Credit card processing fees are deliberately confusing. This guide breaks down every fee type in plain English, shows you what you should actually be paying, and reveals how businesses lose thousands annually to overcharges they never knew existed.
The average small business loses $3,000-$15,000 annually to payment processing overcharges.
Most never realize they're overpaying because processing fees are packaged in ways that obscure the true cost. By the end of this guide, you'll know exactly what you're paying and whether it's fair.
Credit card processing fees fall into three main categories:
On top of these core fees, processors add various monthly and per-transaction charges—some legitimate, many not. Let's break down each category.
What they are: Fees paid to the bank that issued the customer's credit card. These represent 70-80% of your total processing costs.
Who sets them: Visa, Mastercard, and Discover set interchange rates. They're adjusted twice yearly (usually April and October).
Typical rates:
Key Point: Interchange fees are non-negotiable. Every processor pays the same interchange rates. Anyone claiming they can "lower your interchange" is misleading you.
What they are: Fees charged by card networks (Visa, Mastercard, Discover, Amex) for using their network. These are much smaller than interchange.
Typical rates (as of 2025):
Key Point: Assessment fees are also non-negotiable and the same across all processors. They typically add $0.10-$0.20 per $100 transaction.
What it is: Your processor's profit. This is added on top of interchange and assessments. It's fully negotiable.
Common markup structures:
Key Point: Focus your negotiation efforts here. Reducing markup from 0.40% to 0.20% saves $200 monthly per $100K in volume. That's $2,400 annually.
Beyond the core processing fees, many processors add monthly and per-transaction charges. Some are legitimate costs; others are pure profit padding. Here's how to tell the difference:
Typical charge: $15-$50/month
Guarantees the processor a minimum monthly revenue regardless of your volume. Often waived for businesses processing $5K+/month. Negotiate this away.
Typical charge: $10-$25/month
Charged for sending you a statement. This is pure profit padding in the digital age. Should be $0 or <$5 max.
Typical charge: $5-$15/month
Legitimate security standard, but fee amount is negotiable. Many processors waive this if you complete annual compliance questionnaire. Over $15/month is excessive.
Typical charge: $0.10-$0.25 per batch
Charged when you settle transactions (usually daily). Legitimate operational cost. Should be under $0.25. Negotiate if higher.
Typical charge: $10-$25/month
Charged if you accept payments online through a payment gateway. Legitimate for e-commerce but often overpriced. Shop around—many gateways are $10/month or less.
Typical charge: $5-$50/year
Charged for filing 1099-K forms. This is a processor obligation, not yours. Refuse to pay this fee—it's pure padding.
Typical charge: $200-$500
Charged if you cancel before contract end. Locks you into inflated rates. Negotiate month-to-month terms or a contract with no ETF before signing.
Typical charge: $25-$50/month
Charged if you don't complete PCI compliance. While you should complete compliance, this fee is often excessive. Negotiate a cap or grace period.
Typical charge: $50-$150/year
Charged once yearly for "account maintenance." Often negotiable or waived for established accounts. Ask for removal.
Typical charge: $30-$100/month
Leasing a credit card terminal is almost always a terrible deal. You'll pay $1,000+ over 3 years for a $300 device. Buy equipment outright or negotiate free terminals.
Typical charge: $15-$25 per chargeback
Charged when a customer disputes a transaction. Some fee is legitimate (processor handles dispute), but over $25 is excessive. Negotiate if your chargeback rate is low.
A well-priced processing account should have no more than 3-4 monthly fees totaling under $30/month combined. If you're paying $50+ in monthly fees or see more than 5 line items, you're likely being overcharged.
Best practice: Aim for interchange-plus pricing with minimal fees: processor markup (negotiable), PCI compliance ($5-10), and optionally a gateway fee ($10-15) if you're doing e-commerce. Everything else should be eliminated or heavily negotiated.
Understanding fee structure is just as important as understanding individual fees. The way your processor packages their pricing determines whether you can see where your money goes.
How it works: You pay actual interchange + a fixed markup. Example: "Interchange + 0.25% + 10¢"
Pros: Completely transparent. You see exactly what goes to banks vs. processor. Lowest cost for most businesses. Markup is clearly negotiable.
Cons: Statements are more complex because every transaction shows the actual interchange rate (which varies by card type).
Best for: Any business processing $10K+ monthly. This is the gold standard for transparent, low-cost processing.
How it works: Transactions are grouped into "qualified," "mid-qualified," and "non-qualified" tiers with different rates.
Pros: Simpler statements (only 3 rates shown).
Cons: Processors manipulate which transactions fall into which bucket. Advertised "qualified" rates (e.g., 1.69%) apply to very few transactions. Most end up in higher tiers. Markup is hidden and non-negotiable. You typically overpay by 20-50%.
Best for: Almost never. Avoid tiered pricing unless you're a very small business ($5K/month or less) and can verify the effective rate is competitive.
How it works: One rate for all transactions. Example: "2.9% + 30¢" (Square, Stripe, PayPal)
Pros: Dead simple. No contracts, no monthly fees (usually), predictable costs. Great for startups.
Cons: You overpay on low-cost transactions (debit cards) to subsidize high-cost ones (premium rewards cards). Not cost-effective above $15-20K/month.
Best for: New businesses, low volume ($10K/month or less), businesses valuing simplicity over cost optimization.
How it works: Fixed monthly fee + interchange pass-through. Example: "$99/month + actual interchange"
Pros: Predictable processor costs. No markup on interchange. Can be very cost-effective for high volume.
Cons: Higher monthly cost. Only saves money above a certain volume threshold.
Best for: Established businesses processing $50K+ monthly with consistent volume.
Read our full comparison: Interchange-Plus vs Tiered Pricing →
Here are realistic effective rate ranges based on business type and transaction mix. If you're paying significantly more, you're likely overpaying.
1.5-2.2%
Physical stores where customers swipe/chip/tap in person. Lower risk = lower rates.
Mix: 60%+ debit, 40% credit/rewards
2.2-2.9%
Online sales where cards are manually entered or saved. Higher risk = higher interchange.
Mix: 70%+ credit/rewards, 30% debit
1.8-2.5%
Invoiced payments, subscriptions, professional services. Mix of card-present and card-not-present.
Mix: 50/50 card-present and keyed
1.3-2.0%
Large transactions ($5K+ average ticket), commercial cards. Level 2/3 data qualification lowers interchange.
Mix: Commercial/purchasing cards
Even within the same business type, rates vary based on: