Years of research confirms that customers spend significantly more when paying with credit cards than they do paying by cash or check.
The psychology is simple: inserting, tapping, or swiping a credit card feels less painful than rushing to an ATM to obtain bills. So, taking credit card payments is a no-brainer for merchants, from corner shops to global retail chains.
But there’s a hitch: merchants must pay fees on every credit card transaction—fees that can add up, especially for small businesses.
Here’s a rundown of credit card transaction fees, plus tips for keeping these fees from ballooning.
What are credit card processing fees?
Credit card processing fees are transaction fees that businesses pay to credit card companies, payment processors, and the financial institution backing a credit purchase. Merchants pay these credit card fees every time someone uses a credit card to buy something from them.
According to analysts, merchants spend an average of 1.70% to 3.5% of the total purchase amount on credit card processing fees—depending on factors like the type of credit card used, the transaction amount, and type of business. These payment processing fees may include interchange and assessment fees, chargeback fees, payment card industry (PCI) compliance fees, and monthly fees to a payment processor.
Credit card processing fees come in three forms:
- Percentage-based fees: This most common is a percentage-based fee that a business pays from the total amount of a sale.
- Per-transaction fees: This is a flat fee assessed to the merchant on every purchase.
- Monthly fees: This flat fee covers a month of service from a merchant services provider like Shopify.
Credit card fees will lower the net profit you make from each sale. Despite this, few merchants hesitate to accept credit card payments because it eases the friction when a shopper wants to buy something. Shoppers expect to be able to pay by card, and they reliably buy more when they use a credit card than they do when paying cash.
A credit card issuer also can charge fees to buyers, usually in the form of annual account fees, along with interest on late payments. However, these purchasers do not pay fees on every transaction—only merchants do that.
Credit card processing fees by vendor
| Vendor | Monthly Subscription | Transaction Fees | Additional Costs |
|---|---|---|---|
| Shopify Payments | Included in all Shopify plans at no additional cost |
In-person payments: Basic plan: 2.7% (no per-transaction fee) Advanced and Plus plans: 2.4% (no per-transaction fee) Online transactions: 2.4% - 2.9% + $0.30 per transaction Currency conversion fees: 1.5% (US-based stores), 2% (other regions) |
No monthly fees, hidden fees, setup fees, or additional transaction fees |
| PayPal | No subscription |
In-person transactions: 2.29% + $0.09 per transaction Online transactions: 2.89% + $0.49 per transaction |
Chargeback fees: $20 per incident Cross-border fees: 1.5% + 4% for currency conversion Optional services: Recurring billing: $10/month, advanced fraud protection: $10/month + $0.07 per transaction |
| Square | Free: $0 Plus: $89/month Premium: Custom pricing |
Free plan: 2.6% + $0.15 (in-person), 2.9% + $0.30 (online) Plus plan: 2.5% + $0.10 (in-person), 2.9% + $0.30 (online) Premium plan: Custom pricing |
No monthly fees, PCI compliance fees, or early termination penalties |
| Stripe | Pay-as-you-go pricing, no monthly fees or setup fees |
Domestic cards: 2.9% + $0.30 per charge International cards: 1.5% Manually entered cards: 0.5% |
Cross-border transactions: 1% + $0.30 Currency conversion: +1% if required |
| Helcim | No subscription |
In-person transactions: 1.83% + $0.08 Online payments: 2.61% + $0.08 Discounts available for high-volume transactions |
No setup fees, PCI fees, or cancellation penalties Chargeback fee: $15 (refundable if won) Currency conversion fee: 1% above market rate |
| Finix | Individual merchants plan: $250/month (for businesses processing up to $1M annually) | $0.08 (card-present transactions) $0.15 (card-not-present transactions) Custom rates for businesses processing over $1M |
Same-day deposits: 1% Disputes: $15 |
Shopify Payments
Shopify Payments is Shopify's native payment processing solution that integrates directly with your store's checkout. It allows merchants to accept retail payment options, such as credit cards, debit cards, mobile wallets, tap to pay, and buy now, pay later (BNPL) without the need for third-party payment processors. Plus, it’s available across multiple countries and eliminates the additional transaction fees typically charged when using external payment processors.
