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Merchant Credit Card Fee Guide 2025: How Much Does It Cost to Process Credit Cards?

Doug Van Spronsen

Rescue Team

Swipe. Tap. Go.

It seems so quick and easy to pay with plastic these days. But behind the scenes, every credit card transaction is cutting into your bottom line. With each dip, tap, or swipe of a card, merchants are being bled dry by sky-high processing fees. Last year alone, businesses in the US paid a record $16.7 billion in credit card processing fees – an amount that would make even the wealthiest CEOs wince.

And yet, payments keep moving further away from cash. In 2022, credit card volume hit $9.5 trillion in the US. Customers love the convenience and rewards of credit. Meanwhile, merchants suffer the costs. This unavoidable shift is forcing companies to accept card payments to stay relevant.

In this guide, we’ll break down the typical credit card processing fees that merchants pay, explain how the system works, and provide actionable tips to help you reduce these costs.

Understanding Credit Card Processing Fees

Cashless transactions have overtaken traditional cash payments, making credit card processors and payments essential for modern businesses. With credit card transaction volumes hitting record highs, merchants face the challenge of managing processing fees, which have surged significantly.

What Are Credit Card Processing Fees?

Credit card processing fees are charges that merchants pay for accepting credit card payments from their customers. These fees are necessary to facilitate the secure and efficient transfer of funds from the customer’s bank account to the merchant’s account. The credit card merchant fees are divided into several components:

  • Interchange Fees: These are fees set by the card networks (Visa, MasterCard, etc.) and paid to the card-issuing bank. They typically represent the largest portion of the processing cost.

  • Assessment Fees: These are fees charged by the card networks for maintaining the network infrastructure.

  • Processor’s Markup: This is the fee charged by the merchant service provider for facilitating the transaction and providing necessary services.

Each of these components plays a vital role in ensuring the smooth processing of credit card transactions. Understanding them can help businesses make more informed decisions about their payment processing solutions.

Average Cost of Processing Credit Cards in 2024

The cost of processing credit cards varies depending on several factors, including the type of card used and the merchant’s business type. On average, merchants can expect to pay between 1.5% to 3.5% per transaction in 2024. This range includes the interchange fee, assessment fee, and credit card processor markup.

Different types of credit and debit cards can come with varying costs. For example, debit card transactions typically have lower fees compared to credit card transactions. Premium cards, which offer more rewards and benefits to cardholders, usually come with higher fees due to the increased risk and benefits provided. Understanding these differences can help merchants better anticipate their processing costs.

The Problem with High Credit Card Processing Fees

High credit card fees are a significant burden for many businesses. These fees can drastically reduce profit margins, making it harder for businesses, especially small and medium-sized ones, to thrive. The financial strain of these fees can lead to higher prices for consumers and limit business growth.

Additionally, hidden fees and lack of transparency in traditional credit card processing fee models exacerbate the issue, creating unexpected expenses that can disrupt financial planning. Understanding and addressing these high costs is essential for maintaining a healthy bottom line.

Financial Impact on Businesses

High credit card processing fees can significantly impact a business’s bottom line. For small to medium-sized businesses, these fees can represent a substantial expense that cuts into profits. The average small business spends about $10,000 annually on credit card processing fees. This cost can be even higher for businesses with high transaction volumes or those that only accept credit cards or a large number of premium credit cards.

The financial burden of these fees can be especially challenging for businesses operating on thin margins. In some cases, the cost of processing transaction fees alone can be the difference between profitability and loss.

Hidden Costs and Fees

In addition to the standard processing fees, businesses often face a variety of hidden costs that can add up over time. These hidden fees can include charges for services like using payment processors, gateway fees, PCI compliance fees, chargeback fees, monthly minimums, and early termination fees.

The lack of transparency in traditional payment processing fees and models can make it difficult for businesses to understand the true cost of accepting credit card payments. This lack of clarity can lead to unexpected expenses and financial strain.

Breaking Down the Main Credit Card Processing Fees

Credit card processing involves several types of fees that merchants need to be aware of. Here’s a detailed breakdown:

Interchange Fees

Interchange fees are the largest component of credit card processing costs. These fees are set by the credit card networks, and paid to the card-issuing bank. They cover the risk and cost of processing transactions. The rate varies based on the type of card and transaction method (e.g., swiped, keyed, online).

Payment Gateway Fees

Payment gateway fees are charges for using the technology that processes online credit card payments. These fees typically include a monthly fee and a per-transaction fee. The gateway ensures the secure transfer of payment information from the customer to the payment processor.

PCI Compliance Fees

PCI compliance fees are charges for ensuring that a merchant’s payment processing system adheres to the Payment Card Industry Data Security Standards (PCI DSS). These standards are designed to protect cardholder data and prevent fraud. Non-compliance can result in hefty fines and increased fees.

