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What Is The Standard Credit Card Processing Fee

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What Are The Average Credit Card Processing Fees That Merchants Pay?

While the list of MCC codes may seem extensive, many businesses fit into more than one category. Thats where processing fees based on your industry classification become complicated. For example, if your business is categorized as both a retail establishment and a travel agency , youll be charged credit card processing fees based on both types of industry practices.

And if you dont know the MCC code that applies to your business, it can be difficult to determine how much youll pay in processing fees. Thats why credit card processing companies typically use an automated tool that assigns your company with a default MCC code based on some basic information that you provide.

If youre unhappy with the credit card processing fee that results from your MCC code, you may want to consider filing a complaint with the Federal Trade Commission . The FTC works with businesses and credit card processors to ensure fair pricing for all types of merchants. Keep in mind, however, that if your business does not qualify for a lower fee under current law, or if you cannot provide sufficient evidence that your particular business type deserves to be reclassified into a different category, the FTC may not be able to help.

Battle Over Swipe Fees Is Nothing New

Credit card processing fees have long been contentious, with Walmart in and out of litigation during the last decade with Visa over high fees. Late last year, to stop accepting Visa credit cards issued in the UK due to high fees. The two companies ultimately struck a deal that prevented a shutdown of British Visa cards for Amazon purchases.

In the U.S., the battle continues with retailers arguing for decades that the fees set by Visa and Mastercard amount to price fixing. But the fight now takes on new urgency with consumers coping with higher prices of nearly everything.

Leon Buck, vice president at the National Retail Federation, estimates the average family spends on fees about $700 a year — an amount that will continue to climb with inflation since the fees are a percentage of their total spending bill.

These fees get factored into the cost of everything consumers buy, said Doug Kantor, general counsel at the National Association of Convenience Stores. This is bad for merchants, bad for consumers and bad for inflation.

What Are Credit Card Merchant Fees The Different Types Explained

If youve decided to accept credit card payments for your business, youll quickly realize there are many merchant providers out there and they all charge differently. Unlike other overhead expenses, such as rent or business supplies, credit card processing fees are more complicated to predict and understand. This is because the pricing models that determine credit card merchant fees vary among merchant service providers and can include hidden costs.

In this post well explain more about the different types of credit card merchant fees, the pros and cons of each, and help you determine which is best for you.

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The Cost Of Accepting Credit Card Payments

When your business processes credit card payments, there will be multiple fees taken out of the total transaction amount. The non-negotiable credit card network fees can vary:

  • From 1.15% + $0.05 to 2.50% + $0.10 in interchange fees, although this could be as high as 3.30% + $0.10 if the client uses an American Express card.
  • From 0.13% to 0.15% in assessment fees.

The most important factors in what your business pays will be its MCC and the type of credit card the customer uses.

Next, your payment processor will take its cut, unless you’ve chosen a processor that charges one flat rate to cover all the fees in the transaction.

With credit cards growing more and more popular, the typical merchant doesn’t have much of a choice but to pay these fees to the card issuer and payment processor. By knowing how much you’ll pay on each transaction, you can price your products appropriately and ensure you’re making enough money on each sale.

Some businesses also charge a credit card convenience fee to cover the cost of the processing fees above.

Payment Service Providers Vs Merchant Account Providers

What Are the Average Credit Card Processing Fees That Merchants Pay ...

There are numerous payment processors available for you to work with, each with different features, services, and costs. Generally, however, a differentiator between providers is whether theyâre a payment service provider , like Square or PayPal, or a merchant account provider, like Payline Data or Dharma Merchant Services.

Payment service providers have attempted to simplify the transaction fee part of credit card processing by charging a flat-rate fee on every transaction of the same type and eliminating long contracts and hidden fees. Although these providers may have pricing structures that are easier to understand, they may not necessarily be cheaper than traditional merchant account providers. Letâs break down the transaction fee pricing models of a few top payment service providers, as well as merchant account processors to see how their credit card processing fees differ.

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What Factors Can Impact The Fees You Pay

There are many things that can influence how much you pay. Below is a breakdown of what has an impact on the credit card fees.

  • The Processing Method: card-present transactions have a lower rate than card-not-present.
  • The Data Submitted with the Transaction: the more secure the transaction , the lower the rate.
  • The Merchant Category Code: some MCCs have specific interchange categories.
  • The Card Type: the type of card will influence the rate. The highest to lowest interchange fees are as follows: premium credit cards, standard credit cards, signature debit cards, PIN debit cards.
  • The Card Brand: specialty card offers, like rewards, can impact the interchange rate.
  • The Card Owner: the interchange rate is influenced by the card owner, whether that is an individual, business, corporation or municipal agency.

