How to Determine Your Average Credit Card Processing Fees

Business owners have been relying on traditional merchant accounts to process credit and debit card transactions for years. But with the industry expanding and evolving more rapidly over the past few years, including the introduction of the industry has expanded and evolved over the years, it’s even more important to know the processing fees your business is being charged.

As a business owner, you may be wondering, “what’s the average credit card processing charge for my type of business?” There is not one simple answer. Many different variables impact the fees a merchant pays. The more you know, the more likely you are to save on your credit card processing fees. Below you will find our guide to calculate your credit card processing cost.

The Average Credit Card Processing Cost

If you’re looking for the short answer: the average credit card processing cost for a business where cards are swiped is typically 2.3%-2.4%. For ecommerce and other card-not-present businesses, the average cost is usually between 2.3%-2.5%. Of course, these costs can fluctuate depending on a variety of factors.

While these numbers can give you an idea, it’s best to fully understand what goes into credit card processing costs so you can come up with a more personalized estimate. Underestimating your fees can hurt your new businesses when it is most vulnerable.

What is an Effective Rate and How Does it Help with Payment Processing?

An effective rate is the amount that your business pays in processing fees relative to your gross volume. It is especially useful when you are looking to determine your average processing expenses.

How to Calculate an Accurate Effective Rate

There are a few different factors that go into determining your business’ effective rate. They include:

1. Processing Method

Your processing method affects how many and which types of fees apply. A business can process a credit card in two ways: card-present and card-not-present.

As the names imply, card-present refers to a business that physically swipes cards, while card-not-present refers to e-commerce and other businesses that process transactions remotely. Your processing method affects your interchange fees, processing markup, along with other third-party charges. Card-Present businesses have better cost benefits compared to card-not-present businesses, including:

Card-Present Business

  • Lower interchange fees (roughly 1.60% plus $0.10 transaction fee)
  • Lower monthly fees (around $5-$15) and transaction fees ($0.08-$0.10)
  • Low risk and lower interchange plus rates
  • Lower occurrences of chargebacks and fraud

Card-Not-Present Business:

  • Higher interchange fees (roughly 1.90% plus $0.10 transaction fee)
  • Higher software costs associated with online gateways (generally $10-$15/month plus a $0.01-$0.08 transaction fee)
  • Higher risk and higher interchange plus markups from processors
  • Higher occurrences of chargebacks and fraud


2.    Average Ticket Size

Ticket size refers to the amount of a typical credit/debit sale. It has a large impact on your business’ processing fees. The greater your average ticket size, the more expensive your average processing costs will be. On the other hand, as the ticket size decreases, the number of transaction fees incurred increases. Because transaction fees have a larger impact on smaller transactions, they have a greater impact on overall cost. One way to save on processing fees is to set a minimum for credit cards. This will help decrease the number of smaller transactions.

How to Calculate Average Ticket Size for Determining Average Processing Fees

Divide your business’ expected/actual monthly processing volume by its average ticket. Then, multiply by the total transaction fee (roughly $0.18-$0.20 for card-present businesses, $0.25-$0.30 for card-not-present businesses). Divide by the processing volume before multiplying by 100. Your result will be the percentage of total volume that goes towards paying transaction fees.

How to Calculate Average Credit Card Processing Costs

  1. Calculate your average monthly processing volume and average ticket amount. As an example, we will use $10,000 and $50.
  2. Find the average interchange cost for your processing method (1.60% for card-present and 1.90% for card-not-present). We’ll be using card-not-present for our example.
  3. Add the processor’s interchange markup to the average interchange cost. For this example, we use 0.25% as the markup. Adding it to 1.90%, the total now is 2.15%.
  4. Next, determine the impact your average ticket will have on transaction fees by following the steps in the “How to Calculate Average Ticket Size” section, and add that number to your running total. In our example, we’re using the $0.25 transaction fee. Here’s how it works out:

$10,000 / $50 * $0.25 = $50
$50 / $10,000 * 100 = 0.50%
0. 50% + 2.15% = 2.65%

  1. Finally, figure the impact monthly fees will have by using the average monthly charges from the “Processing Method” section and the formula for determining average ticket impact. As a card-not-present business, we used monthly fees of $15:

$15 / $10,000 * 100 = 0.15%
0.15% + 2.65% = 2.80%

For our example, an online business that processes $10,000 a month with an average ticket of $50 will pay about 2.80% of volume or $280/month in credit card processing charges.

