Credit Card Processing Fees: What Are They And How To Manage Them

For many business owners, it may come as a surprise that credit card processing fees aren’t entirely fixed.

With credit and debit cards now accounting for over 60% of monthly payments, and credit cards alone accounting for nearly 32%, businesses are finding that processing fees, though seemingly small, can add up quickly and impact the bottom line.

What most business owners don’t realise is that there are smart ways to reduce credit card processing fees.

What are credit card processing fees? 

Every time a customer pays with a credit card, multiple entities (card networks, issuing banks, and payment processors) work behind the scenes to process the funds and move them from the customer’s account to the merchant’s account. Each of these entities charges the business a specific fee, collectively known as credit card processing fees or the Merchant Discount Rate (MDR). 

Here are the three main components of credit card processing fees, and what they mean:

Interchange fee (paid to the issuing bank)

After a customer enters their credit card details, the transaction must first be approved by the bank that issued the card (the issuing bank). The issuing bank partners with card networks (such as Visa or Mastercard) to issue these cards to customers.

It issues contracts to cardholders, manages their accounts, and ensures they repay the borrowed credit on time. Because the issuing bank assumes this financial risk, it charges an interchange fee, which accounts for the largest portion of total credit card processing costs.

The interchange fee can vary based on:

• The card type – Discover and American Express often have a higher interchange fee since they operate their own networks
• The transaction type – card-present credit card transactions have a lower interchange fee than card-not-present transactions (online or contactless), since the former carry a lower fraud risk than the latter
• The risk level – Credit cards with embedded chips carry lower fraud risk than mag-stripe-only cards, and therefore have lower associated fees.

Assessment fees (paid to the card network)

After the issuing bank approves the transaction, it passes through the card network. The card network facilitates communication between the issuing bank and the acquiring bank, and ensures that the payment data is transmitted securely.

To operate and maintain this infrastructure, card networks charge an assessment fee that is applied to every transaction.

Assessment fees are typically much smaller than interchange fees (usually a fraction of a per cent) and vary by provider. 

Visa’s assessment fee is 0.14% of the transaction amount, whereas MasterCard charges 0.14% for transactions under 1000 USD, and 0.15% for transactions over 1000 USD. Discover charges 0.13% and American Express charges 0.165%.

Processor markup (paid to the payment processors)

A third-party payment processor, such as Unlimit, allows businesses to accept and manage customer payments and serves as a technical and financial bridge between all parties involved.

It provides the software, APIs, terminals, and reporting tools to ensure funds are transferred correctly to each party and adds its own markup fee to cover operational costs, customer support, and value-added services such as fraud protection, analytics, and multi-currency processing.

The processor markup can take different forms (flat-rate, interchange-plus, tiered pricing, or monthly subscription) depending on the payment processor’s pricing model.

Do credit card processing fees vary by region?

Fees for processing credit card payments can vary significantly by country and merchant category.

In some regions, interchange fees are strictly regulated. In the European Economic Area (EEA), consumer credit card interchange fees are capped at around 0.3% of the transaction value, and consumer debit card interchange fees are capped at around 0.2%.

In contrast, the United States does not impose a broad regulatory cap on many credit-card interchange rates. As a result, average rates are higher (around 2%) for many credit card transactions.

 Some of the key industry-based differences include:

• Risk profile & transaction method: Industries with higher fraud risk (e-commerce, travel bookings, ticketing) are charged higher interchange and processing fees because the issuing banks and networks face greater risk of chargebacks or non-payment.
• Average ticket size & frequency: Businesses that have many small transactions (quick-serve restaurants, convenience retail) may see lower average fees than those that routinely handle large ticket sizes (luxury goods, lodging) because large tickets carry more processing risk and potential liability.
• Merchant Category Code (MCC) differences: Each merchant is assigned an MCC by the card networks, which influences the fee structure. For example, utilities or charities MCCs may receive more favourable rates than gaming or travel MCCs due to lower risk and higher predictability. 

What is the average fee for credit card processing in 2025?

The average credit card processing fee was found to range between 1.10% and 3.15%. So for a sale of 100 USD, businesses would pay 1.10 to 3.15 USD in credit card processing fees.

However, the credit card processing fee is highly contextual. It can vary depending on the industry, transaction volume, the credit card type, payment network, and the pricing model offered by the payment processor.

Here are the four major pricing models and how they work:

Flat-rate pricing

Payment processors charge a blended fee (a combination of interchange, assessment, and processor fee) for every transaction. Businesses could be charged a flat rate of 2.9% + 0.30 USD per transaction, regardless of the card or transaction type, card network, industry, etc.