Since your data is stored in a centralized dashboard, you can track transactions, handle payouts, and manage chargebacks, streamlining your financial processes in one place. The system maintains consistent rates, offers predictable payouts, and adheres to PCI compliance and EMV standards for all card readers. This ensures secure transactions for both merchants and customers.
Pricing structure: Shopify Payments is included in all Shopify plans at no additional cost.
Processing fees:
- In-person payments: Basic plan charges 2.7% with no per-transaction fee, while Advanced and Plus plans offer lower rates at 2.4%.
- Online transactions: Range from 2.4% to 2.9% plus $0.30 per transaction, depending on your plan level
- Currency conversion fees (international sellers): 1.5% for US-based stores and 2% for stores in other regions
Additional costs: There are no monthly fees, hidden fees, setup fees, or additional transaction fees that are typically charged by third-party payment providers.
💡TIP: You can lower credit card rates by upgrading your subscription with Shopify.
PayPal
PayPal offers merchants a straightforward way to accept credit cards, debit cards, and digital wallets like Apple Pay and Google Wallet online and in-person. Unlike traditional processors, PayPal removes complex fee structures and long-term contracts. You can process transactions through PayPal Zettle, online checkout options, digital invoices, or virtual terminals across sales channels without switching between different payment systems or providers.
Pricing structure: No monthly fees, statement fees, or early termination penalties
Processing fees: 2.29% + $0.09 for in-person transactions and 2.89% + $0.49 for online transactions
Additional costs:
- Chargeback fees: $20 per incident
- Cross-border fees: 1.5% + 4% for currency conversion when accepting international payments
- Optional services: Recurring billing $10/month, advanced fraud protection $10/month + $0.07 per transaction
Square
Square is an all-in-one payment processing solution that allows retailers to take in-store, online, and mobile payments. The system works by connecting to Square's payment gateway, using a card reader for in-person transactions or payment portal for online sales to process transactions.
When a customer pays, Square verifies funds with their bank, approves the transaction, and deposits money into your merchant account. And with its next-day deposits, you won’t have to endure waiting periods typical with traditional processors. Square also offers transparent pricing with bundled fees, making it simpler to understand costs.
Pricing structure:
- Free: $0
- Plus: $89/month
- Premium: Custom pricing
Processing fees: Varies based on the plan:
- Free: 2.6% + $0.15 in-person transactions, 2.9% + $0.30 for online transactions
- Plus: 2.5% + $0.10 for in-person transactions, 2.9% + $0.30 for online transactions
- Premium: Custom pricing
Additional costs: No monthly fees, statement fees, PCI compliance fees, or early termination penalties
Stripe
Stripe is designed primarily for online businesses, but it also supports in-person payments through Stripe Terminal. The system works as an intermediary between merchants and customers' banks, validating transactions and moving funds securely between accounts. It supports dozens of payment methods and more than 135 currencies, and operates on a straightforward flat-rate pricing model—with no setup fees or early termination penalties.
Pricing structure: Pay-as-you-go pricing
Processing fees:
- Domestic cards: 2.9% + $0.30 per successful charge
- International cards: 1.5% per successful charge
- Manually entered cards: +0.5% per successful charge
- Custom pricing available for merchants with large payments volume or unique business models
Additional costs: 1% + $0.30 for cross-border transactions and +1% if currency conversion is required
Helcim
Helcim is designed to help small businesses save money while accepting both in-person and online payments. The platform uses interchange plus pricing, which combines the base cost from card networks with a single markup. There are no monthly fees, user fees, setup fees, deposit fees, PCI fees, or cancellation penalties. And with Helcim’s Fee Saver, merchants can pass credit card processing costs to customers who choose credit cards over cheaper payment methods like debit or ACH. This gives merchants access to free credit card processing while remaining compliant with card network rules.
Pricing structure: No subscription
Processing fees:
- In-person transactions: 1.83% + $0.08
- Online payments: 2.61% + $0.08
- Discounts available for high-volume transactions based on business needs and volume of transactions processed
Additional costs:
- $15 fee for chargebacks (Helcim will reimburse it if you win the dispute)
- Currency conversion fee of 1% above the daily 5pm EST market rate for merchants using Helcim’s Multi-Currency Processing (MCP) service
Finix
Finix helps US and Canadian businesses process in-person and online transactions. It operates on an interchange and subscription model with flexible fee-customization options for optimizing your payment revenue and margins. These options include international charge adjustments, transaction volume discounts, payment method-specific fees, and accelerated settlement timeframes. The processor doesn’t charge any extra fees for PCI compliance, setup or fraud protection tools.
