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Credit Card Processing FeesThe cheapest credit card processing is not always what it seems to be.

Many credit card processors offer teaser rates and tack on hidden fees.

Processing credit cards are confusing and overwhelming with extensive fee schedules and a never-ending list of rules and regulations.

But if when you plan on processing credit cards and increase business, there’s no other choice but paying them.

We recommend making an effort and learn about them and knowing what the charges are for before you pay them.

Cheapest Credit Card Processing For Small Business

By understanding the different processing charges, if you find costs that seem unfair or shouldn’t be there, you’re better able to dispute them or have them explained to you.

Understanding the different processing charges gives you a good understanding of your overhead costs for taking credit cards as payment.

If you’re planning to open a merchant account and you want to learn more, read our guide below before choosing a credit card processing company.

Knowing Who’s Involved

Before digging deeper into the different fees involved in processing credit cards, learn about who delivers these fees, or the middleman between the merchant and the customer. These financial go-betweens include:

Credit Card Associations

These include companies creating the cards, like MasterCard, Visa, American Express, and Discover.

Banks Issuing the Cards

Banks like Wells Fargo, Chase, and Citi Bank are the institutions issuing credit cards. Sometimes associations act as a bank by issuing credit cards themselves.

These associations include American Express and Discover Card.

Merchant Companies

These card providers manage all processing tasks for credit cards, like sales and customer support.

The management happens with an acquirer’s help which gets help from sales companies, banks, or acquirers considered double-duty and depends on the financial situation.

Online Gateways

Also called special payment portals, these gateways direct transactions, sending them to acquirers like online checkout or shopping carts.


All the financial parties above play roles in all card transactions. Normally, merchant accounts and processors have the same roles in the transaction.

Types of Credit Card Processing Fees

After you understand what parties are involved when completing card transactions, you need to understand the various fees you see when doing these card transactions.

Fees for Transactions

This processing fee gets assessed each time you process transactions. Transactions fees stand for the most cost when processing credit cards.

Set Rate Fees

Besides individual transaction fees, you get charged for set rate fees. Your statement may not show set rate fees, each institution varies on what they call them, but most of them show on the monthly statement and are easily discernable.

Miscellaneous Fees

Set rate fees always get charged monthly, but miscellaneous fees only show up, depending on the connected transaction incident.

For example, when a customer disputes a credit card charge or returns an item, chargeback fees show up on your statement.

Chargeback fees are only one of the miscellaneous processing fees. Continue reading and discover the other fees and rates the merchant account gets charged.

Wholesale and Markup

Card fees, transaction fees, set rate fees, and miscellaneous fees, fall under two different categories: either wholesale or markup fees.

It’s important to remember that wholesale card fees are not negotiable while markup fees are.

Wholesale Card Fees

Wholesale card fees, also known as base card fees and pre-markup card fees, apply to all card processing accounts. A wholesale card fee is what the name implies; it’s the cost for your wholesale transactions.

An issuing card banks and the different associations, like MasterCard, Visa, American Express, and Discover decide the cost for your card transactions.

These fees stay consistent no matter which card provider you chose.

Shopping around doesn’t find you cheaper rates and fees from the different card processing companies. You’re wasting your time because they’re the same industry wide.

Markup Card Fees

These fees let your card processing company earn profits from you for using their merchant services.

When picking a card processing company, choose wisely.

If you choose the right one, your fees are modest but choose the wrong one, and the card processing fees cut deep into your profits.

The less honest processing companies hide their fees among the clutter of strange models for pricing and hard to understand terms. These strange terms confuse both new and experienced small business owners.

Markup fees differ among the various card companies and are the most important fees to compare when shopping for merchant accounts.

Breaking Down the Fees for Processing Credit Cards

Below we give you a breakdown of each card processing fee we talked about earlier. We want you to have a better understanding of what fees get charged to your merchant account.

Fees for Transactions

The most expensive of the merchant fees, interchange and reimbursement charges come from the issuing financial institution and card association.

Assessments and Interchange Reimbursement Fees

Charged by the month on each sale, the fees are a set percentage for each card transaction and have a flat rate fee attached.

