How Much Do Credit Card Companies Charge Merchants

Credit card transactions have quickly become the lifeblood of eCommerce businesses and storefronts alike. According to Capital One, global credit card transactions in 2022 reached an estimated 678 billion—an average of 1.86 billion every single day.

Credit cards provide a high level of convenience for consumers, increase the speed of transactions, and provide a secure pathway for funds.

However, accepting credit cards does come with a flipside; the ongoing sting of credit card fees. The added costs that come with every transaction can seriously affect profitability and make it difficult to understand running costs, especially when certain fees appear to sneak in without notice.

By understanding how credit card companies charge merchants and how these fees are calculated, businesses can explore optimization strategies to manage and reduce some of these costs. As well as improving profit margins, these activities can also enhance the customer experience and give merchants a competitive advantage in the marketplace.


  • Understanding how credit card companies charge merchants is crucial for optimizing costs and enhancing customer experience.
  • Credit card fees, including interchange, assessment, and payment processor fees, impact businesses on a per-transaction or recurring basis.
  • Leveraging technology, monitoring chargebacks, and addressing individual business factors help to reduce credit card fees and improve overall profitability.
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How Much Do Credit Card Companies Charge Merchants?

Credit card companies typically charge merchants a fee for each transaction processed. This fee is a percentage of the transaction amount, often ranging from about 1.5% to 3.5%. 

The exact rate can vary based on several factors, including the type of card used (debit or credit), the card brand (Visa, MasterCard, etc.), the merchant’s business type, and the terms of the merchant’s agreement with their payment processor.

Basics of Credit Card Fees

Credit card fees refer to a range of charges that are imposed by credit card issuers on cardholders and merchants for completing credit card payments, either online or in person.

In addition to generating revenue for the card network, the purpose of credit card transaction fees is to cover operational costs and risk management. In some cases, fees may also go towards administering the value-added perks offered to cardholders, such as rewards programs and cash advances. Fee ranges will vary depending on the credit card network and financial institution in question, as well as the terms and conditions of the card agreement.

Businesses need to make sure they understand the credit card processing fees they’re responsible for paying and how this adds to the cost and compliance of accepting these cards regularly. Common types of fees that merchants should be aware of include:

However, this doesn’t mean that merchants have zero control over the size of the fees they pay. The merchant service providers that a business is using to handle credit card payments play a key role in determining the size and structure of credit card fees.

By facilitating credit card transactions, merchant service providers act as intermediaries between credit card companies and the issuing banks. This enables them to lower credit card fees for customers who meet certain criteria, such as transaction volume or secure payment history. This makes your choice of merchant service provider a key consideration when it comes to business overheads.

Breakdown of Common Credit Card Fees

Credit card fees can be broken down into a range of different levies that are applied separately, either on a per-transaction basis or as a recurring monthly fee. Viewing these costs individually makes it easier to understand what is contributing to your credit card processing costs and where you may be able to save money.

So, what types of fees should businesses expect to encounter when accepting credit and debit cards?

Interchange fees

An interchange fee is paid by the merchant’s acquiring bank to the issuing bank every time a credit card transaction is made. Most interchange fees are made up of two parts: A percentage of the total transaction amount, and a flat fee that is charged per transaction.

The purpose of an interchange fee is to compensate the card issuer for the risk and operational costs associated with providing the credit or debit card service to the customer.

Strictly speaking, merchants do not pay interchange fees directly to the card network. Rather, they negotiate with banks such as Chase or Citibank to receive a “merchant discount rate” that is passed onto them by their bank. The size of the full interchange fee is determined by the card brand i.e. Visa or Mastercard. Each network will calculate the fee differently, depending on the type of card, the industry, and the merchant’s payment processing volume. Usually, interchange fees will range between 0.3-2% of the total transaction value.

Assessment fees

An assessment fee is imposed by payment networks in exchange for processing credit card payments. These fees are paid by the merchant’s acquiring bank directly to the credit card network to help maintain payment infrastructure, support services, and enhance revenue.

Unlike interchange fees, merchants are not able to negotiate assessment fees with credit card networks. They are set by the network and passed on to merchants through their bank and the card brands they accept. Assessment fees are normally charged as a percentage of the total transaction amount and are smaller than interchange fees.

Payment processor fees

The payment processing company used by the merchant will charge a range of processing fees in exchange for facilitating transactions and providing equipment such as POS (point of sale) and card readers. Given that other fees such as interchange fees and assessment fees go directly to the card networks, these costs are how payment processors make revenue and maintain their infrastructure.

Payment processing fees can be broken down into a range of smaller fees, including:

Transaction fees. Also known as “swipe fees,” these fees are charged on every transaction processed by the credit card processing company e.g. Discover. This takes the form of a flat fee or a percentage of the transaction amount.

