How much do Credit Card Companies Charge Merchants?

Whether you’re a business owner or an agent looking to provide terminals and POS systems it’s crucial to know how much you actually have to pay to credit card companies. Because once you know the ins and outs of the confusing world of credit card charges, you can make the best possible decision for your own business (or your clients). I will break it down step by step in this article. But first, we need to understand the basics of credit card processing.

The Basics of Credit Card Processing

Credit card processing fees are unavoidable for businesses accepting credit card payments. These fees typically range from 1.5% to 3.5% per transaction, depending on the type of card used, the merchant’s industry, and the payment processor’s pricing model. For example, on a $100 transaction, a merchant could pay between $1.50 and $3.50 in credit card transaction fees. It is essential to understand how these fees are charged and how you can manipulate them to achieve the lowest rate while keeping your customers happy. Several factors influence these fees, including the type of credit card, transaction method (in-person vs. online), and the merchant’s agreement with their credit card processor.

What Are Credit Card Processing Fees?

Credit card processing fees are the costs associated with accepting credit card transactions. These fees are split between 3 major players that are involved in completing a successful transaction:

Banks (Bank of America, Wells Fargo, Chase, etc.)
Credit card companies (Visa, Mastercard, Discover, etc)
Payment Processors (Square, Stripe, Paypal, etc)

When a customer swipes, inserts, or taps their credit card, the transaction goes through these intermediaries which provide these services:

Credit card networks (Visa, Mastercard, American Express, and Discover) facilitate transactions between merchants and banks.
Issuing banks (Chase, Wells Fargo, Bank of America) that provide credit cards to consumers and authorize transactions.
Acquiring banks (Wells Fargo Merchant Services, Chase Merchant Services, etc) that process transactions on behalf of the merchant.
Credit card processors (Square, Authorize.net, Fiserv, Worldpay) that act as intermediaries between the merchant and banks, ensuring transactions are approved and funds are settled.

Each of these entities charges a fee for its services, which contributes to the overall cost of accepting credit cards.

How Much Do Credit Card Processing Fees Cost?

The cost of credit card processing fees varies depending on the merchant’s chosen pricing structure. The two most common pricing models are:

Flat-rate pricing: Merchants pay a fixed percentage of the transaction amount, regardless of the card type. For example, a payment processor may charge 2.9% + $0.30 per transaction.
Interchange-plus pricing: Merchants pay the actual interchange fee set by the credit card network plus a markup from the payment processor. This model provides greater transparency but can be more complex to manage.

This might sound difficult, but I will break it down for you in an easy-to-understand comparison.

Flat fee rate pricing = Buying a candy bar

Imagine you go to a candy store, and every candy bar costs $2, no matter what brand or size you choose. Whether you pick a small chocolate bar or a big one with nuts and caramel, you always pay the same price—it’s simple and easy to remember! This is like flat-rate pricing: The business pays the same percentage fee for every credit card transaction, no matter the card type.

Interchange-Plus Pricing = Paying for Ice Cream by the Scoop

Now, imagine you’re at an ice cream shop where you pay based on what you order. A small scoop of vanilla might cost $1, a medium scoop of chocolate $1.50, and a fancy caramel sundae with toppings $3. You only pay for exactly what you get—sometimes cheaper, sometimes more expensive. This is like interchange-plus pricing: The business pays a different fee based on the type of credit card used, plus a small extra fee from the payment processor. “Ok…but how do I know which one is best for my business or my clients?” It’s simple. When every transaction cost is the same (flat-rate), this is ideal for:

Small businesses with low transaction volumes.

Startups and businesses that prefer simplicity and predictability in fees.
Online businesses process many small transactions.

When you pay different rates based on the card brand or transaction type (interchange-plus pricing), it’s ideal for:

Businesses with high sales volumes ($10,000+ monthly in credit card sales).
Merchants who want lower costs per transaction and fee transparency.
Companies that process a mix of credit cards (debit, rewards, corporate).

Now, an important note… Different credit card processors will have varying fee structures. For example:

Square: Charges a flat rate of 2.6% + $0.10 for in-person transactions and 2.9% + $0.30 for online transactions.
PayPal: Charges 2.99% + $0.49 per online transaction.
Stripe: Charges 2.9% + $0.30 per online transaction with additional fees for international cards.

Which brings me to my next point…

Types of Credit Card Processing Fee Structures

There are three primary types of credit card processing fees:

Interchange Fees (unchangeable): These are fees paid to the issuing bank and are determined by the credit card network. They typically range from 1.3% to 3% per transaction.
Assessment Fees (unchangeable): These are fees charged by the credit card networks (Visa, Mastercard, etc.) to maintain their infrastructure. They are usually a small percentage of the transaction amount.
Payment Processor Fees (can be optimized): These are fees charged by credit card processors for handling transactions on behalf of merchants.

