In each business transaction involving credit cards, processing fees take a bite out of the total profits. We generally see credit card processing fees be somewhere around 2% of each purchase - you can see network specific rates in the table below. Businesses have some power to minimize costs by shopping around different payment processors. They can end up receiving competitive rates that can end up saving them a significant amount of money over time. In order to be able to shop around, it's important to be well versed in the topic at hand. To that end, we've put together this guide on credit card processing fees, so that merchants are better equipped when setting up credit card payments for their business.
|Average Credit Card Processing Fees*|
|MasterCard||1.55% - 2.6%|
|Visa||1.43% - 2.4%|
|Discover||1.56% - 2.3%|
|American Express||2.5% - 3.5%|
*While those are values we generally see, it is an estimated average. In reality, much more goes into [processing](/credit-card-processing/how-credit-card-processing-works) fees for a business and individual fees will highly vary based on a number of factors. We outline and describe some of the costs that contribute the most in the sections below.
- The Discount Rate - The percentage of a sale that goes towards paying credit card processing fees is referred to as the discount rate. This involves all the fees which are paid to card issuers and networks via interchange fees and assessment fees. These sections give an overview of what factors can impact these fees.
- American Express Processing Fees - American Express is a special case, as it is the only card network that is also a card issuer. Amex's unique position also makes them work a little differently when it comes to credit card processing fees. With this issuer, they tend to be more expensive than what other networks charge, especially when it comes to processing returns.
- Other Costs & Fees - Accepting credit card payments comes with some additional costs to consider. In many cases you will be required to pay a monthly fees to your MSP, as well as cover the cost of card readers. This section outlines some common practices by payment processors, which you should be aware of before beginning to shop comparatively.
A note about accepting credit card payments: In order to accept credit cards as a form of payment, most businesses will need to sign up with a merchant services provider. These MSPs act as middlemen between the merchant and the credit issuer. For a fee, they are the ones that handle processing of all credit card payments for your business - everything from collecting interchange fees to managing the transfer of funds between the merchant's bank and the credit issuing bank. When shopping around for MSPs, sometimes referred to as acquirers, you will want to collect as many price quotes as possible. Below we detail the major costs that influence the price you get quoted, and tell you which ones you have power to negotiate. Below is a list of some of the most popular MSPs.
|Popular Merchant Service Providers|
|Flagship Merchant Services||CreditCardProcessing.com||National Bankcard||Chase Paymentech|
|Leaders Merchant Services||E-Commerce||Exchange Merchant One||Cayan|
|The Transaction Group||GoEmerchant||Merchant Credit Card||iTransact
A discount rate applies to all the credit card processing fees a merchant must pay to their merchant service provider with each transaction. Though it can consist of many more fine components, we can think of it as follows: the discount rate = interchange fee + assessment fees. The first two components are decided by credit card networks, and are fixed. This means that no matter which MSP you pick, you will pay the same discount rate. Prices will only begin to differ between markup fees, which are a seperate payment you make to your credit card payment processors.
Credit Card Interchange Fee
The biggest piece of the pie will be eaten up by interchange fees, which are collected mainly by credit card issuers. These fees are often presented as some percentage plus an additional fixed amount - usually no greater than $0.25. Interchange fees vary widely based on a number of factors such as:
- Network - MasterCard, Visa, American Express, and Discover are the four major credit card networks, and they all charge slightly different interchange rates. As noted previously, American Express tends to be the most expensive of the group for several reasons, which we discuss below. There is also price variation within the individual networks. For example, a World Elite MasterCard will have different interchange fees than a World MasterCard would.
- Card Type - Fees are also impacted by whether the card being used in the transaction is a debit or credit card. Furthermore, the type of credit card is also important. Business credit cards tend to be the most expensive to process, followed by rewards credit cards and regular credit cards closing the group off.
- How the Payment is Processed – Whether you, the merchant, swipe the credit card through a reader or punch in its number directly into the system will also impact the fees you are charged for a particular transaction. Credit card networks will also discriminate between online and mobile payments, and card-not-present transactions. In general, we've observed fees on swiped transactions to be lowest.
