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Credit Card Processing: What Business Owners Need to Know

Featured image by Michal Jarmoluk via Pixabay

The average fee for credit card processing varies. It usually ranges from 1.5% to 3.5% of each transaction. The final percentage is based on a host of factors. In this post, we take a look at the pertinent details.

What Is a Credit Card Processing Fee?

Businesses must pay fees each time a customer makes a purchase using a credit card as payment. Then, depending on the type of credit card you accept in your business, the fees may vary. They include several different layers of charges, such as:

Interchangeable Fees

These are also referred to as a “discount rate” or “swipe fee.” Businesses pay these fees directly to the credit card issuer.

Ecommerce businesses have interchangeable fees to account for the greater risk of fraud when they accept a credit card online at the time of payment.


Interchangeable fees also depend on the type of business a customer is purchasing from, the amount of the purchase, and the type of card they are using.

Assessment Fees

In order for someone to make a purchase to occur, the network requires an assessment fee. However, businesses receive reimbursements for assessment fees based on total monthly sales rather than per transaction.

Payment Processor Fees

The payment processor may charge an additional fee to facilitate the payment. However, the processor can reduce these into smaller fees that take place over time. For example, these could be monthly or annual account fees, withdrawal fees, statement fees, annual account fees, or others.

Three Factors Determine How Much Businesses Pay in Credit Card Processing Fees

It is important for business owners to understand that there are three major components that determine how much they will pay in credit card processing fees. These include:

  1. Credit card network
  2. Bank that issues the credit card
  3. Payment processor

Obviously, credit card services involving credit processing can be quite complicated.

However, point of sale (POS) solutions simplify the process. They also make it easy for merchants to minimize fees from card paying options. POS solutions also provide hardware and and integrate with software options.

The latest mobile and smart chip solutions also assist with terminal and software options. Their goal is to accommodate existing systems with ease regardless of the customer’s current situation. Find more information here.

What Are the Types of Credit Card Processing Fees?

Other systems and safeguards include:

  • Hosted payment acceptance forms
  • PCI compliance
  • Mobile payment processing
  • Acceptance of card-not-present transactions

The customary types of transactions include:

In-Person Fees: The customer pays in person using their credit card.

Alternative Methods: A customer makes a purchase using a form of payment other than credit card methods.

Card-Not-Present: A customer completes a transaction online using their credit card. Then a business enters the customer’s credit card to charge remotely.


Why Do Processing Fees Vary So Much?

Part of the price fluctuations in credit card processing can be ascribed to the pricing model a business chooses for credit card processing fees. Merchants can choose the pricing model that best suits their needs.

For example, the pricing models are:

Tiered Pricing: These pricing models accompany different transactions for different tiers.

Interchange Plus Pricing: Merchants who choose this pricing model will have to pay the interchange rate transaction and predetermined add-on fees. Moreover, this pricing may have you pay the interchange rate for each transaction as well as an additional percentage or small fee per transaction.

Flat-Rate Pricing: With this method, a fixed percentage of each transaction and a small per-transaction fee (usually $.20-$.30 per transaction) is charged to the credit card processor. This pricing model helps merchants gauge their credit card processing over time.

The Wall Street Journal collected data in recent years that showed consumers used credit cards for 62.3% of their payments. They used cash for 15.5% and electronic payments for 14.2%. Meanwhile, checks accounted for only 7.5% of the total. Clearly, consumers are fond of plastic.