Finances (US)

Credit card processing fee: Learn what it is!

Do you accept credit cards for your business? If so, you need to learn more about a credit card processing fee! Read on to learn more and avoid this cost!

What is a credit card processing fee? Find out more about it!

To have a credit card, you have to pay certain fees. Source: Canva.
To have a credit card, you have to pay certain fees. Source: Canva.

If you’re a business owner, chances are you’ve heard of a credit card processing fee. These costs can add up quickly and greatly impact your bottom line if not managed correctly.

However, what exactly are these fees, why do merchants pay them, and how can businesses save money by better understanding them?

Well, you can read on to find out! This post covers everything from credit card processing fees to improved credit card acceptance!

Therefore, with this knowledge, you will be well-equipped to confidently manage your merchant services! So, read on!


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What is a credit card processing fee?

To facilitate the authorization and processing of credit card transactions, businesses pay credit card processing fees to banking institutions.

Moreover, banks allocate a percentage of each credit card sale (the merchant discount rate) to the credit card processing provider.

Who pays the card processing fee?

Behind the scenes, credit card processing services undertake the arduous task of taking and processing consumer payments.

Therefore, to facilitate a flawless financial transaction for all parties involved, the payment processor functions as a middleman between buyers, sellers, card issuers, and card networks.

With this, the business will incur a nominal cost from the merchant account or payment service provider for processing the transaction.

So, if you are a consumer, you won’t need to pay any credit card processing fees! However, you’ll need to pay the credit card processing fee as a business owner using this service!

You must be wondering if it is legal for a merchant to charge more if you pay for their service through a credit card. Well, the answer can be different depending on where you are making your purchase.

Therefore, only in a handful of states are credit card surcharges illegal. So, any additional fees for using a credit card to make a purchase must be itemized.

Also, this surcharge must be made apparent to the customer before they make their purchase.

Types of credit card processing fees

There is more than one type of processing fee. Source: Canva.
There is more than one type of processing fee. Source: Canva.

Businesses that accept credit card payments often incur three types of processing fees: interchange fees, assessment fees, and payment processor fees.

So, in order to make an informed decision about applying for a credit card, it would be helpful to have this information at hand.

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The interchange fee is typically the most expensive of these charges for businesses.

Also, the credit card provider charges this fee to cover the costs of processing your payment.

Therefore, fees associated with accepting credit cards in person are typically higher than those associated with processing those cards online.

Payment Processor

The vendor’s chosen third-party payment processor, as opposed to the consumer’s credit card issuer or the vendor’s own credit card network, may assess transaction fees.

Therefore, these fees might be paid monthly, annually, or in one lump sum at the end of the contract.


Credit card processing fees are significantly reduced when assessed fees are paid directly to the card network (Visa, MasterCard, Discover, or American Express).

Moreover, these expenses differ from network to network based on many factors.

For example, some networks may impose additional fees on the transaction if a credit card is used instead of a debit card or if a large volume of money is sent.

Also, additional fees may arise for transactions, such as those incurred when converting one currency to another.

Moreover, you should know that a portion of each month’s sales is taken as a fee by the credit card processing network from the seller.

Therefore, the buyer may be using a credit card network that is incompatible with these. So, some networks can issue their own credit cards.

However, if the company you use can’t, you’ll need to pay assessment fees.

Why are card processing fees so high?

Pay attention to your credit card fees! Source: Canva.
Pay attention to your credit card fees! Source: Canva.

Interchange fees have increased in tandem with using credit cards to make purchases.

Moreover, as a result of the plethora of credit card options available, banks must compete with customers by providing attractive incentives to use their cards.

Therefore, higher interchange fees will be necessary to offset the advantages (as mentioned before).

In addition, credit card companies offer issuing banks more favorable interchange rates. This way, they can get them to accept their cards.

Moreover, on a smaller scale, interchange fees are a significant source of revenue for financial institutions. For example, notably credit unions and community banks.

Can the fees get lower?

You might try to negotiate cheaper processing fees with your processor. First, you need to know what kinds of costs are open to discussion.

Moreover, none of the assessment costs or interchange rates are negotiable. Also, the respective card networks establish those charges.

However, the price tag of the central processing unit is up for grabs. So, if you can raise your sales volume, you will have more leverage in any talks.

How can you avoid credit card processing fees?

You can see how quickly these fees mount up. However, you can mitigate these fees to provide your company with the most cost-effective answer.

So, read some tips below to learn how to avoid these credit card processing fees!

Read all the terms

Be sure to read the fine print when it comes to fees. Also, it’s possible that to continue utilizing a service, you’ll need to pay a periodic fee, or they will charge a one-time fee just to receive a statement.

Moreover, you should weigh the lease payments against the equipment’s projected useful life to see if leasing or buying makes more financial sense.

Opt for different processing tools

Customers often contact their credit card provider in one of two ways when they dispute a charge. For example, either by claiming they didn’t make the charge or by disputing the amount.

Also, the company will charge a fee from the merchant if the chargeback is valid, which might add up to a significant amount.

Using chip-protected card readers and contactless techniques, as well as eliminating or reducing card-not-present transactions like over-the-phone orders, can help cut down on fraudulent activity.

Don’t get flat-rate pricing

To the untrained eye, flat rate pricing can look appealing, but it may really be more expensive than competing models.

Moreover, the amount of business or the type of transaction are two examples of variables that can impact an exchange rate.

Therefore, by committing to a set rate, you are giving up the chance of getting a better interchange rate as it fluctuates over time.

Learn how to avoid finance charges on your credit cards

While some fees you can’t get rid of, there might be some others that you can. And the more fees you get to waive, the better!

Save money for yourself, and read the following content to learn how to avoid finance charges on your credit cards.

avoid finance charges credit cards

Avoid finance charges on credit cards: Learn how!

Are you trying to pay off your credit card without hefty charges? If so, you can read on to learn how to avoid finance charges on credit cards!

About the author  /  Victória Lourenço

Victória Lourenço is part of the finance writer team for The Mister Finance website. She is a translator and copywriter, having worked on finance topics for over four years. She has a goal to keep studying finances to help people learn more about how to use their credit cards, make loans, and use other money-related products in a way that they can find a more meaningful and healthy financial life!

Reviewed by  /  Aline Barbosa

Senior Editor

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