5 Ways to Save on Credit Card Processing

In today’s market, consumers are using less cash and relying more on credit cards for their transactions. According to the Federal Reserve, credit card payments registered the highest growth rate by number (10.2%) among the core payment types from 2015 to 2016.

With more and more customers choosing plastic over cash, as a business owner, failing to accept credit cards isn’t in your best interest. But if you aren’t careful, your business’ processing fees can quickly add up. According to the U.S. Small Business Administration, typical merchant account companies can charge up to 5% on all of a company’s earnings from credit card sales, which can include the following fees:

  • Fee from the issuing bank: Known as an interchange fee, it is a percentage of each transaction. How a payment processor handles the different interchange fees will determine the rate your business pays.
  • Fee charged by the credit card providers: All providers (Visa, MasterCard, Discover, etc.) charge an assessment fee for every transaction.
  • Fee charged by the payment processor: In addition, your payment processor may charge additional fees for chargebacks, monthly minimum/maximum, as well as account start up and cancellation fees.

While credit card fees are inevitable, with proper planning, you can reduce these fees and save up to hundreds of dollars every month. Use our 5 tips below to help you cut some unnecessary costs from your credit card processing fees.

Tips to Reduce Your Credit Card Processing Costs

1. Do Your Research / Set Up Your Account Properly

Sometimes small mistakes can lead to higher credit card processing fees. Because the type of business, type of transactions, and frequency of transactions impacts your fee structure, it’s important that your account is set up properly from the beginning.

You should also thoroughly research your options to ensure you choose a structure that caters to your business and your consumer’s buying habits. If your business sells big-ticket items, choosing an interchange plus pricing system may help you save money compared to a flat fee payment processor. If your customers frequently use business credit cards, you’ll want to rule out the tiered pricing system, to avoid that expensive, non-qualified rate.

2. Reduce Risk of Credit Card Fraud

The higher the security risk you pose as a merchant, the higher your processing fees will be. Reduce your risk of credit card fraud by choosing to swipe/insert credit cards over manually entering the information. Credit cards’ microchips and magnetic strips have built-in security features, while manual transactions are more susceptible to fraud and human error. In fact, some banks charge more when card information is input manually.

If you have to input the information manually, be sure to provide the security information that protects the cardholder and validates the purchase, for example, the billing zip code and security zip code. This can help reduce the risk of fraud, which helps reduce your fees.

3. Set Credit Card Minimums

If your business handles small transactions, you may want to think about setting a credit card minimum for your customers, especially if your business uses the interchange plus pricing or the tiered pricing system. Setting a minimum can help reduce your credit card processing volume, which can keep your processing bill down. It’s important to not set the minimum too high though; you don’t want to deter your customers at their point of purchase!

4. Process Transactions Everyday

It is essential that you set up your terminal correctly. Many businesses are unaware that they are paying expensive processing fees because they are allowing their transactions to stack up throughout the week. When you wait multiple days to process transactions, the volume appears higher for that period, causing a spike in the processing rate. Getting into the habit of doing your batch processing at the end of each day helps lower the number of transactions per period. This will help you secure a better rate.

5. Ask for Help

Understanding all of the different variables that go into credit card processing rates can be tough, especially for business owners who are juggling multiple other roles. Speaking with an expert can help guide you through your payment processing options and ensure that your account is set up correctly.

Most experts would recommend negotiating lower rates with your payment processor, especially if you’ve been working with them for an extended period of time and you’ve increased sales. Your provider isn’t going to want to lose business to a company that is on the rise!

There are several factors to consider when it comes to your credit card processing. While credit card processing fees are unavoidable, following the tips above can help save your business money.

Credit Card Processing Fees Explained

Your Guide to Understanding Your Credit Card Processing Fees

With so many different fees involved with credit card processing, it’s not easy for you as a business owner to keep track of what you’re being charged. But the more you know, the more likely you’ll notice an unfair cost and look to dispute it. Not to mention, it will help you have a better understanding of what your true overhead is. Below is our complete guide to all of the different types of processing fees and everything you need to know to truly understand them.

