A complete guide to credit card processing and interchange fees
Merchant services is the umbrella term for the financial services that allow businesses to accept credit cards, debit cards, and other forms of electronic payment. When a customer swipes, dips, taps, or enters their card information, a complex network of companies works together to move money from the customer's account to yours.
Process Visa, Mastercard, American Express, and Discover
Apple Pay, Google Pay, and Samsung Pay
E-commerce and invoice payments
Subscriptions and memberships
Every card transaction involves multiple parties working together in just a few seconds. Understanding who's involved helps you understand where your processing fees go.
The bank that issued your customer's credit card (Chase, Bank of America, Capital One, etc.). They take on the risk of lending money to the cardholder.
Visa, Mastercard, American Express, and Discover set the rules, facilitate transactions, and determine interchange rates.
The company that handles the technical aspects of routing your transactions to the card networks and depositing funds to your account.
The bank that holds your merchant account and receives the funds from transactions before depositing them to your business account.
Interchange is the largest component of your processing costs, typically making up 70-90% of your total fees. These fees are set by the card networks (Visa, Mastercard, etc.) and paid to the card-issuing bank.
Interchange rates are non-negotiable — every processor pays the same rates. What you CAN negotiate is the markup your processor charges on top of interchange.
Debit cards have lower rates than credit cards. Rewards cards (cashback, miles) cost more because the bank funds those rewards. Business/corporate cards have the highest rates.
Card-present transactions (swiped, dipped, tapped) cost less than card-not-present (online, keyed-in) because they carry lower fraud risk.
Your industry affects rates. Restaurants, hotels, and gas stations have special categories. Higher-risk businesses pay more.
Providing complete transaction data (address verification, tax amount, customer code for B2B) can qualify you for lower rates.
These are approximate rates as of 2024. Actual rates vary and change periodically.
| Card Type | Card Present | Card Not Present |
|---|---|---|
| Debit Card (Regulated) | 0.05% + $0.21 | 0.05% + $0.21 |
| Debit Card (Unregulated) | 0.80% + $0.15 | 1.65% + $0.15 |
| Visa Credit (Basic) | 1.51% + $0.10 | 1.80% + $0.10 |
| Visa Rewards | 1.65% + $0.10 | 1.95% + $0.10 |
| Visa Signature (Premium) | 2.10% + $0.10 | 2.40% + $0.10 |
| Mastercard World Elite | 2.20% + $0.10 | 2.50% + $0.10 |
| American Express | 2.30% - 3.50% (varies by merchant) | |
Your total processing cost is made up of three main components. Understanding each helps you evaluate processor quotes and find savings.
The largest portion goes to the bank that issued your customer's card. This compensates them for the risk of lending to cardholders and funding rewards programs.
Card networks charge small fees for using their payment rails. These typically run 0.13-0.15% for Visa/MC, with additional fees for certain transaction types.
This is what your processor charges for their services. This is the only component you can negotiate! Shop around and negotiate for better rates.
Many processors charge additional fees: monthly minimums, PCI compliance fees, statement fees, batch fees, annual fees, and early termination fees. Always ask for a complete fee schedule before signing.
Processors offer different pricing structures. The right choice depends on your business type, volume, and average transaction size.
Simple, predictable pricing. Same rate for all transactions.
Best for: Low volume, simple businesses, mobile/occasional sellers
Actual interchange cost plus a fixed markup. Most transparent.
Best for: Most businesses, especially high volume or debit-heavy
Transactions sorted into qualified, mid-qualified, or non-qualified tiers.
Best for: Rarely — most merchants overpay with tiered pricing
For most businesses processing over $5,000/month, interchange-plus pricing offers the best value and transparency. You'll see exactly what interchange you're paying and can easily compare processor markups.
Estimate your monthly processing costs based on your business details. This calculator uses average interchange rates to give you a realistic estimate.
Get quotes from multiple processors and negotiate the markup. Even a 0.10% reduction saves $100 for every $100,000 in processing volume.
Card-present transactions have lower interchange rates. Upgrade to EMV terminals and encourage customers to insert or tap their cards.
Check for unexpected fees, rate increases, or errors. Many processors add fees over time hoping you won't notice.
For online transactions, collect and submit address verification (AVS) data. For B2B sales, include tax and customer code to qualify for lower rates.
Regulated debit cards have the lowest interchange rates. Consider offering small incentives for debit card use.
Look for month-to-month agreements without early termination fees. This gives you flexibility to switch if you find a better deal.
We help businesses find the right payment processing solutions at competitive rates. Get a free analysis of your current processing costs.
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