Each time a merchant accepts a credit card payment, they pay a credit card processing fee. On average, this fee ranges from 1.10% to 3.7% of the total purchase amount. These fees can be negotiable, especially for merchants with many transactions. Generally, it's recommended that businesses keep their effective rate for credit card processing at 3% or lower to ensure they aren't overpaying for merchant services.
Average Cost of Credit Card Processing
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KEY TAKEAWAYS ON AVERAGE COST OF CREDIT CARD PROCESSING
- The average cost of credit card processing ranges between 1.10% and 3.7%.
- In addition to the processing fee percentage, merchants charge a flat fee, costing anywhere from $0.05 to $0.10 for each transaction.
- American Express has the highest processing fees among major networks, ranging from 1.55% to 3.7%.
- Discover's processing fee ranges from 1.10% to 2.4% of the total purchase amount.
- Visa and Mastercard processing fees range from 1.15% to 3.15% per transaction.
- Several factors affect credit card processing fees, such as the type of service, merchant and business size.
- Interchange fees are higher for card not-present transactions since they’re more fraud-sensitive.
Source: Visa USA Interchange Reimbursement Fees, Mastercard Interchange Rates and Fees, North Carolina Interchange Rate/Fee Schedule
What Are Processing Fees?
Most businesses allow customers to pay for goods and services with credit cards. Each time they accept a card transaction, they pay financial institutions a certain amount for authorizing and completing it. This amount is a credit card processing fee (sometimes referred to as a merchant discount fee).
Merchants shoulder this cost and typically include it in their products' prices. Because the average cost of credit card processing ranges between 1.10% to 3.7%, it can affect the profitability of a small business. Credit card processing fees include interchange, assessment and payment processor charges.
Processing Fee | Description |
|---|---|
Interchange Fees | Also known as a swipe fee, it's the amount businesses pay to the financial institution issuing the |
Payment Network Fees | Payment processors are the middlemen between the credit card issuer, the merchant's bank and the |
Assessment Fee | An assessment fee is an amount businesses pay to the credit card network to provide the infrastructure |
ADDITIONAL COSTS FOR NON-PRESENCE OF CARDS
One factor affecting credit card processing fees is whether or not the card is present during the transaction. As the world becomes more digital, card-not-present (CNP) transactions have become more commonplace. The usual scenarios involving CNP transactions are as follows:
- Online purchases or invoice payments
- Phone orders (when you provide credit card details during the call)
- Recurring, auto-debit payments
These may provide more convenience to consumers, but they present a higher risk to merchants. Card-not-present fraud becomes more challenging to detect since they can't physically examine the card and verify its details. Due to this, processing fees for CNP transactions tend to be higher.
Average Credit Card Processing Fees by Payment Network
While all merchants pay interchange fees for credit card transactions, the rates vary depending on the payment network. Understanding how rates vary is essential to business owners since it affects how much they spend for the average cost of credit card processing and, ultimately, their bottom line.
Credit Card Network | Processing/Interchange Fee Range |
|---|---|
American Express | 1.55% to 3.70% |
Discover | 1.10% to 2.40% |
Mastercard | 1.15% to 3.15% |
Visa | 1.15% to 3.15% |
Visa Processing Fees
Visa is one of the most well-known payment processing networks in the U.S. and worldwide. Of the four major players, Visa has the largest share in the U.S. market, accounting for about half of all credit cards in circulation. Given its popularity, merchants should be familiar with its processing fees.
Program | Starting Interchange Rate | Fees | Highest Interchange Rate | Fees |
|---|---|---|---|---|
Supermarket | 1.15% | $0.05 | 2.00% | $0.07 |
Retail | 1.43% | $0.10 | 2.10% | $0.10 |
Small Merchant | 1.29% | $0.10 | 1.88% | $0.10 |
Recurring Payments | 1.43% | $0.05 | 2.30% | $0.05 |
Insurance | 1.43% | $0.05 | 2.35% | $0.10 |
Restaurant | 2.10% | $0.00 | 2.70% | $0.00 |
Services | 1.55% | $0.10 | 2.40% | $0.10 |
Education | 1.43% | $0.05 | 2.25% | $0.10 |
Advertising | 1.43% | $0.05 | 2.40% | $0.10 |
Real Estate | 1.43% | $0.05 | 2.25% | $0.10 |
Charity and Religious Organizations | 1.35% | $0.05 | 1.35% | $0.05 |
Government | 1.55% | $0.10 | 1.55% | $0.10 |
Fuel | 1.15% | $0.25 | 1.15% | $0.25 |
Travel | 1.75% | $0.10 | 2.40% | $0.10 |
Non-Qualified Consumer Credit | 3.15% | $0.10 | 3.15% | $0.10 |
Like all networks, Visa's interchange fees come in a range. However, compared to other major networks, its starting figure is lower at 1.15%. However, you can't say the same about its highest interchange rate. At 3.15%, it's between Discover’s 2.4% and the 3.7% maximum rate from Amex. Visa and Mastercard have the same interchange fee range.