In the past there has been little to no transparency on how the fees were calculated and with cards being such an important part of the online purchasing ecosystem merchants were at the mercy of the banks. However things have improved and an effort to standardize interchange, within the EU, has come into action.

How To Reduce Your Credit Card Processing Fees

Want to reduce your credit card processing fees but not interested in spending too much time researching merchant services accounts? Here are some options for paying as little as possible.

  • Rate locks: Require that your provider offers a lifetime rate lock on fees. This way, your fees will remain the same every month. Service providers often tempt business owners with low initial costs. But over time, these rates can slowly creep up. Before long, business owners are paying far more than they expected.
  • No cancellation fees: Never sign with a merchant account contract that charges cancellation fees. Without these fees, business owners can cancel their accounts and go with a lower service provider without having to pay a hefty cost to do so.
  • Tiered or bundled is a no-no: Under these pricing packages, merchant account providers classify certain purchases as qualified and others as nonqualified, with qualified purchases costing less per transaction.

Merchant account providers have too much discretion when determining what is considered a qualified credit card purchase. Some providers might only consider a debit card transaction that requires a PIN to be a qualified purchase. Those purchases would cost less, but all others would cost more, an expensive proposition for business owners.

If the merchant account providers dont feel they are making enough money, they can send more transactions to the non-qualified rate, Cunningham said.

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American Express Credit Card Processing Fees

American Express is considered the priciest in terms of credit card processing fees. Their high discount rates, which often reach 3.5%, are higher than that of competitors like MasterCard and Visa. While more expensive, up until recently Amex has kept its pricing model simple, meaning most merchants paid the same credit card processing fees.

American Expressâ processing structure is changing with the recent introduction of OptBlue. The details on OptBlue are scarce, but we do know through this new program Amex will be structured more like its competitors â differentiating more between transactions, merchant category codes, etc. Whether credit card processing fees for American Express will drop as a result of OptBlue remains to be seen.

One of the major sought after changes by merchants is the way in which Amex handles returns. While other card issuers will refund the business part of the cost of the credit card processing fees charged to the merchant, American Express did so only when after merchants agreed to paying higher processing fees per transaction. Many hope the new OptBlue program will make Amex a little bit more merchant-friendly in that regard. Once any new details are released, this guide will be changed to reflect them.

Types Of Fees Included In Payment Processing Fees

Merchant Services/ Credit card Processing Monthly Minimum Fee Explained

1. Flat fees

Flat-rate fees are payment plans where the payment processor charges the fee for all transactions, regardless of the type of card, brand, or whether its an in-store or physical purchase. Flat-rate fees are charged as a percentage of the transaction amount or as a percentage of the purchase plus an additional fixed fee.

Flat-rate fees are preferred by new businesses that do not handle large volumes of transactions that allow them to negotiate a fee with the payment processor. Also, the business is aware of the fees they will incur every time they process a payment.

2. Interchange plus pricing

With an interchange plus pricing strategy, the payment processor charges an interchange fee plus a fixed fee or percentage per transaction. For example, a processor may charge 0.5% + 15c per transaction above the interchange fee. Interchange plus plans are more complicated to understand than flat-rate plans, and it makes the bank statement more difficult to understand.

3. Tiered fees

In a tiered pricing model, the processor takes the different interchange fees and groups them into three categories, depending on the level of risk associated with the transaction. The categories include qualified rate, mid-qualified rate, and non-qualified rates. The different tiers are discussed below:

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Square Credit Card Processing Fees

Square offers one standard rateâ2.6% + $0.10âto any business that signs up, no matter how big or small the company and no matter what their payment volume is. Although business owners appreciate this simplicity, Square is costlier for most businesses than a traditional merchant account provider.

The only difference is that fees are slightly lower for brick-and-mortar merchants who use one of Squareâs point of service solutions, such as Square Register or Square Terminal. Like most credit card processors, Square charges a higher rate to process manually entered card payments and invoice payments. The invoice fee comes into play when you send your customer an invoice via Square that they pay online.

Type of Transaction
2.9% + $0.30

Get Payment Processing From Your Pos Provider

To reduce credit card processing costs for small businesses, you might consider working with one provider for both credit card processing and POS solutions to:

  • Simplify your payment processing
  • Eliminate additional costs like integration fees or fraud prevention fees

Youll have seamless integration and if your business qualifies for credit cards processing discounts, you can lower the overall fees.

