Merchant Credit Card Fee Guide 2024: How Much Does It Cost To Process Credit Cards?

You’ve heard that cash is king. Not so much anymore! 

Cashless transactions have dethroned the age-old cash payments. When was the last time you withdrew cash from an ATM? Or paid for your groceries using hard cash? If you’re like most people, then it’s probably been a while. 

With credit card transaction volume hitting over $9.5 trillion in the US in 2022, accepting card payments is no longer a question of whether to, but how to. The same year, merchants in the US paid $16.70 billion in processing fees, which was a 16.7% increase from the previous year.

If this solidifies your resolve to embrace digital and cashless payment methods, the first step should be to understand what credit card processing fees are, how they work, and how you can lower them.

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Understanding Credit Card Processing Fees

Credit card processing refers to the transactional processes involved in securing a credit card transfer between a buyer and a seller. The transactional procedures are the authorization, clearing, and settlement processes of the funds being transferred.

To complete payment processing, credit card companies have to charge processing fees. Also referred to as swipe fees, these are simply fees that the merchant pays to the credit card company or credit card service providers to accept the payment.

Credit card merchant fees are split between multiple key players- merchants, credit card networks, banks, and processors. 

Processing fees vary depending on the service provider, the agreement between the merchant and the processor, the type of credit card used (debit, credit, corporate, rewards, etc), and the type of transaction (online, dipped, swiped, or keyed in). 

Generally, here’s a breakdown of the types of payment processing fees you can expect:

Interchange fees

These are fees a merchant pays directly to the credit card provider. Also known as the discount rate, interchange fees vary depending on the amount being transacted and the industry in which the business is. 

For example, the interchange fees for online transactions may be higher due to the higher risk of credit card fraud.

They are a combination of a percentage of the transaction amount and a fixed fee charged per transaction.

Interchange fees are set by credit card issuers, such as Bank of America, Citi, or Chase, and are adjusted every year in April and October.

Assessment fees

Assessment or network fees are directed to the credit card network- Mastercard, Visa, American Express, and Discover, to help settle costs associated with maintenance and operation. 

Assessment fees usually make up a small percentage of the transaction amount. These fees also vary depending on the card network.

Processor markup

These are fees charged by the payment processor, which is the company that manages and facilitates credit card transactions. This company accepts credit card payments and sends them to the payment network, either through an online payment gateway or a physical card reader.

Processor markup fees are also known as merchant service fees.

They also vary depending on the credit card processor and include monthly service fees, per-transaction fees, transaction processing equipment lease fees, and statement fees.

Other credit card processing associated costs

Other associated fees charged on credit card transactions vary based on the payment processor, transaction type, and the merchant’s agreement with the processor.

Here are some other fees apart from interchange, assessment, and processor markup fees:

  • Transaction fees– These are the fees charged for every transaction processed. Transaction fees may be made up of a percentage of the transaction amount and a fixed fee for each transaction. The rates also vary based on card type, transaction type, and industry or business type.
  • Payment gateway fees– Businesses need a payment gateway to process online card transactions. Digital transactions come with their own set of fees, including batch, monthly, setup, and transaction fees. These fees can also vary based on transaction type.
  • Terminal or equipment fees– Small businesses often lease or purchase payment processing equipment, such as point-of-sale (POS) systems or credit card terminals. These equipment often have setup fees, ranging between $0 and $2,000, and sometimes monthly fees from the payment processor.
  • Chargeback fees– Sometimes, a customer opens a transaction dispute and seeks a refund of their payment. The payment processor is likely to charge a fee to cover the cost of conducting an investigation and processing the refund. This amount can average between $20 and $100 or higher depending on the number of chargebacks the merchant gets.
  • PCI-compliance fees– Businesses running credit card transactions must be compliant with the Payment Card Industry Data Security Standard (PCI DSS). This regulation is managed by the Payment Card Industry Security Standards Council (PCI SSC) and is meant to protect the cardholder’s data. The average PCI compliance fees vary depending on various factors, such as business specifications. Small businesses can pay about $300 per year while large enterprises can expect to pay up to $70,000.
  • Early termination fees– If a merchant decides to terminate their contract with the payment processor before the period agreed upon, the processor can charge early termination or cancellation fees. 
  • Miscellaneous fees– These are fees charged for additional services, such as statement fees, account set-up fees, and batch fees.

Payment Processing Pricing Structures

Payment processing companies often structure their pricing plans under four models:

Interchange plus pricing

Interchange-plus pricing is one of the most transparent models since it allows merchants to see how much exactly they’re paying for the interchange and fixed service fees.