Chargeback Fees

Chargeback fees are penalties imposed when a customer disputes a transaction, and the funds are returned to the customer. These fees can be costly and may include the transaction amount and additional processing fees. Reducing chargebacks is crucial to minimizing these expenses.

Monthly Minimums

Monthly minimum fees are charges that ensure a merchant fees a minimum amount of processing fees each month. If a merchant does not meet this threshold, they must pay the difference. This fee can be a burden for businesses with low transaction volumes.

Early Termination Fees

Early termination fees are charges for ending a processing agreement before the contract term is complete. These fees can be substantial and discourage merchants from switching providers. Understanding contract terms and avoiding long-term commitments can help businesses avoid these costs.

Hardware Costs

Hardware costs include the price of purchasing or leasing credit card processing equipment, such as point-of-sale (POS) systems, card readers, and terminals. These costs can vary widely based on the equipment’s features and the card network and capabilities.

What Impacts Your Credit Card Processing Rates?

Several factors can influence the rates you pay for credit card processing:

  • Card Type

    Different types of cards come with different processing costs. For instance, rewards cards, which offer points or cash back to users, generally have higher interchange fees due to the benefits provided.

  • Card Present vs. Card Not Present

    Transactions where the card is present (e.g., swiped or dipped) typically have lower fees compared to card-not-present transactions (e.g., online or keyed-in). The latter is considered higher risk, leading to increased fees.

  • Business Type and Volume

    The type of business and its transaction volume can impact processing fee rates. High-risk businesses, such as those in the travel or gaming industries, often face higher fees. Similarly, businesses with higher transaction volumes may qualify for lower rates due to increased negotiating power.

Tips to Reduce Your Credit Card Processing Costs

Reducing credit card processing costs can significantly improve your bottom line. Here are some effective strategies:

Negotiate with Your Provider for Lower Rates

Don’t be afraid to negotiate with your merchant service provider. Many providers are willing to offer lower rates to retain your business, especially if you have a high transaction volume.

Switch to Interchange-Plus Pricing

Interchange-plus pricing is a transparent pricing model that separates the interchange fee from the processor’s markup. This model can help you understand the exact costs and potentially save money compared to bundled up pricing models.

Shop Around and Compare Providers

Take the time to compare different merchant service providers. Look for those offering competitive rates, transparent pricing, and good customer service. Switching providers can lead to significant savings.

Reduce Chargebacks with Fraud Tools

Implementing fraud prevention tools can help reduce chargebacks, saving you money on fees and protecting your business from fraudulent transactions. Tools like address verification services (AVS) and credit card companies call verification value (CVV) checks can be effective.

Use a Payment Gateway like Stripe or PayPal

Payment gateways like Stripe or PayPal offer competitive rates and advanced fraud protection features. They can be a cost-effective solution for online businesses, providing transparency and ease of use.

Surcharging as an Alternative Model

Surcharging is an alternative model that shifts the cost of credit card processing fees to the customer. Instead of the merchant absorbing these fees, a small surcharge is added to the transaction amount, covering the processing cost.

Surcharging Model vs. Traditional Processing

The surcharging model offers several benefits over traditional processing:

  • Near-Zero Processing Fees: By passing the cost to customers, merchants can significantly reduce or eliminate processing fees.

  • Transparency: Customers are aware of the surcharge, leading to greater transparency in transaction costs.

  • Optimized Revenue: Lower processing costs mean more revenue stays in the business, improving profitability.

Rescue Payments as a Solution

Rescue Payments provides a compliant surcharging solution that helps businesses reduce credit card processing fees. Their model is designed to be transparent and easy to implement, ensuring that businesses can pass on the surcharge without violating regulations.

Why It Can Eliminate Most Processing Fees

By using Rescue Payments, businesses can offset most of their credit card processing fees. This solution allows merchants to retain more of their revenue, making it an attractive option for businesses looking to reduce costs and improve their financial health.

Taking Control of Your Credit Card Processing Fees

High credit card processing fees can be a significant burden for businesses, affecting their profitability and financial stability. Understanding these fees, their components, and how to manage them is crucial for any business that accepts credit card payments.

Rescue Payments offers a game-changing solution that can help businesses minimize these fees through a compliant surcharging model. By passing the cost of processing fees to customers, businesses can enjoy near-zero processing costs, increased transparency, and optimized revenue.

If you’re struggling with high credit card processing fees, consider exploring Rescue Payments as a solution. Take control of your average credit card processing costs and improve your bottom line today.

Want advice on setting up a surcharge program?

We host weekly live trainings teaching you how to get the most out of your surcharge program, and if you want to get learning right now, you can download our Surcharge Canada Guide.

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