Pros:

• Makes it easier to predict credit card processing costs
• Simplifies accounting with one consistent rate
• Eliminates the need to track different interchange and network fees.

Cons:

• May lead to overpaying if most of the transactions are low-risk, or using a debit card
• Lacks transparency into how much goes to banks, networks, or processors
• Doesn’t scale efficiently for high-volume merchants.

Many businesses typically begin with flat-rate pricing and later transition to interchange-plus pricing.

Interchange-plus pricing

Seen as the most transparent and cost-effective model, interchange-plus pricing charges a fee that covers the interchange, assessment, and processor fee. Also, it offers a breakdown of how much goes to each party involved.

Businesses might pay 1.8% + 0.10 USD (interchange) + 0.3% + 0.15 USD (processor markup), which accounts to 2.1% + 0.25 USD in total.

Pros:

• Provides complete transparency into what is being paid to whom
• Rewards higher volume with lower overall costs
• Makes it easier to negotiate processor markup as business grows.

Cons:

• Adds more complexity in billing and statements
• Causes costs to fluctuate as interchange rates shift
• May include monthly minimums or additional account fees.

Tiered pricing

Here, each transaction is classified into tiers (qualified, mid-qualified, or non-qualified) based on card types. Then, based on the tier, each transaction is charged a specific fee.

• Qualified: Debit card and cards without reward programs
• Mid-qualified: Cards with certain types of reward programs
• Non-qualified: Corporate cards and cards with high-end rewards programs.

Qualified transactions are charged the lowest rate, while non-qualified transactions receive higher rates. Sometimes, if a transaction doesn’t meet certain criteria (for example, keyed-in, reward card, or high-risk MCC), it gets bumped into a higher tier.

Pros:

• Group transactions into simpler categories for pricing
• Offer incentives for lower-cost types of card use (for example, swipe vs keyed-in)
• Provide flexibility for handling a combination of different card types.

Cons:

• Tiered pricing makes it harder to see the true cost of each transaction
• Some transactions may default to higher-cost tiers
• Impossible to forecast which tier a transaction will fall under.

Membership pricing

Also known as subscription-based pricing, the membership pricing model charges businesses a flat membership fee ( monthly or annually). Sometimes, businesses may also be charged a per-transaction fee in addition to the subscription cost.

A business might pay $100 per month plus interchange + 0.2% per transaction.

Pros:

• Makes it easier to predict base costs
• Maybe the cheapest option for high-volume merchants
• Often, bundles include value-added features such as reporting, analytics, and fraud protection.

Cons:

• Expensive for low-volume merchants
• May end up paying for unused features
• Requires careful volume tracking to ensure the subscription offer savings.

Other common fees associated with payment processing

Beyond standard processing fees, businesses may encounter additional fees depending on their payment processor and pricing plan. These fees help cover operational costs, risk management, and support services.

• Transaction fee – A fixed fee per transaction or a percentage of the transaction value that typically covers the processor’s cost of routing and verifying each payment.
• Monthly fee – A recurring charge used to cover account maintenance, customer service, analytics and reporting, etc.
• Monthly minimums – A threshold for processing fees that businesses should meet each month. If the total fee falls short, extra charges apply.
• Chargeback fee – A charge applied when a customer disputes a transaction and requests a refund through their bank. It covers the expense for investigating the dispute and processing the refund.
• Early termination fee – A charge applied if a merchant ends their processing contract before the agreed term.
• Refund fee – A fee applied when a transaction is refunded, as the original processing costs aren’t always reversible.
• PCI compliance fee – A recurring fee to cover costs associated with maintaining PCI DSS compliance, which protects the cardholder’s data.
• Statement or reporting fee – A fee applied when detailed monthly account statements or transaction reports are offered as an add-on service.

How to calculate credit card processing fees

Knowing how to calculate the true credit card processing fees helps businesses stay informed, compare processors, and identify opportunities to lower overall charges. Here’s a step-by-step breakdown of how to do it.

Step 1: Calculate the total processing fees and total card sales from the monthly statement.

Step 2: Use those numbers in the following formula to find the actual credit card processing fees:

True credit card processing fees = (Total processing fees / total card sales) x 100

If a business paid 2,500 USD in processing fees on 100,000 USD in card transactions, it’s paying an average of 2.5% per transaction.

Typically, 1-3.5% is considered normal for most businesses.

Five strategies to reduce credit card processing fees

Credit card processing fees are an inevitable cost of doing business. However, there are smart ways to reduce them without sacrificing convenience.

