Every time a customer pays with a credit card, part of it goes to credit card processing costs. While they may look like a flat percentage on the statement, they’re actually made up of several parts. Knowing what merchants are really paying for helps them spot hidden charges and negotiate better terms with payment service providers.
The cost to route a credit card payment through the financial system is called the processing fee. It’s split between the issuer, the card network, the acquirer, and the payment processor. The exact amount depends on the card brand, the payment method, and the merchant’s processing history.
Not all transactions are priced the same. Payments made in person with the card present usually carry lower fees because the fraud risk is lower. Online or other card-not-present payments typically cost more, since there’s a higher chance of fraud when the physical card isn’t involved.
Fees exist because every card payment relies on multiple parties. Each one—the issuer, the card network, and the payment processor—takes a share, and they make up the merchant fees found on the statement.
The interchange fee goes to the card issuer, usually a bank that issued the customer’s card. These fees compensate for the risk of lending money and handling fraud.
The rate for interchange is set by card networks such as Visa and Mastercard. They maintain extensive schedules with hundreds of categories, where the exact fee depends on things like whether the payment was online or in-store, the card brand, and the business type.
Assessment fees, sometimes called credit card assessment fees, are charged by the credit card network. They are smaller than interchange but apply to every card transaction. Networks may also include scheme fees, which help maintain payment rails and brand infrastructure.
The payment processor fees are charged by the credit card processor or processing company. This is the markup merchants pay beyond interchange and assessment. Processors justify these charges by providing settlement, reporting, customer service, and fraud tools.
This markup is sometimes referred to as the merchant discount rate. The scope of services, from authorisation to dispute management, influences how much merchants pay.
When merchants accept credit cards online, a card payment processor uses a gateway to route the card transaction. Fees may apply for each request. These per-transaction costs cover authorisation, encryption, and fraud screening. They ensure that credit card payments pass through securely.
A chargeback occurs when a cardholder disputes a card transaction. While interchange and assessment are unavoidable, chargeback fees are charged directly to the merchant. These fees compensate the processor for handling the dispute. The financial cost can extend beyond fees to lost goods, time, and potential penalties for high chargeback ratios.
Some credit card processing companies charge PCI DSS compliance fees. These cover costs related to maintaining security standards when handling credit cards. Non-compliance can result in fines from the credit card network and higher transaction fees.
Payment processors may pass on additional types of fees, such as:
Payment processors typically use three main pricing models, and each has trade-offs in terms of cost, transparency, and simplicity. The table below breaks down how these models work so merchants can see which one best fits their business.
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Interchange-plus |
Flat-rate |
Tiered |
|
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How it works |
Merchants pay the actual interchange fee set by the card networks, plus a transparent markup from their payment processor. |
Every transaction is charged at the same fixed rate, regardless of the underlying interchange. |
Transactions are grouped into “qualified,” “mid-qualified,” and “non-qualified,” each with different rates. |
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Pros |
Transparent and often cost-effective for businesses with higher volume. |
Easy to understand and predictable, with no surprises on statements. |
Can appear cheaper upfront and easy to quote to merchants. |
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Cons |
Requires careful review of statements; fees vary depending on card type. |
Usually more expensive overall; smaller transactions don’t benefit from lower interchange rates. |
Least transparent model; many transactions end up in the most expensive tiers. |
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Best for |
Businesses that want clarity and scalability as they grow. |
Small businesses or startups that prioritise simplicity over cost savings. |
Merchants that prefer a straightforward rate quote, even if costs are higher in practice. |
Premium and rewards credit cards carry higher interchange, while debit card transactions are often cheaper. The type of card directly shapes the credit card processing rates.
The merchant category code (MCC) influences costs. High-risk industries, like travel or gaming, pay higher transaction fees. Networks and issuers adjust credit card processing fees to account for fraud and chargeback risk.
Average ticket size, monthly volume, and how data is captured matter. Manually entered card details tend to cost more than chip, contactless, or tokenised card transactions.
If the business shows high fraud or chargebacks, there may be higher payment processor fees. Good history, PCI DSS compliance, and use of fraud tools can reduce them.
Cross-border card transactions often include extra interchange and assessment fees. Regional pricing differences mean the cost to accept credit card payments may rise if selling globally.
There are several ways to bring down credit card processing costs without disrupting how merchants get paid. Start with the payment provider: if the merchant’s business has strong payment volume, low dispute rates, or a solid technical setup, they may be able to negotiate better rates. Choosing the right pricing model for the transaction profile also makes a big difference.
On the operational side, simple steps like enabling AVS and CVV checks, keeping terminals and integrations up to date, and passing complete transaction data through a gateway can help merchants qualify for lower interchange fees. Steering customers toward lower-cost methods—such as debit or bank transfers—and setting compliant minimums for when accepting credit cards can also cut expenses.
Finally, merchants should look at how they structure sales. Increasing average order value spreads fixed costs across more revenue, while offering account-to-account or other direct payment options reduces reliance on higher-cost card payments.
The average credit card processing fee ranges from 1.5% to 3.5% of each transaction. Within that, the standard credit card processing fee for a retail card-present transaction might be around 1.5% to 2%, while online or keyed card transactions often approach 3%. The merchant’s effective rate will depend on industry, geography, and payment mix.
For example, a business processing $1 million annually at a 2.9% effective rate spends $29,000 on credit card transaction fees. This is why it's crucial to review statements and understand typical credit card processing fees.
Every card payment has a fee, but many of those charges can be reduced. By breaking down what merchants are actually paying, they can find savings and keep more of each transaction.
Antom helps businesses identify and cut unnecessary costs, from high cross-border fees to poor approval rates. Contact us to review your current setup and learn where you could be saving.