Account fees. These service fees are charged on a monthly or annual basis for account maintenance. If POS hardware is being offered as part of the merchant’s payment plan, it will also include the cost of hardware.

PCI compliance fees. This fee helps payment processors maintain compliance with the latest Payment Card Industry Data Security Standard (PCI DSS) requirements for secure online transactions.

Additional fees

As well as the credit card fees mentioned above, there are a range of other fees that contribute to credit card processing costs for business owners. These include per-transaction fees and fees that are charged on a recurring basis to maintain certain services:

Gateway fees. There will be a fee for using an online payment gateway to securely transmit payment data to the card network and the acquiring bank. This fee is either paid via the payment processor (if they offer their own payment gateway) or a separate service if the business subscribes to a separate gateway.

Statement fees. Many processors will charge an extra fee for generating monthly statements that provide information on transaction activity and the itemized fees charged during that period. Although this is an extra cost, it’s significantly easier than trying to keep track of fees on your own.

Chargeback fees. Whenever a customer disputes a transaction and funds need to be returned to the issuing bank, there is usually a cost per chargeback that is passed onto the merchant by the acquiring bank or merchant services provider. A chargeback fee can be anywhere from $15-$45 per chargeback that gets approved, so these fees can add up incredibly quickly.

Although many of these fees only add a few cents per transaction, they can have a significant cumulative impact on a merchant’s bottom line, especially for small businesses with lower transaction volumes.

Factors Affecting Credit Card Fees for Merchants

Given that businesses have little choice but to accept credit card and debit card transactions from customers, it’s important to understand how these fees are calculated. There’s a range of factors that influence the size and type of fees applied to businesses:

The type of card used

The card type being processed—as well as the type of transaction—has a big impact on the fees that a merchant needs to pay to facilitate the transaction.

Credit cards, for example, carry much higher interchange fees than debit cards because the risk profile of credit cards is much larger. For this reason, card brands do not allow merchants to add a surcharge to process debit card transactions.

Different types of credit cards will also involve different fees. Rewards credit cards such as American Express will typically carry higher average credit card processing fees. Rewards cards cost merchants more to process due to the complexity of the program and administering the perks on offer.

It’s also important to note that processing fees for both debit cards and credit cards will vary depending on whether the transaction is taking place in person or remotely over the phone or the Internet. The risk profile for card-not-present transactions is higher than for cards that are physically swiped, as it’s easier for fraudsters to offer false information and bypass the identification process. As a result, credit card processors will charge higher fees for these transactions.

Merchant’s industry and size

The size of a merchant’s processing volumes, as well as the industry they operate in, has a huge influence on credit card processing fees.

Put simply, large merchants that process a high volume of transactions carry a lot more negotiating power with the financial institutions that pass on interchange rates. This puts them in a strong position to secure lower interchange fees and reduce credit card fees overall.

This being said, any business that operates in an industry considered to be ‘high-risk’ will find it more difficult to lower fees. Certain industries including subscriptions, travel, and gambling, are considered by merchant account providers and banks to be at higher risk of encountering chargebacks and fraud. The merchant category code (MCC) assigned by the credit card issuer will identify

As a result, they may be charged higher processing fees to cover higher compliance costs and underwriting. Furthermore, many merchant service providers refuse to provide accounts for high-risk businesses, which gives these merchants less choice over providers in the first place.

Merchant’s processing history and risk profile

Both banks and major credit card networks will consider a merchant’s individual history and profile when assessing the size of credit card fees. A business with a good credit score and compliance with best practices for fraud prevention and monitoring will be considered more reliable and therefore may be eligible for better rates. On the flip side, frequent incidences of fraud or unstable processing volumes can result in higher fees.

For example, having to process chargebacks frequently on behalf of the merchant will result in one-off fees per chargeback, and may also lead to higher interchange fees if the financial institution deems it necessary. The combination of these fees can make it difficult for businesses to reduce operational costs and increase profitability.

How Merchants Can Lower Their Credit Card Fees

Although credit card fees may appear to be set in stone, certain factors that contribute to these costs are within the merchant’s control and contribute to significantly lower credit card processing costs:

Negotiate with payment processors

Payment processing fees can contribute significantly to the size of credit card fees, so working with your payment processor is a critical step to lower payment costs. If your business has steadily grown in processing volume, there’s a good chance that your processor will consider giving you a discount. Providing information such as your average transaction volume, size, and chargeback rate will help to showcase why your business deserves a more favorable rate.

Alternatively, you can get quotes from competing payment providers to give you more leverage during negotiations. In addition to processing fees, it’s important to consider the impact of any monthly fees or extra add-on services that other processors may include.

Choose the right pricing model

A lack of transparency over how processing costs are calculated can cause merchants to spend more than is necessary on processing credit card transactions. Flat-rate pricing and tiered pricing can cause confusion due to a lack of clarity about interchange rates. Moreover, the way that pricing is calculated can also end up penalizing businesses whose transaction volumes are either small or large.

