Credit card processing fees are the fees charged by a merchant service provider when a business accepts credit cards as payment. These fees are typically a percentage of the transaction total, plus a flat fee per transaction.
There are three main types of credit card processing fees: interchange fees, assessment fees, and processor markup fees. Interchange fees are set by the card brands (Visa, Mastercard, etc.) and paid to the issuing bank. Assessment fees are set by the card associations (Visa, Mastercard, etc.) and paid to the card association. Processor markup fees are charged by the merchant service provider and typically include a percentage of the transaction total plus a per-transaction fee.
businesses need to be aware of these fees so that they can budget for them and price their products and services accordingly. We’ve put together a guide to help businesses understand the different types of credit card processing fees, how they are calculated, and what they can do to reduce them.
What Are Interchange Fees?
Interchange fees are the fees that businesses pay to banks when their customers use a credit or debit card to make a purchase. Interchange fees are set by the card brands (Visa, Mastercard, etc.) and typically range from 1% to 3% of the transaction total, plus a flat fee per transaction.
For example, if a customer spends $100 at a business using their Visa credit card, the business would pay an interchange fee of around 1.5% of the transaction total, plus a $0.15 flat fee per transaction, for a total of $1.65 in interchange fees.
What Are Assessment Fees?
Assessment fees are the fees that businesses pay to card associations (Visa, Mastercard, etc.) when their customers use a credit or debit card to make a purchase. Assessment fees are set by the card associations and typically range from 0.11% to 0.15% of the transaction total, plus a flat fee per transaction.
For example, if a customer spends $100 at a business using their Visa credit card, the business would pay an assessment fee of around 0.11% of the transaction total, plus a $0.15 flat fee per transaction, for a total of $0.26 in assessment fees.
What Are Processor Markup Fees?
Processor markup fees are the fees that businesses pay to their merchant service provider when their customers use a credit or debit card to make a purchase. Processor markup fees typically include a percentage of the transaction total plus a per-transaction fee.
For example, if a customer spends $100 at a business using their Visa credit card, the business would pay a processor markup fee of around 2.9% of the transaction total, plus a $0.30 per-transaction fee, for a total of $3.20 in processor markup fees.
How to Reduce Credit Card Processing Fees
There are a few things businesses can do to reduce their credit card processing fees:
1. Shop around for a merchant service provider that offers competitive rates.
2. Make sure you are using the most efficient payment processing method for your business.
3. Negotiate with your merchant service provider for lower rates.
4. Ask your customers to use alternative payment methods, such as ACH or cash.
5. Bundle your credit card processing services with other business services.
6. Pass the credit card processing fees on to your customers (if allowed by your state).
7. Use a credit card processing service that offers interchange-plus pricing.
8. Get creative with pricing and billing to reduce the impact of credit card processing fees.
9. Educate your employees on the importance of efficient payment processing.
10. Review your credit card processing statement regularly to look for errors and opportunities for improvement.
The Bottom Line
Credit card processing fees are a necessary part of doing business, but there are things businesses can do to reduce the fees they pay. Shopping around for a merchant service provider, using the most efficient payment processing method, and negotiating for lower rates can all help to reduce credit card processing fees.
