You’ve heard “cash is king”—but in 2025, that crown has long since been passed on.
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 or you’re simply not using cash as often as before.
Data from Capital One shows that cash now represents just 11% of in-store transactions in the US, and that consumers are 2x more likely to choose credit cards over cash when paying. And it’s not just about usage; credit card holders also spend more. According to Capital One, consumers “spend up to 4x as much when they pay with credit cards instead of cash.”
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.
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 facilitate payment processing, credit card companies charge processing fees. Also referred to as swipe fees, these are costs 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. There are the 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 that merchants pay to the card-issuing banks (e.g., Bank of America, Citi, Chase) each time a customer uses a credit or debit card. Interchange fees are set by the card networks (e.g., Visa, Mastercard), not directly by the issuing banks, although the banks receive the fees.
Interchange fees vary based on several factors, including:
- The type of card used (e.g., rewards, corporate, debit)
- The transaction method (e.g., in-store, online, keyed-in)
- The industry or merchant category code (MCC)
Online or card-not-present transactions often have higher interchange fees due to increased fraud risk.
They typically consist of a percentage of the transaction plus a fixed fee (e.g., 1.80% + $0.10).
Visa and Mastercard usually review and adjust interchange rates twice a year, typically in April and October—though these changes can be delayed or modified.
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
Processor markup 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 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 depend on the 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. According to SecurityMetrics.com, 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, if the interchange fee for a transaction is 2.1%, an intercange-plus pricing model will cost 2.1% + $0.10 Another benefit of this model is that you pay lower rates when your interchange fee is in the lower categories. You also pay higher rates when your interchange fee is in the 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 set 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 tier 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 premium cards, like reward and business card transactions.
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 Pay is one solution that uses this pricing model.
Average Credit Card Processing Fees for 2025
When a customer pays with a credit card, the merchant pays a small percentage of the transaction amount in processing fees. These fees typically fall between 1.5% and 3.5% per transaction, depending on the type of card used and how the transaction is processed.
Here’s a general overview based on 2025 interchange data from Visa and Mastercard:
1. Interchange fees (the biggest piece of the fee puzzle)
Interchange fees are what card-issuing banks (like Chase or Bank of America) earn. These are set by Visa and Mastercard and vary by:
- Industry type (e.g., supermarket, retail, travel)
- Transaction method (in-store vs. online)
- Card type (basic vs. premium rewards cards)
Visa 2025 Consumer Credit Card Interchange Examples:
- Retail (in-person): ~1.43% + $0.10
- E-commerce / Card-not-present: ~1.89% to 2.30% + $0.10
- Restaurants: ~2.10% to 2.60% (depending on card level)
- Non-qualified transactions (e.g., those missing key data): ~3.15% + $0.10
Mastercard 2025 Consumer Credit Card Interchange Examples:
- Retail (Merit III Tier 1): ~1.43% + $0.10
- E-commerce / Full UCAF: ~2.10% to 2.60% + $0.10
- Restaurants: ~1.85% to 2.00% + $0.10
- Standard / fallback rate: ~3.15% + $0.10
2. Assessment Fees (from Visa and Mastercard)
These are small fees charged by the card networks themselves:
- Visa: ~0.13%
- Mastercard: ~0.1375%
These are applied on top of the transaction amount.
3. Processor Markups
On top of interchange and assessments, your payment processor may add:
- A flat fee (e.g., $0.10 per transaction)
- A percentage markup (e.g., 0.3% – 1%)
- Monthly fees or tiered pricing plans
What does this mean for you?
In total, your effective rate will likely fall between:
- ~1.5% – 2.5% for in-person debit or basic credit card transactions
- ~2.5% – 3.5%+ for online, rewards, or corporate card transactions
If you see rates higher than this range, it’s worth digging into your statements—or shopping around for a better processor.
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 likely 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
The good news 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 credit 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.
On top of that, surcharge programs and additional fees may put off some customers if not implemented correctly.
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, you can also 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%.
Conclusion
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.
FAQs
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.