This pricing model charges based on the rates of the interchange fees at that specific moment, plus a markup fee that goes to settle the processor’s processing costs.

For example, 2.1% + $0.10 per transaction is based on the interchange-plus pricing model.

Another benefit of this model is that you pay lower rates when your interchange fee is in the lower categories. The same happens for higher categories. This is why it’s important to consider whether your transactions mostly fall under the lower or higher rates.

Some popular processors offering interchange plus pricing structures include Payment Depot, Stripe, and Helcim.

Flat-rate pricing

With this model, the payment processor charges a fixed percentage or flat fee on all transactions. They’re usually charged as a percentage plus a per-transaction rate, such as 3% + $0.10.

This is a great model for merchants who want a straightforward structure with no surprises. The fees are the same for all types of card transactions.

However, it’s not the most cost-effective option, especially for merchants that have a high volume of credit card transactions or those with bulk transactions of small amounts.

Payment processors who’ve popularized this model include PayPal and Square.

Tiered pricing

This pricing structure has three tiers for different transactions- qualified, mid-qualified, and non-qualified. Transactions are tiered based on various criteria, such as digital transaction or point-of-sale.

Each of the tiers has its own pricing rate. The qualified tier has the lowest (1.5% to 2.9%) while the non-qualified is the highest. While it’s simple, it’s not the most straightforward when it comes to criteria that make a transaction fall into a particular tier.

Generally, qualified rates are for debit cards and non-reward credit card transactions. On the other hand, the non-qualified tier is for “lavish” cards, like reward and business card transactions. Standards cards fall into the mid-qualified tier.

Additional factors that make up the tiering criteria include:

  • Swiped cards or card-present transactions (qualified)
  • Keyed-in transactions (mid or non-qualified)
  • Card-not-present transactions (non-qualified)

Membership-based pricing

Unlike other pricing models, this structure doesn’t take a cut from every transaction. Instead, it’s based on a subscription structure where merchants pay an annual or monthly fee plus the specific interchange rates at the time of the transaction.

The benefit of this pricing model is transparency and predictability. This makes it a popular choice for small businesses looking to set up credit card payments.

Stax is one card payment processor that uses this pricing model.

Average Credit Card Processing Fees for 2024

Here’s a breakdown of what you can expect from major credit card companies:

Credit Card Company Average Interchange Fees Average Assessment Fees
Mastercard 1.15% plus 5 cents to 2.50% plus 10 cents 0.1375% for transactions under $1,000

0.01% for transactions over $1,000

Visa 1.15% plus 5 cents to 2.40% plus 10 cents 0.14%
American Express 1.43% plus 10 cents to 3.30% plus 10 cents 0.15%
Discover 1.35% plus 5 cents to 2.40% plus 10 cents 0.13%

Factors Affecting Credit Card Processing Fees

Merchant credit card fees aren’t uniform for all businesses and transactions. There are multiple factors that processors use to determine how much you pay. 

Let’s look at a few:

Business type and industry

Card card brands have a “Merchant Category Code” which they use to classify businesses based on the goods and services they provide. All industries and business types are also put under these categories.

Every category is subject to different rates that are also calculated based on business size and risk. The four-digit Merchant Category Code (MCC) influences the interchange fee, benefits offered to customers who shop in various categories, and general card transaction rules.

For example, a baby clothing shop is assigned an MCC of 5641 under “Children’s and Infant’s Wear Stores”

The risk associated with each industry also affects the processing fee. Some risks include the level of credit card fraud and the number of chargebacks. Examples of businesses considered high-risk include pharmaceuticals, adult entertainment, and casinos. Such businesses are likely to pay a higher payment processor fee.

Sales volume

Sales volume is another factor affecting credit card processing fees. Large and small businesses aren’t treated the same when it comes to credit card transactions. Businesses with a higher sales volume or bulk purchase orders can negotiate for lower processing fees.

For example, large businesses, such as retail stores and supermarket chains can pay lower rates since they have the “leverage”. On the other hand, a small or medium-sized beauty and cosmetics shop might not be afforded the same benefit.

Average transaction size

As we’ve seen, the processing fees charged by card-issuing banks and brands are a combination of a percentage and a fixed fee for every transaction. Generally, a business with a lower average transaction size will pay higher processing rates. The opposite is also true.

For example, a healthcare consultant specializing in emergency care and complex surgeries is likely to have a higher average transaction size. That means their processing rate is lower.

