CC Processing Charges: Info on Avg. Merchant Transaction Costs

Whenever your company accepts credit card payment from your customers, it is not actually free. Substantial fees are happening in the background. If you’re unaware of them, they do eat up a sizable chunk of your sales revenue.

Knowing these credit card processing fees can help you reduce them, or at the very least, plan for them.

What Exactly Are Credit Card Processing Fees?

If you need your company to accept credit card payments from clients, you will want to get that support from your supplier. You need to know that these are not free–there are processing fees involved. These are known as credit card transaction fees.

Many fees are involved whenever a customer swipes their card enters it through an internet purchase. A number of them visit your credit card provider, and a few go to your lender. Others are billed on a per-transaction foundation, while some you want to pay monthly no matter the number of card transactions you did that month.

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The typical credit card processing fees you can expect is about 1.7% – 3.5% per transaction. Knowing these charges can help you manage your organization’s finances better by taking into account all expenses involved in credit card transactions. You are also better equipped to compare costs from other suppliers and choose the best one for your company.

You should also know that there are two kinds of credit card service providers: payment service providers (PSP) or merchant account providers. Each manages the credit payment processing fee otherwise.

Payment service providers such as Paypal, by way of instance, make things simple by charging a flat fee on each transaction. Additionally, there are no hidden charges or contracts you want to take care of. The advantage, however, means that they may not be the cheapest option available.

Merchant account providers would be the opposite. They generally involve complicated, variable credit card merchant fees with multiple pricing structures. They also have more requirements and a more extended application period. The trade-off, however, is that merchant account providers offer the lowest overall fees on transactions. If your company experiences a huge volume of card transactions, this is the best thing to do.

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Kinds of Credit Card Processing Fees

Here are some typical processing fees that you want to be conscious of. Note that these will change based on which payment processor you select.


Transaction fees, as its name implies, are incurred if your customer swipes a card with your organization. They take the most critical chunk of credit card processing charges.

To understand these charges, it is vital to understand what happens in the background. Credit cards are normally part of one or more major card networks: Visa, Mastercard, American Express, or Discover. Your chosen payment chip sets that of these networks it supports.

After a customer swipes in your credit card terminal, your payment processor sends a fund petition to the cardholder’s issuing bank. Once approved, the payment processor then manages the move to your account on the receiving bank.

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Every thing involved in the transaction–the card system, payment processor, and the sending and receiving bank–all get a part of the transaction fee.

Card transaction fees are composed of the interchange fee, evaluation fee, and the payment processor markup charge. We’ll talk about the first two after, but the markup fee is worth mentioning today.

The payment processor markup is only a fee charged by your service provider for their services (and for them to make a profit). It varies significantly from provider to provider, so you’ve got a lot of control in maintaining this as low as possible. Try to search for a supplier with low markup charges, and do not enter into contracts that are long-term. This way, you can switch providers if your present one decides to ramp up their markup charges.


Compared to transaction fees which are levied for each and every single card swipe, flat fees are recurring fees billed by your payment processor. Your company pays for them just for using your provider’s services. They are fixed expenses you incur regardless of the number of transactions you did in a month.

Normally, a reasonable monthly flat fee is about $15 – $50. Here are some typical flat charges your supplier might be charging:

  • Account charges are what you pay for only using the supplier’s processing services and maintaining your account open. Some also charge a processing fee, which is what you have to cover if your total monthly transactions did not reach a specific threshold.
  • Rental charges are what you pay for leasing or renting the supplier’s credit card terminal. This one is unavoidable as you won’t have the ability to use any other terminal with particular suppliers. The fantastic thing is that most payment processors can be negotiated to supply this free of charge, especially if your company has a huge volume of transactions.
  • Withdrawal charges are a fee incurred whenever you will need to transfer funds from the payment processor to your account. Most are fixed, so it is reasonable to withdraw money in larger batches.
  • Legal and compliance charges are essential to adhere to certain laws and regulations. It is usually performed by the payment processor for your benefit. Examples include reporting transactions to the IRS or ensuring your company complies with the Payment Card Industry Data Security Standard (PCS DSS).
  • One-time Fees include payments you will need to do after, which is normally charged when you start your account or purchase your own credit card terminal. Payment chips also charge a cancellation fee if you choose to terminate your contract early.
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Incidental fees are the ones which are billed on a case-to-case basis. They generally involve special cases, like when disputes arise or when you request certain services from the supplier. Thus, you often won’t have to cover these regularly.

Here are two typical incidental fees you may face:

  1. A non-sufficient funds fee (NSF) is a penalty made from the company if your bank account does not have sufficient funds to cover your payment processor. Needless to say, it is something which you can avoid completely.
  2. Dispute fees are charged whenever a cardholder disputes some fees with your organization. Frequent reasons include charging the incorrect amount or unintentionally double swiping. If the dispute ends up in a refund to the cardholder, you will want to pay an extra chargeback fee. Normally, these charges can cost you $15 per return.


The interchange fee is charged by the issuing bank for each credit card transaction created. It is a percentage of the whole transaction amount, which is determined by many things. These might involve the sort of credit card (low grade or premium), the card system, and what danger level the merchant is.

As it’s billed by the issuing bank, interchange fees are non-negotiable for each and every transaction.


The assessment fee is a fee that is charged by the credit card system and is how they gain from card use. It is a fixed rate levied on each transaction on the community. The interchange fee and evaluation fee is generally bundled into a single payment.

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Each card has its own corresponding evaluation fees and determining it is exceptionally complicated. The actual calculation is a puzzle and involves nearly 300 different pricing arrangements, which can be updated bi-annually.

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What we do know is that the credit card system fees assessment fees, similar to the way the creditor treats loans. High-risk merchants (new companies or people with a history of fraud) have a more substantial assessment fee in contrast to more proven businesses.

Like interchange fees, appraisal fees are non-negotiable, no matter which payment processor you use.

How to Decrease Credit Card Processing Fees

Credit card processing fees can add up to a substantial expense. Luckily, there are ways to reduce them.

1 strategy most companies use is requiring a minimal amount for card transactions. This could help mitigate some of their card processing costs, which is relatively higher for smaller purchases.

Online transactions also feature higher fees versus in-person transactions, so go with the latter as far as possible if it applies to your company. The main reason is that there are more dangers in the event the cardholder or card isn’t present during the transaction, so additional fees and measures are required.

In addition, be cautious of chargebacks. Not only can this incur a fee, but banks may tag your company as a greater risk. They may wind up charging you higher fees in the future. It’s possible to implement measures like requiring clients to sign an authorization form for recurring credit card fees.