The fees get calculated on a total transaction volume percentage each month.

These merchant assessment and interchange account processing fees are non-negotiable and include: Assessments and dues, NABU/APF/data usage fees, Merit 1/ecommerce/CNP fees.

MasterCard, Visa, American Express, and Discover. Each card processing company publishes their merchant assessment and interchange fees on their websites, and the rates listed are wholesale.

For the price structure with interchange-plus, the card processor quotes a higher rate than the listed wholesale cost. The higher rate is the processor’s markup or the cost they add to any listed wholesale costs.

If your account has a tiered price plan, the quote they give you is Non-Qualified, Qualified, or Mid-Qualified which includes their pricing margin in the quote.

Tiered pricing plans mask the processing margin, making knowing the margin range more difficult.

Set Rate Fees

Fees for the Merchant Terminal
These fees cover merchants with a physical store location, where the customer’s credit card gets swiped at the terminal. With an online storefront, you don’t pay fees for the merchant terminal.

Card issuers try locking the merchant in a long-term lease, but we don’t recommend leasing the equipment.

The best card processors encourage buying the machine up front for a one-time cost instead of leasing the equipment.

Buying the terminal saves thousands over the cost of a leased machine. Helcim, for example, offers several terminals for sale.

Fees for Payment Gateways
Fees for payment gateways are like fees for a terminal, but are fees charged to online businesses. Credit card processors, like CDGcommerrce, offer free in-house gateways for payments.

PCI Charges
Fees charged for the Payment Card Industry, these fees are for compliance or non-compliance. If you have non-compliance fees, it means the business fails to uphold standards set by the Payment Card Industry (PCI), and costs more to process cards.

You pay compliance fees to the merchant provider to guarantee your business always conforms to the PCI regulations.

While some card providers charge compliance fees, they don’t always provide the service. Verify your issuing agent provides what you’re paying for and keeps you compliant.

Fees Charged Annually
The fees you get charged each year covers the basic uses of your merchant account provider’s card services. We recommend looking for a merchant service company without the annual fee. The better financial institutions don’t charge this usage fee.

Early Termination Fee
Providers charge this fee anytime you cancel your service before your contract end date. Read your contract carefully and know your contract end date to avoid this added fee. 

Fees Charged Monthly
Fees charged by the month, cover costs for the card provider’s customer support call center. Most customer support calls come from the merchant card provider’s mistakes and the cause for the provider’s fees.

If your business is small with low transaction volumes, look for the best or lowest possible monthly fees through companies like Payline Data. Their basic low transaction volume plans start at $5 each month.

Minimum Monthly Fees
Merchants not reaching a set transaction total for a set period, like one month or the full year, see this fee on their bill. Minimum fees vary by the provider you use, but most fees cost about $50,000 each year.

Minimum fees is another area where it pays to shop around for a card processor. Providers, like Dharma Merchant Services, don’t charge a monthly or annual fee, making your total cost to take credit cards less.

Statement Cost Fees
Merchants have these fees added to their billing for covering the cost of printing account statements and mailing them. Processing companies may waive these fees if the merchant agrees to get their billing statements electronically. If you still want a paper statement, plan on paying up to $15 each month for these billing costs.

IRS Reporting Fees
Merchant card service providers report transactions information directly to the Internal Revenue Service on a 1099-K form, for an added reporting fee. These extra charges differ by the provider and are from $2 – $5.

Online Account Reporting
An alternative to the paper statement fees, you find the online account fees for merchants using digital account access. The majority of providers do not charge these fees and the ones that have them lump the online charges with other fees.

Network Processing Fees
A few network processing fees are non-negotiable, like Visa’s FANF fee. The FANF fee is not a profit generating fee and is non-negotiable. This fee, like the assessment fee, gets charged to your card processing company and they can’t control the fee or its amount.

Miscellaneous Fees

Address Verification Service Fees (AVS)
The address verification service fee or AVS gets charged on all individual transactions from online or telephone sales businesses. A retail business occasionally keying in credit card information won’t see this charge on their bill.

