Average Fees for Credit Card Processing

Fees Credit Card Processing

We know the pain you go through every day on processing credit card payments. We also understand how it impacts your profit margins significantly, especially after the pandemic outbreak, when you have seen so many low-sale months. But we have good news for you! You can reduce this financial burden by learning about the right payment processing fees. In fact, being a business owner, you need to be aware of the average fees for credit card processing and their different types.

The average credit card processing fees range between 1.4% and 3.5%, depending upon the card network you are processing. Further, business owners must remember that credit card processing fees are completely different from the charges your customers pay for holding a credit card.

While the total payment processing charge you will pay each month depends upon a number of factors, it’s possible to minimize those undesirable charges through smart ways. How about passing on the charges to your customers, for example? Or what if you can negotiate with your merchant account services provider for a reduced payment processing fee?

What is a Credit Card Processing Fee?

If you are processing credit cards for some time now, you already know this. But for newbies, let’s give a simple definition of the term.

A credit card processing fee is the charge you pay every time a consumer makes a purchase using his/her credit card. You are paying this fee to your payment processor for using a credit card processing service.

Now, you may ask why do I process credit cards then? Well, it’s simple. Today’s customers are looking for faster and more convenient payment options to pay for their purchases. You may think, “I have enough customers who would pay me cash!”

But you will be surprised to hear that whether offline or online, customers would abandon their carts if they don’t get their desired payment options. In fact, do you know that many of your potential customers may not have even entered your store just because they did not find the logo of their preferred transaction method outside your door?

So, now that you know credit card processing is important, you need to think of ways to accept credit card payments cost-effectively, without affecting your profits. Before moving on to the average payment processing fees charged by payment processing solution providers, let’s briefly discuss the various layers involved in these fees.

  1. Interchange Fees: You pay this fee directly to your credit card issuer. Also known as the swipe fee or discount rate, an interchange fee is generally higher for online purchases since the digital marketplace is exposed to numerous cybersecurity threats.
  2. Payment Processor Fees: Your payment processor may charge an additional fee for facilitating your transactions. A payment processor fee structure may include withdrawal fees, annual or monthly account fees, equipment rental fees, statement fees, and many others.
  3. Assessment Fees: You may pay assessment fees to the credit card network through which a particular transaction is made. Assessment fees are charged on a monthly basis rather than a per-transaction basis.

What are the Average Credit Card Processing Fees?

The Factors –

  • The exact rate depends on the card network, that is, Visa, MasterCard, American Express, and Discover.
  • It also depends upon the type of credit card used to make a purchase. For instance, a high reward credit card would come with higher payment processing fees compared to a lower or no rewards card.
  • Another factor is the merchant category code or MCC of the particular business.
  • The credit card processing charges also vary based on the type of transaction – that is swiped/dipped or keyed-in or eCommerce transactions.

Here’s a table mentioning the average fees for credit card processing for all four card networks.

Card Network Average Credit Card Processing Fee Range
Visa 1.43% + $0.10 to 2.4% + $0.10
MasterCard 1.55% + $0.10 to 2.6% + $0.10
Discover 1.56% + $0.10 to 2.3% + $0.10
American Express 2.5% + $0.10 to 3.5% + $0.10

Again, as we mentioned, those are just average credit card processing fees you can expect to pay. However, the charges really vary on a number of factors. For example, it would differ for card-present and card-not-present transactions.

The Costs Included in Payment Processing Fees

Some of the common costs that contribute to the average credit card processing charges include –

  1. The Discount Rate: It is the percentage of sales that go straight into paying your payment processing charges. The discount rate involves all those fees that you pay to the card networks and card issuers in the form of interchange rates and assessment fees.
  2. American Express Processing Fees: Out of all the card associations, Amex or American Express is a special case. Because it’s the card association that’s also a card issuer.

Therefore, Amex’s payment processing fees work a bit differently. It is this unique position of Amex that makes its fees expensive, especially the one associated with processing returns.

Discover, too, works in a similar fashion as it has to operate both its own payment networks and issue credit cards.

  1. Other Fees and Costs: There are some additional costs as well. For example, in some cases, you may require to pay your merchant services provider a fixed monthly fee. You may further need to cover the costs of installing new payment terminals or card readers.

Effective Rate

Effective rate is defined as the processing fees a merchant pays in relation to the gross volume. Although your effective rate is denoted as a percentage, it is not equivalent to a payment processor’s rate. The best way to estimate the effective rate for your particular business is to calculate your average processing expenses.

In short, an effective rate is not a fixed charge that merchants need to pay on a monthly or annual basis. The effective rate is the charge you pay for your merchant services, and it is just a percentage of your entire processing volume that you paid as processing fees.

Hence, merchants should not rely on rough averages. It’s always a good habit to consider a few variables to get a complete picture of how the processing fees work for your business. Those factors and variables include –

  • The processing method
  • Card-present and card-not-present transactions
  • Debit and credit card charges
  • Average ticket size

Check out with your merchant services provider regarding the rates and know what you will end up paying. Weigh out your average payment processing fees with your profit margins and try to negotiate with your provider for a more cost-efficient solution.


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