Pricing structure: Individual merchants plan: Processing subscription tier starts at $250 monthly for businesses processing up to $1M annually
Processing fees: $0.08 for card-present transactions and $0.15 for card-not-present transactions. Custom rates apply for businesses processing more than $1M annually.
Additional costs:
- 1% for same-day deposits
- $15 for disputes
Hidden and additional fees
Credit card processing fees often include numerous hidden charges. These costs leave merchants paying thousands of dollars annually in unnecessary charges that silently eat away at their bottom line.
The base processing fee structure typically includes interchange fees paid to card-issuing banks, assessment fees paid to card networks, and processor markup fees. However, many payment processors bury additional charges, like monthly statement fees, batch processing fees, PCI compliance charges, fees to adhere to security standards, and early termination penalty disclosures in small print. These hidden costs quickly turn good deals into profit-draining burdens.
Hidden fees retailers should be well aware of include the following:
- Early termination fees: Some processors charge merchants a fee for canceling their contract early.
- Batch processing fees: Fees for processing multiple transactions at once
- PCI noncompliance fees: Additional costs for not adhering to PCI DSS security standards
- Cross-border & currency conversion fees: Higher fees for international transactions
- Refund fees: Some processors keep part of the transaction fee even if a refund is issued.
Careful provider selection and regular statement audits can help merchants identify costly hidden fees that erode profit margins, reclaim thousands in unnecessary payment processing costs, and redirect these funds to growth-focused initiatives that generate returns instead of padding processor profits.
Three types of credit card processing fees
When merchants pay credit card processing fees, those fees are split among the various financial service providers that make credit card payments possible. The fees break down into three main categories:
1. Interchange fee
An interchange fee is one paid to the bank that formally extends credit to the cardholder. These are traditional banks like Bank of America, Chase, and Citibank, as well as credit unions, whose names are printed on Visa and Mastercard cards. These financial institutions take the largest cut of your credit card processing fees.
Notably, Discover and American Express operate their own payment networks, which means they collect interchange fees at somewhat higher rates than what banks charge. That means merchants that accept Discover and American Express ultimately pay higher total fees to those companies. This is why some sellers choose to not accept those cards, and only accept Visa and Mastercard.
2. Payment processor fee
This fee goes to the credit card processor, which is a payment processing company that facilitates your credit card transactions. Popular credit card processors include Stripe, PayPal, and Shopify Payments. These companies, which may also provide point-of-sale equipment like credit card readers, take both a percentage-based cut and a flat fee, which could be either a per-transaction fee, a monthly fee, or both.
3. Assessment fee
Assessment fees go to credit card networks, which connect merchants and banks throughout the world. These networks, powered by major credit card companies like Visa, Mastercard, Discover, and American Express, transmit purchase amounts and purchase details like a merchant category code. Buyers may know these codes, which cover categories like gas stations and restaurants, from the special cash-back perks that some credit cards offer for specific spending categories.
How to calculate your credit card processing fees
Your credit card processing fees will be the sum of the following inputs:
- Monthly fees from your payment processor: These are fees that businesses will pay to payment processors for the ability to accept credit card payments. Some payment processors charge a monthly minimum fee, while others charge monthly by the transaction. It’s noteworthy that some free payment processors may make up for it by charging higher processing fees on each transaction. For example, Shopify’s all-in-one service starts at $24 per month after a free trial. By contrast, PayPal does not charge a monthly fee, but it takes a commission from each sale.
- Transaction-based fees from the payment processor: Your transaction fees are typically a blend of a flat per-transaction fee and a commission on the total purchase price. For instance, PayPal charges merchants 2.29% of the purchase price plus a $0.09 transaction fee for in-person transactions, and 2.89% + $0.49 for online transactions. Shopify Payments fees range from 2.4% to 2.9% of a purchase, plus a flat $0.30 transaction fee. These transaction-based fees almost always include interchange fees, so you don’t have to calculate those as a separate line item.
