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Bankrate has partnerships with issuers including, but not limited to, American Express, Bank of America, Capital One, Chase, Citi and Discover. SHARE: James Leynse/Getty images April 21, 2022 Checkmark Bankrate logo How is this page expert verified? At Bankrate, we take the accuracy of our content seriously. "Expert verified" means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced. Their reviews hold us accountable for publishing high-quality and trustworthy content. Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Bankrate logo The Bankrate promise
At Bankrate we strive to help you make smarter financial decisions. While we adhere to strict editorial integrity, this post may contain references to products from our partners. Here's an explanation for how we make money. The content on this page is accurate as of the posting date; however, some of the offers mentioned may have expired. Terms apply to the offers listed on this page. Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer. Bankrate logo The Bankrate promise
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Every time a customer makes a purchase with a credit card, businesses are required to pay fees to accept credit as payment. These fees can vary depending on the type of credit cards you accept, and they include several different layers of charges: : This fee, which can also be referred to as a swipe fee or a discount rate, is paid by businesses directly to the credit card issuer. This fee may be higher for online purchases to account for the increased risk of fraud when a credit card isn’t present for a transaction. Also note that interchange fees can depend on the type of card, how much is being charged and the type of business being operated. Payment processor fees: It’s also possible the payment processor will charge an additional fee to facilitate the payment. Payment processor fees can be broken down into smaller fees that take place over time, and may include monthly or annual account fees, equipment rental fees, withdrawal fees, statement fees and others. Assessment fees: Assessment fees are paid to the credit card network for the purchase to take place. Note that assessment fees are 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, average credit card processing fees fall within a specific range with each of the four major credit card networks. Credit card network Processing fee range American Express 2.5 percent to 3.5 percent Discover 1.56 percent to 2.3 percent Mastercard 1.55 percent to 2.6 percent Visa 1.43 percent to 2.4 percent 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 their fees and how much merchants need to pay to accept their credit cards as payment. While businesses have to pay more money to accept when compared to Mastercard or Visa, a confirmed that 99 percent of U.S. merchants who accept credit cards accept Amex. This statistic flies in the face of the frequent rumors that many businesses don’t accept American Express, although it’s true that American Express isn’t as abroad. What are the different pricing models for processing fees
We noted how credit card processing fees can fall within a specific range for each of the , but part of the fluctuation can be attributed to the pricing model chosen for credit card processing fees. Merchants may have the option to accept a pricing model that suits their needs best, so it’s 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, certain qualified transactions may be charged a lower rate, whereas others require a higher percentage in fees. This type of pricing typically works best for merchants who process most of their transactions in the lowest tier. Flat rate pricing: Flat rate pricing works exactly as it sounds. With this pricing model, the credit card processor will charge the merchant a fixed percentage of each transaction plus a small per-transaction fee (usually $0.20 to $0.30 per transaction). This pricing model makes it easy for merchants to 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 predetermined add-on fees. With Interchange Plus pricing, you may pay the interchange rate plus an additional percentage or a small fee per transaction. Model Average Fees 1.5% to 2.9% for card-present transactions, 3.5% for non-present transactions 2.75% to 2.90% per transaction 2.2% + $0.22 per transaction Note that the unique factors that influence these pricing models are the reason you might pay 2.5 percent to 3.5 percent in fees to accept American Express or 1.43 percent to 2.4 percent to accept Visa. Many costs are wrapped into credit card processing fees, which can make the total cost of accepting credit cards vary dramatically over time. How to lower your credit card processing fees
Credit card processing fees aren’t always set in stone. There are a few ways you can lower your costs in order to lessen the burden that these fees can have on your businesses’ overall profit. Negotiate fees with credit card processors: The higher the number of transactions, the more likely 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 make the case for 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 through an added 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 info with the issuer. Many processors reward merchants for using these systems by charging them lower interchange rates. FAQs
Why are some processing fees higher
Processing fees can fluctuate depending on the card type, rewards offered and the risk assumed by the merchant. Credit card networks are also likely to increase their interchange fees in order to entice banks to carry their products. These fees are one of the most common ways that banks generate revenue.
What other fees can I be aware of
You may face initial fees when you sign up for a credit card processing company that will provide you with terminals that help you process your transactions. Other fees you could face are all over the place but may include fees from your credit card processor each time a customer , fees for , fees for non-sufficient funds to pay your credit card payment processor and more.
How do the fees differ if the card is not presented in-person
Credit card processing fees can be higher for purchases made online or over the phone, and there’s a good reason why. has made in-person purchases considerably more secure, but online purchases are most susceptible for fraud since a credit card chip cannot be used to create a unique token for each transaction, and since all you need is a credit card number and a security code to make an online purchase. The bottom line
Accepting credit card transactions is a key way to build your business and give your customers a wider range of options for covering the costs of your goods or services. However, these card processing fees can significantly increase your business’s overall costs. Knowing how these fees work and the kinds of strategies you can use to lower them is one key way to maximize your earnings and build a profitable business. SHARE: Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more. Cathleen's stories on design, travel and business have appeared in dozens of publications including the Washington Post, Town & Country, Wall Street Journal, Marie Claire, Fodor’s Travel, Departures and The Writer. Related Articles