Published in: Research | Sept. 13, 2019
Average Credit Card Processing Fees and Costs in 2019
By: Lyle Daly
For the typical merchant, accepting credit card payments is a must. American consumers used credit cards in 23% of transactions in Oct. 2018, according to the Federal Reserve Bank of San Francisco. Merchants that don't accept cards are at a big disadvantage.
Taking credit card payments isn’t free, though. Each transaction includes multiple fees that cut into the merchant’s profits. To find out how much merchants pay, we analyzed the factors that determine these fees. We also took a look at how much the average credit card processing fees are.
Here's what we found.
Summary of key findings
- To process credit card payments, merchants must pay interchange fees, assessment fees, and processing fees. These fees go to the card's issuing bank, the card's payment network, and the payment processor.
- Interchange fees cost between 1.15% + $0.05 and 3.15% + $0.10 of per transaction.
- Assessment fees cost between 0.10% and 0.15% per transaction.
- Processing fees vary widely depending on the payment processor. Most charge a percentage of the transaction, a flat-rate fee, or both.
Types of credit card processing fees and costs
To start, we need to clarify the different types of credit card processing fees and costs. There are two fees, known as base costs, that are charged by the payment network (e.g., Visa or Mastercard) on every transaction involving one of their cards:
- Interchange fees: The bank that issues the credit card receives the interchange fee. For example, if you have a Chase credit card on the Visa payment network, Chase receives the interchange fees on your transactions.
- Assessment fees: The payment network receives the assessment fee. In the example above, Visa would receive the assessment fee on every transaction where you used your Chase Visa card.
Those two fees are non-negotiable.
In addition, merchants must pay the company they use to process their credit card payments.
This company accepts the credit card payment, either through a physical card reader or an online payment gateway, and sends the transaction to the payment network. Depending on the payment processing company, costs for this service could include any of the following:
- A per-transaction fee.
- A monthly service fee.
- The price of the equipment used to process transactions.
Average credit card interchange fees
|Payment Network||Average Interchange Fees|
|Visa||1.15% + $0.05 to 2.40% + $0.10|
|Mastercard||1.15% + $0.05 to 2.50% + $0.10|
|Discover||1.40% + $0.05 to 2.40% + $0.10|
|American Express||1.43% + $0.10 to 3.15% + $0.10|
Note: These aren't the highest and lowest interchange fees for each payment network. We've removed some of the outliers (like Discover's 0.00% + $0.75 for credit payments on utility bills and American Express's 3.10% + $0.10 for some non-U.S., non-swiped payments) to make the table better reflect average fees.
With each payment network, there are several factors that determine the interchange fee a merchant pays. Here are the most significant:
- Merchant category: Every merchant has a merchant category code (MCC) corresponding to its type of business. Payment networks charge different interchange fees based on the business’s MCC. For example, a supermarket has different fees than a restaurant.
- Type of credit card used: Networks have various types of cards with their own sets of benefits. Cards that offer more benefits, such as travel rewards or purchase protections, usually have higher interchange fees. A World Elite Mastercard will have higher interchange fees than an Elite Mastercard, a Visa Signature Preferred Card will have higher fees than a Visa Signature Card, and so on.
- Processing method: Interchange fees can change based on whether the card was swiped/inserted, keyed in, or not present (in the case of online or phone transactions). This is in part because the risk of fraud varies based on the processing method.
American Express also uses transaction amounts to determine its interchange fees, with higher-value transactions costing less for the merchant.
Of the payment networks, Visa and Mastercard tend to have the lowest fee amounts. They're also the two largest payment networks in the United States. Discover is a close third, though, and it falls into a similar fee range. For many merchants, processing fees will be the same for Visa, Mastercard, and Discover.
American Express has consistently been the most expensive payment network, which is one reason why it’s accepted by fewer merchants than the other three. In 2018, American Express lowered its fees by the largest amount in 20 years. Although it still has a higher average range, it’s now more in line with the other payment networks.
Credit card assessment fees
|Payment Network||Assessment Fee|
|Mastercard||Transactions under $1,000: 0.1375%; $1,000 or more: 0.01%|
The assessment fee is the payment network’s cut, and it’s a much smaller portion of each transaction.
American Express is once again the most expensive payment network, but this time around, Discover has the lowest rate, at least for transactions under $1,000. For transactions $1,000 and over, Mastercard is the clear winner. That being said, the differences in assessment fees between each payment network are minuscule.
Credit card processing fees and costs
|Payment Processor||Cost per Swiped Retail Transaction||Cost per Online Transaction||Monthly Fee|
|Square||2.75%||2.9% + $0.30||$0|
|Fattmerchant||Interchange + $0.08||Interchange + $0.15||$99|
|Helcim||Interchange + 0.25%||Interchange + 0.45%||$15 (retail); $35 (online)|
|National Processing||Interchange + 0.15% + $0.07||Interchange + 0.30% + $0.15||$10 (retail); $10 (online)|
|Payline||Interchange + 0.20% + $0.10||Interchange + 0.30% + $0.20||$10 (retail); $20 (online)|
While merchants must pay the interchange and assessment fees set by the payment networks, they have more flexibility with payment processors.
There are many payment processors available, all with their own pricing strategies, and merchants may also be able to negotiate these rates.
Most payment processors charge merchants the transaction’s interchange fee and then tack on an additional fee in the form of either a percentage of the transaction, a flat rate in cash, or both. Square is an exception, as instead of passing on the interchange fee, it simply charges a larger percentage of the transaction to cover the payment network’s fees and its own fees.
If you’re wondering how this whole fee process works, it starts with the bank that issues the credit card used for the transaction. It deducts its cut (the interchange fee) from the transaction when sending the money.
The payment processor receives the money, minus that interchange fee, deducts its own transaction fees, and sends the remainder to the merchant.
Monthly fees are also common with payment processors -- Square is notable for not having one. Processors with higher monthly fees, such as Fattmerchant, generally have much lower fees per transaction, making them a good choice for high-volume businesses.
In addition to the costs above, merchants that accept in-person transactions also need to have equipment. Costs vary significantly depending on the merchant's needs.
Basic mobile readers are available for $20–$50, although some payment processors (Square included) offer one for free. Terminals and registers are more expensive, as a standard terminal can cost $150 and an advanced register can cost $1,000.
A wide variety of fees
When processing credit card payments, merchants have multiple fees that are taken out of the total transaction amount. The non-negotiable payment network fees can vary:
- From 1.15% + $0.05 to 2.50% + $0.10 in interchange fees, although this could be as high as 3.15% + $0.10 if the client uses an American Express card.
- From 0.13% to 0.15% in assessment fees.
That results in a total of anywhere from 1.28% + $0.05 to 2.65% + $0.10 per transaction in fees charged by the payment network (or more, depending on the payment network). The most important factors in what the merchant pays will be their MCC and the type of credit card the customer uses.
Then, the payment processor will take their cut, unless the merchant uses a processor that charges one flat rate to cover all the fees in the transaction.
So the next time you see a sign that says "No credit cards for purchases under $5," you'll know why.
Pricing information on payment processors is current as of August 2019. Monthly fees were taken from each processor’s least expensive plan and transaction fees are base rates without any discounts based on sales volume.