Average cost of credit card processing fees


Whether you sell products or services online or operate a physical storefront, you will need to work with a credit card processing service to enable credit card transactions. Many small business owners are discovering that credit card processing fees are more expensive than they thought.

According to industry analysts, the average credit card processing fee ranges from 1.5% to 3.5% of each transaction, although the final percentage depends on a host of factors. Also be aware that credit card processing fees are entirely different from the fees consumers pay for a credit card.

If you’re a business that wants to accept credit as payment, you should do everything you can to understand and minimize credit card processing fees. Can you pass credit card processing fees on to your customers? Is it possible to negotiate lower credit card processing fees? Does Visa or Mastercard charge higher fees than Discover or American Express? Here’s what you need to know.

What is a credit card processing fee?

Every time a customer makes a purchase with a credit card, businesses are required to pay a fee to accept credit as payment. These fees can vary depending on the type of credit cards you accept, and they include several levels of fees:

  • Interchange Fees: These fees, which may also be referred to as swipe fees or discount rates, are paid by companies directly to the credit card issuer. These fees may be higher for online purchases to account for the increased risk of fraud when a credit card is not present for a transaction. Also note that interchange fees may depend on the type of card, the amount charged and the type of business operated.
  • Payment processor fees: The payment processor may also charge additional fees to facilitate payment. Payment processor fees can be broken down into smaller fees that take place over time and can include monthly or annual account fees, equipment rental fees, withdrawal fees, statement fees and others .
  • Appraisal Fee: Appraisal fees are paid to the credit card network for the purchase to occur. Note that the assessment fee is paid based on total monthly sales instead of a per transaction basis.

How much do credit card networks charge for processing fees?

It’s important to understand that three major players are involved when it comes to determining how much you’ll pay in credit card processing fees: the bank that issues your credit card, the credit card network, and the payment processor. Even so, the average credit card processing fee falls within a specific range with each of the four major credit card networks.

American Express 2.5% to 3.5%
Discover 1.56% to 2.3%
MasterCard 1.55% to 2.6%
Visa 1.43% to 2.4%

Why are American Express’ processing fees higher?

Where other banks can issue Visa or Mastercard credit cards, American Express is a closed network, meaning only American Express can issue American Express cards. This gives American Express more control over its fees and how much merchants must pay to accept their credit cards as payment.

While businesses have to pay more money to accept American Express credit cards compared to Mastercard or Visa, a Nilson Report 2019 confirmed that 99% of US merchants who accept credit cards accept Amex. This statistic goes against the frequent rumors that many companies do not accept American Express, although it is true that American Express is not as universally accepted overseas.

What are the different pricing models for processing fees?

We have noted how credit card processing fees can fall within a specific range for each of the major credit card networks, but some of the fluctuation can be attributed to the pricing model chosen for card processing fees. credit. Merchants may have the option of accepting a pricing model that best suits their needs. It is therefore important to know how each pricing model works:

  • Tiered pricing: This type of pricing model comes with different pricing for transactions in different tiers or buckets. For example, some qualified transactions may be charged at a lower rate, while others require a higher fee percentage. This type of pricing typically works best for merchants who process most of their transactions at the lowest tier.
  • Flat rate pricing: Flat rate pricing works exactly as it should. With this pricing model, the credit card processor will charge the merchant a flat percentage of each transaction plus a small commission per transaction (typically $0.20-$0.30 per transaction). This pricing model allows merchants to easily anticipate their credit card processing costs over time.
  • Interchange Plus Pricing: Merchants who are offered the Interchange Plus pricing model will pay the interchange rate for each transaction plus a predetermined additional fee. With Interchange Plus pricing, you can pay the interchange rate plus an additional percentage or nominal fee per transaction.
at several levels 1.5% to 2.9% for card-present transactions, 3.5% for no-presence transactions
Flat rate 2.75% to 2.90% per transaction
Exchange More 2.2% + $0.22 per trade

Note that the unique factors that influence these pricing models are why you might pay 2.5% to 3.5% fees to accept American Express or 1.43% to 2.4% to accept Visa. Many costs relate to credit card processing fees, which can cause the total cost of accepting credit cards to vary significantly over time.

How to lower your credit card processing fees

Credit card processing fees aren’t always set in stone. There are several ways to lower your costs to lessen the burden these fees can have on your overall business profit.

  • Negotiate fees with credit card processors: the more transactions, the more a processor will see your value as a merchant and want to do business with you. If you have a higher number of transactions each month, you can ask your processor to lower your fees.
  • Swipe as often as you can: the more you can limit not-present transactions, the less risk you pose to your processor. By maximizing the number of transactions paid for with physical cards and validating the purchase with an additional layer of security verification, you’ll minimize the risk assumed by both parties and likely see lower fees.
  • Use an address verification service: This is a system that verifies the cardholder’s billing information with the issuer. Many processors reward merchants for using these systems by charging them lower interchange rates.


The bottom line

Accepting credit card transactions is an essential way to grow your business and give your customers a wider range of options to cover the costs of your goods or services. However, these card processing fees can significantly increase your overall business costs. Knowing how these fees work and the types of strategies you can use to reduce them is a key way to maximize your income and build a profitable business.


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