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The Basics Of Credit Card Fees

Ellen Cunningham, marketing and content manager at Tech180 and former manager at CardFellow, a site that provides advice and resources to businesses on credit card processing issues, said most small-business owners struggle to understand just how much their merchant account fees will cost them each month.

Thats because the pricing plans that these companies offer can be confusing, Cunningham said.

They offer pricing models that can be very complicated, she said. This is especially true if youre a small business that doesnt have an accounting staff to really look into these fees.

What if you as a business owner dont have the time to fully research credit card processing fees? It might make sense to take a closer look at what is known as your merchant discount, the final rate that youll pay to accept credit transactions.

Unfortunately, the merchant discount is made up of main parts, your base costs and markups. And both of these fees are made up different parts, too.

Flat Fees: A Better Way For Small Businesses

Credit Card Processing Fees

There are astoundingly robust, lightweight, and easy-to-use mobile card reading technologies available that require minimal set-up costs and few extra charges. These are companies with fair, simple pricing and are an excellent choice for most small businesses. One such company, SumUp, offers the lowest overall cost on the market, with just $19 cost for the card reader itself and a 2.75% transaction fee no additional fees whatsoever.

less than five minutes.

Catherine Traffis

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Before Choosing A Payment Processor

Since theres no fixed average cost, because all processors charge different amounts, due diligence and comparison shopping is important. Also, keep in mind that pricing isnt the only criteria when selecting a payment processor. Ask detailed questions. Get clear answers regarding all of their fees, and check their track record of success, security, technological expertise, and responsive customer service.

How Important Is Simplicity

Credit card processing fees are confusing, so its not surprising that some providers such as Stripe or Square promote themselves as a simpler solution, charging a monthly flat fee for credit card processing services.

Cunningham said its usually just small businesses with transactions that average $10 or less, such as coffee shops, that benefit from working with providers such as Square or Stripe.

Businesses with larger transactions will generally pay more each month.

In some cases, merchants dont mind that. They are OK with paying more for simplicity, Cunningham said. That is fine, but you need to understand this. Dont confuse simplicity with competitiveness.

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Average Card Processing Fees In 2022

Credit Card Fees Affect Small Businesses

As discussed, card processing fees in 2022 depend on several factors, including whether payments are primarily processed in person or online. That said, average credit card processing fee ranges are provided below for the major credit card networks:

Average Credit Card Processing Fees By Network

1.48% + $0.05 to 2.53% + $0.10
American Express 1.58% + $0.10 to 3.45% + $0.10

Note that American Express is considered a bit differently than other credit card companies. Unlike the other three credit card companies in the table above, American Express is a closed-loop network. This means that it is not backed by another financial institution, which gives it more control over its practices and charges. American Express calls the fees it charges discount fees, which operate similarly to interchange fees.

If you do have an American Express card, this wouldnt have any impact on things like your or , but it may affect where your card is accepted due to generally higher fees.

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Payment Service Provider Credit Card Processing Fees

As we mentioned, payment service providers are trying to simplify business credit card fees. You donât have to purchase expensive merchant processing hardware to use a PSP, and you donât have to sign a long-term contract or worry about hidden fees. Youâll pay the same flat-rate fee on every transaction of the same type.

PSPs charge a different fee for card-present payments, card-not-present payments, and online payments. For example, youâll pay a lower fee when you accept a credit card at your retail shop. Youâll pay a higher fee if a customer wants to shop online on your website, or if youâre using information from a card thatâs stored on file. Additionally, payment service providers generally provide greater business protection from chargebacks in comparison to merchant processors.

Other Credit Card Processing Fees & Costs

Merchant service providers also charge consumers monthly fees and minimums. The costs are vary widely from provider to provider. Below we highlight how different these merchants can get by breaking down the additional costs of Cayan and First Data.


$99 per year $0

Price points should not be the only way of coparing MSPs. The above table is simply meant to illustrate that prices can vary between providers. There are more qualitative differences that may explain certain price points, and we recommend looking into what you will get with one provider versus another.

Another cost to consider is the price of equipment. If you want to process credit card payments in-person, your business will need at least one credit card reader. Merchants are presented with a wide set of choices in this department. Your personal needs and wants for the equipment will govern how much of a cost you will have to bear here. Some MSPs, such as Chase Paymentech, offer a free credit card reader. We recommend you do not base your decision of a payment processor based on this feature, as it will only provide you gains in the short term. Below is a sample of various card reading products and their prices. They vary in price, because they also vary in capability. You should know, ahead of time, if you want your card readers supporting EMV technology, or NFC payments.

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