#1 – Choose a pricing model that fits the business needs

Not all payment processors offer the same pricing model. Choosing a provider without comparing options may expose businesses to higher markups, unexpected charges, or unnecessary monthly fees.

So, it’s important to research providers, delve into their fee schedules, and gather quotes to find the most practical option. The rule of thumb is to match the pricing model to the business’s transaction size and volume.

Businesses with consistent, high-volume sales can save on credit card processing fees by using an interchange-plus or subscription pricing model. On the other hand, smaller or low-volume businesses may prefer flat-rate pricing for predictability.

In addition, don’t just focus on services related to receiving payments when researching providers. Also, consider other features such as fraud detection and integration capabilities, as they will help streamline business operations.

#2 – Encourage alternative payment methods

Some credit cards, such as rewards or premium cards, carry higher interchange fees, meaning a larger percentage of every sale goes toward processing rather than profit. Over time, this can have a noticeable impact on margins.

To keep processing costs under control, offer discounts to customers who use lower-cost payment methods like debit cards and digital wallets, which have lower interchange fees than credit cards—sometimes less than 1% of the total purchase price. This strategy is known as cash discounting.

Businesses can list a product for 100 USD but offer a 3 USD discount when customers pay with a debit card. Accepting debit cards still offers the same convenience of a card, but at a fraction of the processing cost.

#3 – Reduce the risk of chargebacks

When a customer disputes a transaction for reasons such as billing errors, unauthorised card use, etc., merchants are charged a chargeback fee. Chargeback fees can range from 20 to 100 USD per incident. When this is added to lost sales, chargebacks can quickly become expensive for merchants.

Strategies to reduce the risk of chargebacks include:

• Using clear billing descriptors
• Setting clear return and refund policies
• Documenting delivery through signed receipts or proof-of-delivery screenshots
• Providing fast customer support to resolve disputes before they escalate
• Implementing fraud prevention tools like AVS (Address Verification System), card verification value (CVV) checks, and real-time fraud monitoring.

Fewer chargebacks mean fewer additional fees and less administrative overhead, which directly improves the bottom line.

#4 – Perform batch transactions

Some processors charge a batch fee every time a business closes out transactions for settlement. If a business submits multiple small batches throughout the day, instead of one consolidated batch, the fees can skyrocket unnecessarily.

A simple fix is to process transactions in batches rather than individually. Closing out all payments at the end of each business day helps reduce the per-transaction fees and also simplifies reporting.

#5 – Implement surcharging

When all measures fail, some businesses manage credit card processing costs by passing them on to customers, a process known as surcharging.

Surcharging involves adding a small percentage fee (usually 3-4%) to credit card transactions to help offset the processing cost. A business that pays 3% in processing fees may add the same amount to a customer’s bill when they pay by credit card.

Surcharging without proper disclosure or exceeding legal limits can lead to violations of card network rules and potential fines. So, it’s important that businesses:

• Confirm surcharging is permitted in a region (some countries and U.S. states restrict it)
• Notify customers clearly at checkout and on receipts
• Ensure the surcharge doesn’t exceed the actual processing cost.

How can Unlimit help?

A great way for businesses to save on credit card processing fees is to partner with a payment provider like Unlimit. We are a direct acquirer in key markets and a principal member of all major card schemes. This helps eliminate third-party intermediaries and the associated layers of markup, while also optimising local routing that reduces interchange and scheme costs.

Our clients enjoy:

• Faster time-to-market and the flexibility to experiment or expand without friction through our modular infrastructure that lets businesses activate only the services they need initially and add more over time without additional contracts or reintegration.
• Increased sales and reduced cart abandonment by offering customers fast, secure, and localised checkout experiences through hosted pages, payment links, and embedded widgets that require minimal coding.
• Improved approval rates, lower transaction fees, and reduced compliance overhead by operating like a local in key markets, leveraging Unlimit’s licenses across the EU, India, Africa, LATAM, and APAC.
• More predictable cash flow and fewer FX losses by collecting, holding, and settling funds locally in multiple currencies through banking rails such as SEPA, PIX, SPEI, and SWIFT.
• Improved liquidity, stronger partner relationships, and faster access to funds with instant local and global payouts.
• Real-time insights and actionable data to optimise performance, control costs, and improve approval rates through comprehensive dashboards and analytics tools.
• Proactive support, tailored strategies, and faster problem resolution from dedicated account managers and regional experts who understand complex industries.

Learn more about how Unlimit can power online payments, or get started with our payment processing solution today.

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