The only one you can meaningfully manipulate to save money and maximize your bottom line is by looking at Payment Processor Fees. And each Payment Processor has different pricing models: Flat-rate/blended pricing: A single rate applies to all transactions, regardless of card type. Explained in the previous section above. Interchange-plus pricing: Merchants pay the interchange fee plus a markup from the processor. Explained in the previous section above. Less Common but also options: Tiered pricing: Transactions are classified into different categories (qualified, mid-qualified, non-qualified) with varying rates. This splits up the fees paid by the type of card the customer uses and groups them in buckets. For example:

Basic, no-rewards debit cards go in the cheapest tier (qualified).
Credit cards with some perks go in the middle tier (mid-qualified).
Premium, corporate, and rewards-heavy credit cards go in the most expensive tier (non-qualified).

The more premium the card is, the more fees the merchant pays. Merchants can sometimes experience unpredictable outcomes because they don’t always know how their customers will be categorized. Sometimes, the monthly bill is cheap, and sometimes, it’s expensive. Subscription-based pricing: Merchants pay a fixed monthly fee plus a small per-transaction fee. This structure is ideal for businesses processing lots of payments each month— you get a minor per-transaction cost but pay a fixed monthly fee. To make this super simple to view all in one place… You can look at the most popular processors, their pricing structure (flat rate or interchange plus), and their fees in the table below:

How to Offset Your Credit Card Processing Fees

Now that you know the only way to lower your credit card processing fees is to change the processor fees, merchants can take several steps to reduce or offset credit card fees entirely:

Pass Fees to Consumers: Some businesses implement credit card surcharges, which charge a fixed amount on each transaction. Imagine charging $1-2 extra on each purchase. The problem with surcharging to offset fees is the following:
- Customers don’t like it. They expect the sticker price to be the final price, which lowers their satisfaction and can lead to negative reviews, affecting the business’s bottom line.
- Legal restrictions: Surcharging is illegal in states like Massachusetts, New York, Connecticut, etc., and you’re still paying processor fees on each transaction.

You should also consider: Avoiding Unnecessary Fees: Hidden fees, such as monthly minimum and PCI compliance fees, negotiate with their credit card processor. Keeping Chargeback Rates Low: Excessive chargebacks can lead to higher fees or account termination. Businesses should implement fraud prevention measures and clear return policies. Collect Competitive Quotes: Shopping around for a credit card processor can help merchants secure the best rates and lowest payment processor fees. However… The best method to maximize your profits, reduce costs and eliminate 80-100% of processor fees legally in all 50 states that has worked for thousands of businesses right now is the following:

Implementing a cash discount program

Instead of adding a fee for credit cards, businesses can offer a discount for paying with cash. This makes customers feel like they’re saving money rather than being charged extra. For example, imagine you go to a cookie shop and want to buy a box of cookies. The price is $100 if you pay with a credit card. But the cashier says: “If you pay with cash, you get a discount!” The cash price is only $97 instead of $100. So, you decide to pay with cash and save $3! Here’s the advantage of the cash discount program: Instead of charging extra for credit card payments, the store gave a discount to customers who pay with cash. This way, customers feel like they’re getting a deal instead of being charged an extra fee. The best part is only 5% of merchants know the cash discount program even exists (unlike traditional processing). This is how we’ve helped thousands of businesses across the United States and Canada wipe out 80-100% of their monthly fees. It’s also how we’ve been able to help launch over 1,000 merchant services entrepreneurs across the US and Canada who are making a residual income from placing ‘cash discount’ terminals in local businesses. Like Bryce, who scaled to 50+ terminals in less than a year, making 120k+ in residuals yearly. Or Lisa, a stay-at-home mom who replaced her 9-5 job as a nurse within 13 months by placing terminals and offering the cash discount program. I hope this article helped you understand exactly how much credit card companies charge and gave you a complete game plan for dealing with it. If you’d like to discover how you can help save local businesses hundreds if not thousands of dollars a month by offering the cash discount program while making residual income in the process… We can help you land your first profitable location in the next 30 days (for barely any legwork on your end). If you don’t believe me, you can check out dozens of client testimonials on this page right here. From there, you can book an informational call to get started!

Frequently Asked Questions

What are the typical credit card processing fees?
- Fees range from 1.5% to 3.5% per transaction, depending on the payment processing company and pricing model.
Who pays and receives processing fees?
- Merchants pay processing fees, which are distributed among issuing banks, credit card networks, and payment processors.
Why are processing fees so high?
- Fees cover fraud protection, transaction processing, and credit card rewards programs.

Additional Resources

For further information on credit card payments and merchant services, consider these resources:

Download our 2025 Guide to generating residual income with credit card processing.
Join our Facebook group, Credit Card Processing for Beginners, for free to get LIVE training from industry experts every week and ask questions to entrepreneurs who are already in the industry.
Book a call with our team if you’d like more information on how you can launch your first credit card terminal and make residuals in the next 30 days working just a few hours per week.

By understanding credit card processing fees and taking proactive steps to minimize costs, merchants and agents can optimize their businesses and provide more value!

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