March 17, 2022
As a business owner, you know very well that sometimes you have to spend money to make money. This is the case when it comes to merchant credit card fees. For every sale you make that is paid for via credit card, you will need to pay a credit card processing fee. These fees are made up of several different components and may vary from credit card to credit card and from payment processor to payment processor.
You can’t get away with not paying any merchant credit card fees, but you can educate yourself and understand what the fees are made up of and shop around to find the best deal that makes the most sense for your business.
Different companies set their own credit card processing fees, so the total cost can vary significantly depending on the card network, the type of card used and the business’ merchant category code (this is a 4 digit code used by credit card companies to categorize businesses by type of goods or service they sell).
For this reason, it is hard to provide an estimate of what you can expect to pay in credit card merchant fees. Below is a list of the average range of fees of the 4 major credit card companies:
Keep in mind that the above is the average range, but your actual costs will be determined by your specific situation.
Each payment network calculates their fees, taking into account a number of different factors, including:
While the credit card companies get to choose their own fee structure, you also have to account for fees that you will need to pay to the credit card processor, which also get added to your total merchant credit card fees. Processors offer merchants different pricing plan models, so you can choose the one that best suits your needs. The common pricing plans include:
Visa sets and publishes its interchange rate each year, which is what the processor has to pay per transaction - it is this amount that the processor passes on to you, the merchant, as part of the merchant credit card fees.
Same as Visa, Mastercard also sets its fees each year, which are generally fairly similar to Visa.
American Express works slightly differently from Visa and Mastercard because it is a closed network. This means that only American Express itself can issue its credit cards (as opposed to Visa and Mastercard where other banks can also issue cards), giving it much more control over fees. American Express tends to charge higher fees simply because they can. Some merchants choose not to accept American Express because they don’t want to pay the higher fees that cut into their profits.
There are many types of credit card processing fees that all add up to your total merchant credit card fees. The first two types are non-negotiable and are set by the credit card company and must be paid on each transaction:
The other main fee is the payment processing fees. This fee goes to the company that actually processes the credit card payment, which could be either via a card reader or an online payment gateway. This fee may be per-transaction or monthly. This is where you can negotiate and shop around to find the processor that is the best match for you.
The fees that a payment processor may charge include:
As explained above, the rates charged by the credit card companies can vary and are determined by the companies themselves. Below is a table that lays out the average rates of the main credit card companies and the two main fees that they charge. You can use this table to get a general idea of what your credit card merchant fees would look like on a monthly basis. Keep in mind that this is only meant to serve as an estimate and the real costs will vary and will also include payment processor fees.
Of the credit card payment networks, Visa tends to have the lowest fees, although Mastercard and Discover are similar. Once you add in the payment processor fees, your total merchant credit card fees are likely to be close regardless of whether the customer uses a Visa, Mastercard or Discover.
It’s only American Express users who may make your costs creep up, although even they have lowered their fees in recent years to be more in line with the others. The place where you can really lower your costs are in choosing your payment processor.
Fees are charged for debit cards as well, but because the interchange rate is based on transaction risk, the fees for debit cards tend to be lower because they are lower risk than traditional credit cards.