Parties Involved with Credit Card Processing

Before you can understand your fees, you need to know who is charging you them! The parties associated with processing fees can be thought of as financial middlemen between you, the merchant, and your customers. Some of these middlemen include:

  • Credit Card Associations: These are your major credit card companies (Visa, Mastercard, American Express, etc.).
  • Credit Card Issuing Banks: These are the institutions that issue the credit cards, like Chase and Wells Fargo. Some card associations, like Discover and American Express, take on the role of a bank, developing and issuing their own cards.
  • Credit Card Processors: You may know them as Acquiring Banks or Acquirers, these institutions are the messengers between merchants and credit card associations. Credit card processors allow merchants to complete transactions.
  • Merchant Account Providers: These are the companies that manage all aspects of credit card processing. Depending on the situation, these providers can be financial institutions, independent sales, organizations, or double-duty acquirers.
  • Payment Getaways: These are special portals that route transactions to an acquirer (ex: an online shopping cart).

Types of Credit Card Processing Fees

There are three main types of fees that the above parties can charge you to complete a transaction. They are:

  • Transactional Fees: Transactional fees are charged per business transaction.
  • Flat Fees: Monthly flat fees are dependent upon the type of business you run.
  • Incidental Fees: Incidental fees are only charged when something happens (ex: a chargeback).

Each type can be further broken down into smaller fees that are dependent on the nature of your business.

Transactional Fees

Transactional fees represent the biggest cost of operating a merchant account.

Interchange Reimbursement Fee

The interchange reimbursement fee should be the largest expense paid both per sale and per month. This fee is charged by credit card associations and card-issuing banks per transaction. Wholesale rates for this fee typically consist of a percentage of the transaction as well as a flat per transaction fee (ex: 2.1%+ .10). This fee is usually based on a percentage of your total transaction volume for the month.

If you are on an interchange-plus pricing structure, your processor will quote you a price that will be added to the wholesale rate (ex: .25% + .10). For merchants on a tiered pricing plan, you will get a quote with a qualified, mid-qualified, or non-qualified rate. You will not see the markup, making it more difficult to know what the processors’ margin is.

Flat Fees

There are various flat fees you can be charged. While you may not encounter all of them, some of the more common flat fees in credit card processing include:

  • Terminal Fee: This fee only applies to businesses with physical locations.
  • Payment Getaway Fee: This is e-commerce’s version of terminal fees. Not all online businesses have to pay these fees; some processors have in-house payment getaways that are free.
  • Payment Card Industry (PCI) Fee: These are fees paid to the PCI either for noncompliance or compliance. In noncompliance cases, you pay because your business is not upholding the standards set by PCI. This could wind up costing you more money in the long run. In compliance cases, you have to pay the merchant account provider to ensure you follow the regulations at all times.
  • Annual Fee: These are fees charged every year for the basic use of a provider’s services. Not all merchant account providers charge this fee.
  • Early Termination Fee: This fee can be avoided, as long as you do not cancel your contract early.
  • Monthly Fee: This fee is mostly charged for the purpose of covering call center costs.
  • Monthly Minimum Fee: This fee is charged to merchants who do not reach a certain transaction total for the month and/or year. While the minimum transaction total varies by provider, most are around $50,000/year.
  • Statement Fee: This fee is charged to cover printing and mailing costs for your statements. Some merchants bypass this fee by using electronic billing statements.
  • IRS Report Fee: Merchant account providers charge these fees for reporting transaction information to the IRS (1099-K).
  • Network Fee: Card networks charge non-negotiable fees that are passed through to the merchant (ex: Fixed Acquirer Network Fee, or FANF).

Incidental Fees

While not all incidental fees can be avoided, the goal is to have as few of these charges as possible. Some examples of incidental fees include:

  • Address Verification Service (AVS): This fee is charged on every e-commerce or telephone order transaction. It is important for these types of businesses to keep an eye on their AVS fee. Retail businesses that occasionally need to key-in card information don’t need to worry about this fee as much.
  • Retrieval Request Fee: This fee is charged every time a customer initiates a dispute on a charge from your business. The retrieval request is the first step in the chargeback protocol. If the actual chargeback occurs, you will be hit with a chargeback fee (on top of losing the money from the sale).
  • Batch Fee: This fee is charged whenever you submit a batch of transactions.
  • Non-Sufficient Funds (NSF) Fee: NSF fees are charged if you do not have enough funds in your account to cover your merchant account expenses.


All credit cards and merchant account providers have their own set of costs associated with their services. The more you understand what you are being charged for, the more you can negotiate with your processor to help you save money.