- Merchant Category Code (MCC) – The way in which you categorize your business and each sale you make will also have an effect on the interchange you will pay per transaction. While this affects the interchange rate, it rarely does so by more than few tenths of a percent. Note that trying to classify your restaurant as a ground transportation service to get lower rates is not a good idea. Card issuers are still examining data that is being fed to them in each transaction. Any attempted manipulation of transaction data is sure to be discovered and punished.
MasterCard and Visa make their interchange rate classifications publicly available, so that merchants can see what to expect, depending on the type of business they conduct. Unfortunately, Discover makes the process of acquiring data a bit more difficult. You can access a list of Discover interchange fees only after having partnered with an MSP, who must provide you with a verification code. Alternatively, if you simply want to get an idea of Discover’s interchange rates, this link has some old data from 2012.
The assessment fee is a much smaller credit card processing fee, one that you pay directly to the card network (Visa, MasterCard, Discover, etc.). These fees will also depend on a number of factors, that differ from network to network. Some will charge higher rates for credit card vs debit card usage, while other networks may charge higher rates when the transaction volume is greater. Other incidental fees may arise from specific transactions being unique, such as foreign transactions being processed. Some of the most impactful assessment fees for three major networks can be seen in the table below.
|0.12% (Transactions < $1,000)||0.105%||0.13% (Credit)|
|0.13% (Transactions > $1,000)||-||0.11% (Debit)|
Being one of the smallest networks in the US, Discover tries to compete by offering some of the lowest assessment fees to merchants. Publicly available data suggests that in terms of interchange fees, there is no significant variation between Discover's pricing and other networks.
Merchant Service Provider Markup Fees
The MSPs handling your payment processing will also charge a fee for the services they provide. Some of these fees are charged on a per-transaction-basis, just like interchange and assessment fees. MSPs are constantly competeing for your business, and depending on the volume of transactions your business conducts, the average amount involved in a typical transaction, and a host of other nuances, you will be quoted different per-transaction prices. We recommend you take your time to really shop around and understand the benefits you receive from doing business with a particular MSP. While some may charge higher fees, the benefits or upkeep costs (which we explain in this section below) may be lower.
American Express is considered the priciest in terms of credit card processing fees. Their high discount rates, which often reach 3.5%, are higher than that of competitors like MasterCard and Visa. While more expensive, up until recently Amex has kept its pricing model simple, meaning most merchants paid the same (high) credit card processing fees.
American Express’ processing structure is changing with the recent introduction of OptBlue. The details on OptBlue are scarce, but we do know through this new program Amex will be structured more like its competitors – differentiating more between transactions, merchant category codes, etc. Whether credit card processing fees for American Express will drop as a result of OptBlue remains to be seen.
One of the major sought after changes by merchants is the way in which Amex handles returns. While other card issuers will refund the business part of the cost of the credit card processing fees charged to the merchant, American Express did so only when after merchants agreed to paying higher processing fees per transaction. Many hope the new OptBlue program will make Amex a little bit more merchant-friendly in that regard. Once any new details are released, this guide will be changed to reflect them.
Merchant service providers also charge consumers monthly fees and minimums. The costs are vary widely from provider to provider. Below we highlight how different these merchants can get by breaking down the additional costs of Cayan and First Data.
|PCI Compliance Fee||$99 per year||$0|
Price points should not be the only way of coparing MSPs. The above table is simply meant to illustrate that prices can vary between providers. There are more qualitative differences that may explain certain price points, and we recommend looking into what you will get with one provider versus another.
Another cost to consider is the price of equipment. If you want to process credit card payments in-person, your business will need at least one credit card reader. Merchants are presented with a wide set of choices in this departament. Your personal needs and wants for the equipment will govern how much of a cost you will have to bear here. Some MSPs, such as Chase Paymenttech, offer a free credit card reader. We recommend you do not base your decision of a payment processor based on this feature, as it will only provide you gains in the short term. Below is a sample of various card reading products and their prices. They vary in price, because they also vary in capability. You should know, ahead of time, if you want your card readers supporting EMV technology, or NFC payments.
|Credit Card Reader||Price|
|VeriFone VX 670||$610|
|VeriFone VX 520||$358|
|VeriFone Omni 3750||$99|
|Square Card Reader (Mobile)||$8|