessment Fees
These are small charges imposed directly by the card networks (e.g., Visa, Mastercard). They’re calculated as a percentage of each transaction and are generally non-negotiable. While they’re less than interchange fees, they still add up over time.
3. Processor Markup
This is the fee your payment gateway or merchant services provider adds on top of interchange and assessment fees. Providers package their markup in various ways—flat per-transaction fees, monthly minimums, or a blended rate. Comparing plans can reveal a setup that fits your sales volume and transaction size.
Factors That Affect Your Fees
Several variables influence how much you pay:
- Type of Card: Premium and business cards often carry steeper interchange rates.
- Transaction Method: Card-present transactions (in-store) typically cost less than card-not-present ones (online).
- Monthly Volume: Higher-volume merchants might qualify for lower rates or tiered pricing.
- Risk Profile: Industries deemed higher risk, such as travel or gaming, can face additional surcharges. If you fall into that category, you may want to explore leading high-risk payment gateways.
How to Lower Your Processing Costs
- Choose the Right Pricing Model
- Interchange-plus: You pay the exact interchange rate plus a fixed markup. This offers transparency and often ends up cheaper for larger businesses.
- Flat-rate: You pay a single percentage plus a flat fee per transaction. This can be easier to budget for small to mid-sized operations.
- Encourage Card-Present Sales
Whenever possible, process payments in person to take advantage of lower card-present rates. Mobile readers and POS systems can make this transition smoother. - Monitor Chargebacks
Each chargeback can cost you more than the transaction itself. Implement clear return policies and keep thorough records to dispute unwarranted claims. - Review Statements Regularly
Fees can change over time. A quarterly review of your merchant statements helps you spot unexpected increases or billing errors. - Negotiate with Providers
If your processing volume grows, call your provider to renegotiate fees. Showing that you understand interchange categories and can take your business elsewhere puts you in a stronger position.
Real-World Example
Imagine you run a boutique that processes $50,000 per month in card sales, split evenly between in-store and online. Using a blended interchange rate of 1.75%, assessment fees of 0.13%, and a processor markup of 0.30% + $0.10 per transaction (assuming 500 transactions), your monthly cost breaks down like this:
- Interchange: $50,000 × 1.75% = $875
- Assessment: $50,000 × 0.13% = $65
- Processor Markup: ($50,000 × 0.30%) + (500 × $0.10) = $150 + $50 = $200
- Total: $1,140 per month
That’s about 2.28% of sales. A switch to a pure interchange-plus plan with a 0.20% markup could save you $100–$150 monthly.
Selecting a Payment Partner
When you’re ready to compare providers, look beyond just the headline rate. Consider:
- Monthly Fees: Do you face statement or minimum fees?
- Equipment Costs: Are terminals leased or sold?
- Customer Support: How quickly do they resolve issues?
- Integration: Does the gateway plug into your existing shopping cart or accounting software?
If you’re curious about how a specialized gateway handles higher-risk industries, visit this page on high-risk payment gateways. And if you have questions or need a custom quote, don’t hesitate to contact us.
Final Thoughts
Credit card processing fees are an inevitable part of accepting cards, but they don’t have to erode your profits. By understanding each charge, choosing the right pricing model, and negotiating as your business grows, you can keep costs in check. Review your credit card processing fees in your statements regularly and stay informed about market changes—those steps alone could shave significant dollars off your monthly bills.
To learn more about how credit card processing can fit into your overall payments strategy, explore our resources or get in touch today.