That said, Visa's credit card processing fees vary between programs. Supermarkets and fuel have the lowest starting rate at 1.15%. Fees for supermarkets can go as high as 2%, while fuel fees don’t vary. Meanwhile, Visa’s interchange rate for non-qualified consumer credit is 3.15%.
Mastercard Processing Fees
Mastercard has a significant share in the credit card market, ranking behind only Visa. It is also one of the best-known credit card issuers in the U.S., with about a third of the market. Merchants should expect many customers to use Mastercard, and understanding its interchange rates is an advantage.
Program | Starting Interchange
Rate | Fees | Highest Interchange
Rate | Fees |
|---|---|---|---|---|
Supermarket | 1.15% | $0.05 | 1.45% | $0.10 |
Airline | 2.55% | $0.10 | 2.55% | $0.10 |
Charities | 2.00% | $0.10 | 2.00% | $0.10 |
Insurance | 1.43% | $0.05 | 2.25% | $0.10 |
Real Estate | 1.43% | $0.05 | 1.43% | $0.05 |
Day Care | 1.60% | $0.10 | 1.60% | $0.10 |
Petroleum | 1.90% | $0.00 | 2.00% | $0.00 |
Public Sector | 1.55% | $0.10 | 1.55% | $0.10 |
Service Industries | 1.15% | $0.05 | 1.15% | $0.05 |
Mastercard shares the same interchange rate range as Visa, with an average credit card processing cost of 1.15% to 3.15%. Although merchants often pay varying processing fees across different sectors, Mastercard has set fees for most categories, including the following:
- Service Industries: 1.15%
- Real Estate: 1.43%
- Airline: 2.55%
- Standard: 3.15%
Mastercard does have varying interchange fees for a few programs. For instance, fees may be as low as 1.43% and as high as 2.25% for insurance.
American Express Processing Fees
American Express operates differently from Visa and Mastercard because it works in a closed-loop network. The two other networks, while processing transactions, do not issue credit cards, while American Express does. This closed-loop setup allows American Express to have more control, as it doesn't require the backing of other financial institutions to process its transactions.
American Express credit cards aren't as widely accepted outside of the U.S. since it's primarily based in America. That said, even in the domestic market, Amex only has a single-digit market share.
Program | Starting Interchange Rate | Fees | Highest Interchange Rate | Fees |
|---|---|---|---|---|
Retailer | 1.60% | $ 0.10 | 2.80% | $ 0.10 |
Restaurant | 1.60% | $ 0.04 | 3.25% | $ 0.10 |
Healthcare | 1.55% | $ 0.10 | 3.00% | $ 0.10 |
Travel & Entertainment | 2.25% | $ 0.10 | 3.70% | $ 0.10 |
Business-to-business | 1.65% | $ 0.10 | 3.50% | $ 0.10 |
Professional Services | 1.60% | $ 0.04 | 3.10% | $ 0.10 |
Education | 1.40% | $ 0.10 | 2.75% | $ 0.10 |
Government | 1.55% | $ 0.10 | 2.60% | $ 0.10 |
Like other networks, American Express interchange fees may vary across industries. For example, merchants may have to pay processing fees ranging from 1.55% to 2.6% for transactions in the government sector. Business-to-business transactions have the broadest range, with a starting interchange fee of 1.65% and a high of 3.5%. You may have to spend more on fees for no-card-present (NCP) transactions.
Among the major networks, American Express has the highest interchange rates — merchants pay at least 1.55% and as much as 3.7%, which may impact small business profits. The American Express Optblue Program may be a better option for small business owners.
Discover Processing Fees
Discover acts as both a payment network and a credit card issuer. It is one of the most well-known payment networks in the country.
It shares many similarities with American Express, such as using a closed-loop network. Being a primarily U.S.-based company, Discover credit cards aren't as widely accepted in other countries. Its market share is also in the single-digit range, making up less than a tenth of all credit cards circulating within the U.S.
Program | Starting Interchange
Rate | Fees | Highest Interchange
Rate | Fees |
|---|---|---|---|---|
Recurring Payments | 1.35% | $0.50 | 1.85% | $0.50 |
Supermarkets/Warehouse | 1.60% | $0.50 | 1.90% | $0.10 |
Public Services | 1.55% | $0.10 | 1.55% | $0.10 |
Express Services | 1.95% | $0.00 | 2.05% | $0.05 |
Petroleum | 1.55% | $0.05 | 1.80% | $0.05 |
Retail | 1.56% | $0.10 | 2.15% | $0.10 |
Restaurants | 1.56% | $0.10 | 2.40% | $0.10 |
Hotels/Car Rentals | 1.58% | $0.10 | 2.40% | $0.10 |
Passenger Transport | 1.75% | $0.10 | 2.40% | $0.10 |
Real Estate | 1.10% | $0.00 | 2.30% | $0.00 |
Considering that Visa and Mastercard share the same interchange fee range, Discover falls between them and American Express. Merchants pay anywhere between 1.10% to 2.4% per credit card transaction.
