Understanding Processing Fees
Learn about interchange rates, markup, and how to identify hidden fees in your merchant processing
Processing fees are the costs associated with accepting credit and debit card payments. These fees are charged every time a customer uses a card to make a purchase at your business. Understanding these fees is crucial for managing your business expenses and maximizing profitability.
The Three Main Components of Processing Fees
Set by card networks (Visa, Mastercard, etc.). These are non-negotiable and typically range from 1.5% to 3.5% of the transaction amount.
Also set by card networks. These are smaller fees (usually 0.1% to 0.15%) that support the card network infrastructure.
This is where processors make their profit. It's the only negotiable part of your fees and where most savings can be found.
Monthly Statement Fees
Charges for providing monthly statements, often $10-25/month
PCI Compliance Fees
Monthly fees for security compliance, typically $5-15/month
Gateway Fees
Online payment processing fees, often $10-30/month plus per-transaction fees
Early Termination Fees
Penalties for canceling contracts early, can be $200-500
Equipment Lease Fees
Monthly terminal rental fees, often $20-50/month for outdated equipment
Pricing Models Explained
The most transparent pricing model. You pay the actual interchange rate plus a fixed markup. This allows you to see exactly what you're paying for each component.
Example: Interchange + 0.25% + $0.10 per transaction
Transactions are categorized into "qualified," "mid-qualified," and "non-qualified" tiers with different rates. This model often results in higher costs and less transparency.
Warning: Most transactions end up in higher-cost tiers
One rate for all transactions (e.g., 2.9% + $0.30). Simple but often more expensive for businesses with higher transaction volumes or lower average ticket sizes.
Best for: Very small businesses with low volume
Negotiate Your Markup
The processor markup is the only negotiable part of your fees
Choose Interchange Plus Pricing
Most transparent and typically lowest cost option
Eliminate Unnecessary Fees
Remove monthly fees, statement fees, and equipment lease costs
Encourage Debit Card Use
Debit transactions typically have lower interchange rates
Process Cards Properly
Ensure transactions qualify for the lowest interchange rates
Questions to Ask Your Processor
- •What is your markup over interchange rates?
- •What monthly fees do you charge and what are they for?
- •Is there an early termination fee and how much is it?
- •Do you offer interchange plus pricing?
- •What equipment costs are involved?
- •How do you handle chargebacks and disputes?
Ready to Reduce Your Processing Fees?
Let us analyze your current fees and show you exactly how much you can save