Voice Authorization Fees (VAF)
Sometimes, the merchant provider requires calling toll-free numbers to verify more information before authorization of the transaction. VAF is a rare occurrence so don’t be too concerned about this fee.

Retrieval Request Fees
When the customer disputes charges made to their credit card by your business, a protocol for handling chargebacks begins. The request to retrieve information starts the process. The retrieval fees cover expenses arising from this request for data.

Chargeback Fees
Chargeback fees application depend on the information found during the retrieval process. If the chargeback gets approved, merchants lose the money for the transaction and have an additional chargeback fee added.

Batch Fees
When submitting transaction batches, batch headers or batch fees get charged to the merchant. The fee is small and only gets added when you send transaction batches or one or two times each day.

NSF Fees
A non-sufficient fund fee, or NSF, posts to your account if there’s not enough money in the bank to pay the merchant account fees.

Merchant Account Models Pricing

Merchants have a large selection of merchant account models to choose from when looking for a processing company.

The top four merchant account models pricing is subscription and membership, tiered level pricing, and interchange-plus.

Interchange Plus

An interchange plus merchant account model, is more transparent than other pricing models, with the easiest to understand fees and account terms.

The interchange pricing plan itemizes the fees for wholesale and markup fees.Interchange pricing itemizes the markup and wholesale fee on the merchant statement each month.

While it makes reading the statement difficult, the itemization is helpful for understanding the differences in markups and a wholesale fee.

Tiered Pricing Plans

If your processing company doesn’t offer an interchange-plus plan, chances are you have a bundled price model called a tiered pricing plan.

Most small businesses have tiered pricing plans, making reviewing, and understanding the different charges on your statement difficult.

The bundled or tiered pricing models place transactions in three different categories. Tiered pricing categories include non-qualified, qualified, and mid-qualified.

Non-qualified transaction carries the highest fee rate, while the rate lessens with mid-qualified rates, and the lowest rates are qualified.

While the qualified tier carries the lowest rates, merchants must meet any processing criteria. The criteria include card swipes in-person and same day settlement of batches.

Failing to meet the set criteria or standards, might cause an account downgrade to non or mid-qualified levels.

Tiered plans aren’t always bad, but some merchant processors use this complicated pricing structure for charging excessive processing fees.

Merchants may not know how much they’re paying in fees since these processors don’t show where the transactions fall in the pricing tier.

These complicated pricing structures make knowing the actual markup rates difficult if not impossible.

Membership and Subscription Plans

Membership and subscription are the newest merchant pricing system and is a popular fee plan.

Like interchange-plus, this pricing plan charges the actual transaction cost separate from markup fees.

Membership and subscription plans let merchants pay a transaction fee without paying a percentage on the markup fee.

Merchants processing large transaction amounts enjoy this money-saving pricing without lessening the transparency. Payment Depot uses this pricing plan.

Blended Pricing Plans

Blended pricing is like the tiered plans; only it doesn’t have tiers.

Replacing the tiers is transaction costs with the same transactions and percentage fees regardless what the cost of wholesale is.

Costs blend and create a single and consistent fee and rate. The blending of these fees makes transactions costs high especially with transactions for debit cards.

Processors using the blended pricing plans, like PayPal and Stripe, don’t charge fees each month, making the blended pricing plans a good choice for a business with low-volume transactions.

Choose Based On Your Business’s Size

Each merchant processor account and credit card provider have services with different costs and fees connected to them. Some of these costs for using their services are inevitable, but others are negotiable.

Larger businesses processing larger amounts of the transaction can bargain with their credit card processor for a better rate.

Knowing this, look for processors with transparent fees and rates and ones willing to set you up with an interchange plus processing fee plan.

Processing companies like Dharma, Helcim, and CDGcommerce have a transparent fee and rate schedule and willing offer the interchange-plus pricing plan.

Beware: Many Loan companies try to take over your merchant processing in order to hike your merchant processing fees. If you are in need of a loan check out the SBA Microloans. Otherwise, if you are a startup you can check out startup loan ideas with no collateral.