Typical Credit Card Processing Fees & Rates for Businesses

Understanding credit card processing fees is crucial for any business that accepts card payments. These fees can significantly impact your bottom line, and not being aware of them can lead to unexpected costs.

Processing fees are typically incurred every time a customer uses their credit card to make a purchase, and they vary based on several factors, including the type of card used, the transaction method, and the merchant service provider.

This document aims to provide a comprehensive overview of the typical credit card processing fees and rates, helping businesses make informed decisions and manage costs effectively.

Interchange Fees for Businesses

When it comes to credit card transaction costs, interchange fees constitute the largest portion. Every time a customer completes a purchase using their credit card, these charges are applied. The funds collected from these fees go directly to the financial institution or bank that issued the card. So, for instance, if a customer pays with a Chase Visa card, Chase will receive the interchange fee from that transaction. Below are the typical interchange rate ranges for the four major card networks:

MasterCard: 1.15% + $0.05 to 2.50% + $0.10
Visa: 1.15% + $0.05 to 2.40% + $0.10
American Express: 1.43% + $0.10 to 3.30% + $0.10
Discover: 1.35% + $0.05 to 2.40% + $0.10

It’s important to note that these rates do not include assessment fees, meaning they are not the total cost of processing each credit card transaction.

Credit Card Assessment Fees

Assessment fees are charges levied by individual card networks such as MasterCard and Visa. These fees are designed to cover the costs associated with operating and maintaining their payment processing systems. Unlike interchange fees, assessment fees tend to be lower and are influenced by various factors, including the volume of transactions and the type of card used in the transaction.

According to Wells Fargo, the typical assessment fees for major card networks are as follows:

MasterCard: 0.1375%
Visa: 0.14% for credit card transactions, 0.13% for debit card transactions
American Express: 0.15%
Discover: 0.13%

It’s noteworthy that American Express and Discover have a unique structure; they not only issue their own credit cards but also operate their own payment networks. This enables them to collect both interchange and assessment fees. On the other hand, Visa and MasterCard collect only assessment fees for transactions conducted through their networks.

Payment Processing Fees

Payment processing fees are paid to companies that manage credit card transactions. These companies handle transactions through online payment gateways or physical card readers and may also provide businesses with the necessary equipment, such as card readers or swipers. Payment processing fees typically consist of several sub-fees:

Per-transaction fees
Monthly service fees
Flat rate costs

The specific fees and structures depend entirely on the payment processor selected by the business. Budget-conscious business owners would benefit from comparing different providers to find a cost-effective solution.

Who Determines Credit Card Processing Fees?

Three key parties determine credit card processing rates. These are:

The Card Issuer: This includes banks and financial institutions like Chase, Bank of America, and similar entities. The card issuer plays a crucial role in setting interchange fees.
The Credit Card Network: Major networks like Visa, MasterCard, American Express, and Discover are responsible for establishing the rules and fee structures for processing transactions on their networks.
Credit Card Processors: These companies provide the necessary infrastructure, such as card readers and online payment gateways, for processing credit card transactions. They also set various processing fees that merchants must pay in addition to interchange and assessment fees.

Each of these entities has the power to modify interchange rates and other related fees. As a result, the overall cost of processing credit card transactions can change multiple times during the year. For instance, Visa and MasterCard usually update their rates twice a year. Interchange fees are calculated by credit card providers based on several factors, such as:

Processing Method: Swiping a credit card is generally more cost-effective than manually entering the card details.
Card Type: Fees for business credit cards tend to be higher than those for consumer credit cards.
Card Brand: Various brands have different fee structures.
Sales Volume and Business Type: Higher transaction volumes or specific business categories can affect fee rates.
Merchant Category Code (MCC): These four-digit codes categorize transactions by type, influencing rates depending on the business category.

Major credit card companies provide online resources that detail their interchange rates, helping business owners understand potential costs. In addition, credit card processing providers offer multiple pricing models. Some use flat-rate pricing, while others implement “interchange-plus pricing,” which combines most fees into one rate for easier comparison.

Can You Negotiate Credit Card Processing Fees?

Yes, it is possible to negotiate certain credit card processing fees. Although not all fees are negotiable, businesses can often discuss terms with their credit card processing company to reduce some expenses. Non-essential fees that might be subject to negotiation include:

Terminal lease fees
Statement fees
Account fees
Payment gateway fees
Chargeback fees
PCI compliance fees
Credit card convenience fees
IRS reporting fees
Marked-up discount rate fees

None of these charges are mandatory for credit card transactions, so it is beneficial for businesses to compare different providers to find a more affordable service.

If you find a credit card processing company that suits your needs but imposes high fees, consider negotiating with their customer service representatives. Indicate your intention to switch to a competitor if these fees are not reduced or eliminated. This tactic often works, as processing companies prefer to retain their customers and may offer you a discounted rate to maintain your business.