- Assessment fees from credit card companies: These typically range from 0.15% to 0.25% of the purchase price, depending on the credit card company. For instance, if your customer made a $20 purchase on their credit card, you can expect to pay approximately $0.03 in credit card assessment fees.
Merchant service providers
The fees related to accepting credit cards can be overwhelming, especially for solo entrepreneurs. That’s why you may choose to partner with a merchant service provider that will calculate and remit almost all fees on your behalf.
A merchant service provider is essentially a credit card processing provider that acts as an intermediary between your business, your customer, and financial institutions. It does this, in part, by maintaining a merchant account through which funds pass on their way from your customer’s credit card to your bank account. You’ll pay merchant account fees, which are usually baked into your overall merchant service fees.
Four strategies to reduce credit card processing fees
- Shop around among payment processing companies
- Minimize chargeback fees
- Negotiate fees with processors and banks
- Encourage the use of debit cards
Credit card processing rates have risen over time, with some payment processors charging more aggressive rates than others. Here are some ways to reduce these fees and keep more of your total sales revenue.
1. Shop around among payment processing companies
Depending on how many transactions you process per month, you may spend less with a provider that charges a monthly fee but with lower fees on each transaction. The opposite may also be true, and a monthly fee could push your costs too high. Compare prices by weighing components like monthly fees, flat per-transaction fees, and percentage-based commissions. This will help you find the best option for your precise business needs.
2. Minimize chargeback fees
When customers dispute a charge from your business, their credit card company may issue them a refund and then dock you with a chargeback fee, which can often exceed $100. One way to avoid fraud-based chargebacks is to use an address verification system (AVS), which compares billing addresses submitted by card users to billing addresses on file at banks. You’ll have to pay AVS fees—usually a few cents per transaction—but those can pay dividends in the long run. You can also ask customers to sign a credit card authorization form before making purchases. This is common among monthly subscription services, in which a card is charged on an ongoing basis.
3. Negotiate fees with processors and banks
Many small business owners do not realize that they have the ability to negotiate for lower fees with their card processors and acquiring banks. Whether you do it yourself or hire a professional on your behalf, ask about getting a lower acquirer processing fee or a lower commission on each purchase. If a bank adds charges like a “convenience fee” that you don’t understand, ask for them to be waived.
Some processors may charge more for using an online payment gateway versus a physical point-of-sale terminal. These online payments are called “card not present” payments. Because they don’t involve the same security protections of a physical card, like an EMV chip, these card-not-present payments are more susceptible to fraud and customer chargebacks. Processors and banks may ask for higher fees to account for this risk. Ask if these fees are negotiable.
4. Encourage the use of debit cards
A debit card transaction almost always costs a merchant less than a credit card transaction—often less than 1% of the total purchase price. This is mainly due to the fact that banks charge higher interchange fees on credit purchases than debit purchases. Accepting debit cards still gives consumers the convenience of swiping or tapping a card while making a purchase.
Credit card processing fees FAQ
What compliance regulations should businesses be aware of regarding credit card processing fees?
Businesses must comply with the Payment Card Industry Data Security Standard (PCI DSS), a global information security standard administered by the Payment Card Industry Security Standards Council, that protects cardholder data.
Are there different fee structures for credit card processing?
Yes, different credit card processors use different fee structures. For instance, Shopify charges a monthly fee (which covers an all-inclusive ecommerce service). Its credit card commissions then range from 2.4% to 2.9% of a purchase, along with a $0.30 per-transaction fee.
How do payment processing methods (online, mobile, in-person) affect credit card processing fees?
Your credit card processor may charge different fees for online, mobile, and in-person purchases. Typically, these companies charge the lowest rates for in-person purchases made using the brand’s point-of-sale systems.
What are some potential risks of using a payment processor with high fees?
If you operate on a very thin profit margin, you may not have the flexibility to pay high fees assessed by a payment processor. The slim profit margin you enjoy from a cash, check, or debit transaction may be wiped out by the fees tacked onto credit card purchases.
Is it OK to charge a credit card processing fee?
Yes, it’s ethical to charge your customers a credit card processing fee as long as you’re upfront about the practice.