Type of transactions

In-person credit card transactions result in lower processing fees than online, mobile, key-in, and card-not-present transactions. This can simply be attributed to the fact that the processing company has to verify that the card belongs to the user. Different verification methods, such as PIN or signature have different rates.

Online and mobile transactions involved in mail orders, eCommerce, and telephone orders have a higher risk of fraud, so they have a higher processing rate.

Merchant’s creditworthiness and history

In some instances, a business owner with a bad credit history will be classified in the high-risk merchant category. Remember, this comes with higher processing fees than the low-risk merchant category.

How to Lower Credit Card Processing Fees

Most small businesses prioritize finding credit card solutions that won’t dent their accounts. The best thing is that processing fees aren’t always fixed. There are some strategies you can use to help you lower your processing fees.

Negotiating with processors

While you can’t negotiate the interchange and assessment fees, the markup fee set by most credit card processing companies is negotiable. The higher the sales volume and transaction size, the more valuable the processor will view you and want to remain in business with you.

You can negotiate with your card processor by presenting yourself as a valuable merchant with a high volume of sales and purchase orders. Also, having a good track record with minimal chargebacks can work to your advantage.

When you approach your processor to negotiate, ensure you’re well prepared. Thorough preparation involves having all accurate details and communicating your needs clearly by focusing on the fees and services you want to negotiate.

For example, you can talk to them about your expected sales in the coming years and have graphs or charts showing your annual growth. If your sales volume is large enough, they might offer you a discount.

Choosing the right payment processing partner

Before settling for a payment processor, talk to multiple service providers, get their rates, and conduct a comparative analysis. This can help you choose a processor with the right pricing model for your business or switch to one with considerable savings.

For example, interchange-plus pricing is more cost-effective and straightforward than tiered pricing. On the other hand, flat-rate pricing is more beneficial for businesses with smaller sales volumes.

Generally, the payment processor that uses the membership-based pricing model, like Stax Payments, is ideal for small businesses that want to pay monthly or annual fees without having to worry about the payment processor eating into profits.

Implementing Surcharging

You can pass the credit card fees to the customers by implementing surcharging. A credit card surcharge is a fee that the merchant adds to the purchase price when the customer uses card payments instead of cash. The surcharge is usually a percentage of the purchase price, ranging from 1% to 4%.

When implementing a surcharge, check your state’s laws and regulations to avoid legal issues. For example, merchants in Massachusetts, Connecticut, and Puerto Rico aren’t allowed to implement credit card surcharge programs. 

On top of that, surcharge programs and additional fees may put off some customers.

If you’ve decided to implement surcharging, partner with a reliable surcharging partner, like CardX by Stax. Our integrated online checkout solution, Lightbox, has helped numerous companies succeed through seamless surcharging and payment acceptance.

Encouraging other payment methods 

If you want to continue accepting digital payments minus the heavy credit card processing fees, encourage your customers to make payments through debit cards, digital wallets, or automated clearing house (ACH).

Debit cards have a different payment processing fee model that’s generally cheaper than credit card fees. For example, you’ll notice credit cards have a convenience fee, but debit cards don’t. They also have fewer risks than credit cards, hence why they’re cheaper to process.

Automated clearing house (ACH) transactions are electronic bank-to-bank transfers with lower fees ranging from 0% to 1.99%.


Credit card transactions build your business by providing your customers with a range of options to pay for your goods and services. However, they also have associated merchant credit card fees that can impact your business’s bottom line.

Before committing to any credit card processor, conduct in-depth research on the most efficient and cost-effective options available. Also, understand how the payment processor fees work and how you can lower them to improve business profitability.

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What is the difference between interchange fees and processing fees?

Interchange fees are paid by the merchant to the credit card issuer, while processing fees are paid by both the merchant and the issuer to the payment processor.

Can merchants pass credit card processing fees to customers?

Yes, merchants can pass credit card processing fees to customers in the form of surcharges or cash discount programs.

How do chargebacks affect processing fees?

Credit card processors charge a chargeback fee to investigate the customer dispute and make a refund. On top of that, the payment processing fee isn’t refunded with the payment amount, so merchants have to settle that cost.

Is it worth it for small businesses to accept credit cards, considering the fees?

While it costs money for businesses to accept credit card payments, you’d miss out on many potential sales since more and more customers are adopting cashless payments. If you find the costs a bit high, it might be worth considering alternative options, such as debit cards and automated clearing house (ACH).

How often do credit card processing fees change?

Credit card processors change their processing fees every year in April and October.