The transactions with the broadest processing fee range are those for restaurants. These can go from 1.56% to 2.4% — hotels, car rentals and passenger transport fees can also range up to 2.4%. Express services have the highest starting rate at 1.95%.
Managing and Offsetting Interchange Fees
- 1
Review All Fees in Your Contract
Comb through the contract before signing — that includes reading through the fine print. Take note of all the fees mentioned, such as those for statements, authorization, chargebacks, compliance and online reporting. Most of these are negotiable.
- 2
Offer Cash Discounts
Remember, you only need to pay interchange fees if you accept credit card payments. Offering discounts for cash transactions may encourage consumers to use this payment method instead.
- 3
Encourage the Use of Debit Cards
Although you'll also pay processing fees for debit card transactions, their interchange fees are significantly lower (typically less than 1%).
- 4
Deliberate Whether To Buy or Lease Point-of-Sale (POS) Equipment
You may spend thousands of dollars on leased equipment when you could have bought your own for less. However, if you still choose to lease your POS system, ensure you read through your contract — some have clauses prohibiting cancellation, so you'll have to continue paying them even if you switch processors or your business closes.
- 5
Ensure Early Transaction Settlement
Transaction settlement involves transferring funds from the cardholder's account to the merchant's after a credit card purchase. Usually, the clearing call must be within a day of when the transaction was authorized. The longer it takes, the higher the interchange fees can become.
Average Cost of Credit Card Processing FAQ
It pays to understand how credit card processing can affect small businesses and merchants. MoneyGeek included answers to some frequently asked questions that may provide additional information.
Who sets interchange fees?
Why do merchants have to pay interchange fees?
Interchange fees primarily cover handling costs and those from bad debt and fraud. Financial institutions take on risk when they issue credit cards to consumers. If the cardholder doesn't pay for his credit card debt, that's a loss for the bank. Interchange fees are part of the bank's insurance plan for these situations.
What is an effective rate for credit card processing fees?
Your effective rate gauges how much you pay your payment processor for accepting credit card transactions. You can calculate it by dividing the total credit card processing fees by your monthly sales. Knowing your effective rate allows you to evaluate your payment processor to see whether it's overcharging you.
Which network has the highest interchange fees?
American Express is known to have higher interchange fees than other networks. Since it operates using a closed-loop system (it acts as both a credit card issuer and network processor), it has more control over transactions. That allows Amex to charge higher processing fees than Visa or Mastercard.
Why do networks charge more if the credit card isn’t present?
Card-not-present (CNP) transactions require merchants to pay higher interchange fees because they’re prone to fraud. Without the card, it's more challenging for merchants to spot signs of fraud, such as modified account numbers or missing holograms. Unfortunately, CNP transactions are becoming more popular because consumers like to shop online and set up automatic payments.
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Related Resources
Credit cards play a significant role in consumers' and merchants' finances, and there's more to it than swiping it through a terminal. To provide more information about credit cards, MoneyGeek included the following online resources.
- How Do Credit Card Companies Make Money? Knowing how credit card companies make money may help you understand why there are so many fees involved in these types of purchases. MoneyGeek breaks it down in detail.
- How to Protect Yourself From Credit Card Fraud: Learn more about credit card scams and devise strategies to keep your finances safe.
- Find the Credit Card that Works for You: There are many different types of rewards credit cards, including travel cards, cash back cards and others. Knowing which one fits your lifestyle can help you maximize the benefits it offers.
- How Does Credit Card Interest Work? Despite all the advantages a credit card brings, one drawback is the interest charges if you don’t pay your balance monthly. MoneyGeek details how it’s calculated and provides ways to avoid it.
- Credit Card Glossary: Basic Terms to Know: Beyond interest and monthly payments, there are many other terminologies connected to credit card use. It’s best to know what these are and how they affect your usage.
About Nathan Paulus
Nathan Paulus is the Head of Content Marketing at MoneyGeek, with nearly 10 years of experience researching and creating content related to personal finance and financial literacy.
Paulus has a bachelor's degree in English from the University of St. Thomas, Houston. He enjoys helping people from all walks of life build stronger financial foundations.
sources
- American Express. "Closed Loop Network." Accessed October 27, 2024.
- Mastercard. "Mastercard interchange rates and fees." Accessed October 27, 2024.
- The State of North Carolina. "INTERCHANGE RATE/FEE SCHEDULE." Accessed October 27, 2024.
- Visa. "Visa USA Interchange Reimbursement Fees." Accessed October 27, 2024.