Interchange-plus pricing is more cost-effective for businesses with changeable transaction volumes or types, and it provides more visibility into how prices are set. In this model, merchants pay the interchange fee set by card networks, in addition to a fixed markup levied by the processor. Others such as Stax Pay use interchange pricing with a monthly subscription fee for merchant services, making it easy to understand credit card processing costs.

Consider surcharging

Credit card surcharging can help you lower payment processing costs in several ways. For one, surcharging enables you offset processing fees. When a customer uses a credit card, the merchant incurs processing fees, typically a percentage of the transaction amount. By implementing a surcharge, the merchant (i.e. you) can pass this fee directly to the customer. This means the cost of the transaction is no longer absorbed by the merchant, but by the cardholder.

In some cases, surcharging can encourage customers to use alternative payment methods that incur lower fees for the merchant, such as cash, debit cards, or ACH. This can result in an overall reduction in the average cost of processing payments.

If you’re considering surcharging, you need to ensure that your program complies with all relevant state laws and regulations. This is where CardX by Stax comes in. Considered as a leader in seamless surcharging compliance, CardX lets you accept credit cards at 0% cost. 

Our platform automatically updates to adhere to the latest regulatory changes, ensuring that your business remains compliant 100% of the time.

Using payment optimization strategies

Payment optimization helps merchants to streamline their operations and reduce payment processing costs. For example, efficient transaction routing identifies the most effective route between the available issuing and acquiring banks. As well as reducing processing timeframes, it also reduces transaction fees by finding the pathway that offers the best rate.

It’s also important to choose a payment gateway that offers advanced security features like tokenization and fraud detection. In addition to helping lower fees through better security protocols, this also lowers the risk of fraudulent activities such as chargebacks that substantially increase payment processing costs.

Leverage technology and software solutions to reduce fees

Recent innovations in payment technology have provided businesses with more ways to reduce their payment processing costs. A seamless integration between the POS and payment processor helps to make transactions more efficient, reducing the likelihood of errors that result in higher fees. The growing popularity of mobile and contactless payments also offers some relief, as these transactions are often eligible for lower interchange rates.

For subscription-based businesses, recurring billing and card updater systems reduce the need for personnel to manually process payments or update outdated financial information, which in turn reduces declined transactions.

Monitor chargebacks

Chargebacks don’t only affect the customer experience, but can also prove incredibly costly for merchants. In addition to paying a fee per chargeback, accumulating too many chargebacks can result in financial institutions levying additional fees as a penalty.

Tools such as Address Verification System (AVS) and CVV checks help to prevent fraudulent chargebacks by ensuring that the cardholder’s provided details are authentic. However, ensuring that your eCommerce website or shipping practices aren’t resulting in unnecessary chargebacks is also important. If parcels are going astray or customers are struggling to contact customer support, chargebacks are more likely to accumulate as customers try to resolve their situation. Make sure that all of the information provided on your website is accurate and that customers can contact your business through a range of channels, such as live chat, phone, and email.

Bringing It All Together

Understanding credit card fees is an important first step to businesses being able to tackle their payment processing costs and improve their bottom line.

While businesses can’t avoid credit card fees entirely, there is a range of mitigation strategies available to reduce their impact. Negotiating with payment processors, embracing technology innovations, and monitoring chargebacks are all effective ways to keep processing costs down so that you can invest productively in other areas of your business.

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FAQs about How Much Do Credit Card Companies Charge Merchants

Q: How much do credit card companies charge merchants?

The exact rate can vary based on several factors, including the type of card used (debit or credit), the card brand (Visa, MasterCard, etc.), the merchant’s business type, and the terms of the merchant’s agreement with their payment processor.

Q: What is the average merchant processing fee?

The average merchant processing fee, which includes fees from the credit card company, the payment processor, and other associated costs, typically ranges from about 1.5% to 3.5% of each transaction. However, additional fees like transaction fees, monthly fees, and equipment rental fees may also apply, affecting the overall cost to the merchant.

Q: Is it legal to pass credit card fees to customers?

The legality of passing credit card fees to customers varies by country and region. In th US, credit card surcharging is legal in all 50 states and territories except Massachusetts, Connecticut, and Puerto Rico.

Q: Why are credit card processing fees so high?

Several factors come into play when it comes to credit card fees. These include the costs of maintaining secure and efficient payment networks, the risk of fraud and chargebacks that credit card companies assume, and various operational and administrative expenses. And let’s not forget: these fees are also a source of revenue for credit card companies and banks.

Q: How can merchants lower credit card fees?

Merchants can lower credit card fees by negotiating better terms with their payment processors, choosing a pricing model that suits their transaction patterns (like flat rate, interchange plus, or subscription), reducing chargebacks or fraud, and finally by implementing a surcharging program.