Average Credit Card Processing Fees

If you are a business owner, you’ve felt it: You run that credit card through the scanner and smile as you know a sale is completed. Then, that moment of the slightest regret: A credit card transaction. That means you are going to have to pay a fee. 

There’s no question about it: Every merchant must take credit cards. Indeed, a credit card is virtually a requirement for doing business, and if you have an internet-based company, it is needed to function. 

Of course, this brings up another necessary evil in business: Credit card fees for merchants. Credit card transaction fees can slice a small percentage of all profits off the top of any merchant’s profits. Credit card transaction fees are levied by all card brands, including Visa, American Express, Mastercard, Discover, and more. They are also a part of all alternative payment processing methods, including using PayPal, Venmo, Square, or related services. Finally, a card doesn’t have to be simply a credit card: These fees also hit debit card processing. 

There are critical questions that all businesses must know the answer to:

• How much are credit card fees for merchants?
• How much do credit card companies charge merchants? 
• What are the average merchant credit card fees? 
• And how can a merchant work with a credit card processor to reduce this interchange fee and keep as much of their hard-earned money as possible?

What are credit card processing fees?

Credit card processing fees are the credit card fees for merchants. They help pay for the costs associated with every credit transaction and enable a credit card processing company to pay for their operations.

You may be asking yourself: What the heck is in a credit card transaction fee? And how much do credit card companies charge merchants? 

• The interchange rate: This portion of the fee goes to the issuing bank responsible for issuing the card. You have likely noticed that many banks, including Chase and Bank of America, issue credit cards directly. A financial institution and credit card company will work together to manage credit cards.
• An assessment fee is paid to the credit card company in question.
• The payment processor fee: This goes to the company managing the payment processor.

These are the three components that determine what the average merchant credit card fee is and ultimately impact the total number that you pay. The good news? Lowering one of these items via negotiation or altered service means that you can reduce the credit card fee you pay. 

Great! So, what’s the bad news? Well, a business may also incur additional fees and processing costs. This will answer the question of how much credit card companies charge merchants. It will also impact the average merchant credit card fee.

Your business must work with a combination of all three of these areas to reduce credit card fees for merchants. This can minimize the amount of money that you lose.

Keep this in mind, too: The payment processor is often the most critical component of this fee, as you can sometimes work with a payment processor to find rates and features that work for you. Business owners should seek a high-quality merchant services provider that can fill their needs and keep their fees to a minimum, regardless of their business type or risk level.

Fortunately, companies like Zenti offer various services that can process different types of credit cards and ensure you are paying a reasonable amount of fees. These services include high-risk merchant accounts, retail merchant services, and zero-cost processing. Depending on your business, any of these services can be fantastic. 

What is the average merchant credit card fee?

The average credit card processing fee will vary from business to business. Many factors influence the fee, including the merchant code that a business has and depending on their level of risk and chargebacks incurred. In general, the major credit card networks will levy fees ranging from 1.3% to 3.5% of each transaction, in addition to a monthly fee charged to use their services. These fees are typically initiated directly from the point of sale (POS) device.

The average credit card processing fees are as follows:

• American Express: 1.58% fee, plus an interchange fee of $.10 – 3.45%, plus a $.10 transaction fee
• Discover: 1.48% fee, plus an interchange fee of $.05 – 2.53%, plus a $.10 transaction fee
• Mastercard: 1.29% fee, plus an interchange fee of $.05 – 2.64%, plus a $.10 transaction fee
• Visa: 1.29% fee, plus an interchange fee of $.05 – 2.54%, plus a $.10 transaction fee

As you can see, the average credit card processing fees vary, which ultimately determines how much credit card companies charge merchants. American Express and Discover each charge the highest fee. This relatively high fee helps to explain, in part, why they are used less frequently. As any business owner knows, merchant credit card fees can add up very quickly! As a result, businesses must be very careful with the cards they accept. 

There is an important caveat here: The above is just the average credit card processing fee. Merchant credit card fees can increase or decrease based on several factors, including the quality of the merchant processor you work with. Furthermore, different merchant account processors will offer different services, resulting in higher or lower fees. This includes items like chargeback protection, high-risk eCheck processing, or payments with cryptocurrency. A good merchant account processor – like Zenti – should be able to manage all of these services for you.

Businesses are responsible for paying credit card transaction fees as the costs are incurred. Of course, in most cases, the expense of these fees is factored into a business’s overall model. If you are a business owner, you know it: You will have to mark up the costs of goods. However, this risks increasing prices beyond what the consumer may be willing to tolerate. Furthermore, there is an inherent unfairness in this pricing model: It may hit customers who are paying in cash. As such, businesses should keep these costs to a minimum. It is not only good for their bottom line but also for saving customers money. 

Finally, remember, if you only ask, “How much do credit card companies charge merchants?” you are missing an important factor in this equation. The past decade has seen an explosion of popularity for services that take payments over the Internet. As such, you need to make sure you are also researching how much these credit card transaction fees will charge. Platforms like PayPal and Square will also charge based on the volume of your sales and what other services you need, and this is an important part of the overall payment equation that you must keep in mind. 

What factors determine credit card transaction fees?

Many factors go into determining these credit card transaction fees.

As you can tell from above, the credit card company is one of the most important factors. The low rates of Visa and Mastercard help explain why these two cards are arguably the most popular in the world.

Whether or not a card is a debit or credit card also impacts the total of the credit card transaction fees. Debit card transactions are cheaper for merchants. This is because they have lower interchange fees and present less risk to a merchant and credit card processing company: If a card has an insufficient balance, the charge simply won’t complete. It is also worth noting that all debit cards are not created equal. If a card requires PIN verification, it has lower interchange rates than those that require signature verification. Again, this is tied to the risk of the card to a vendor and processor. However, it will have a higher per-transaction fee, which somewhat balances out.

Credit card transaction fees can also be altered by how the charge is run. A merchant is charged less for sales conducted in-store via a card reader system than for what is known as “card not present” transactions. CNP transactions are over the internet or by someone taking a card over the phone.

Why are these charges riskier? Fraud. is much easier to defraud a vendor with a card, not present transaction, than with a card paid for in a store. Card-present transactions often have numerous ways of verifying that the owner is using the card. This reduces the risk of fraud and lower fees for the vendor in question. 

Finally, the merchant category code greatly impacts credit card transaction fees. Every business has a merchant category code (MCC) that identifies your business type and what kind of products or services you sell. The International Organization for Standardization determines these codes. Your code may rise or fall depending on the assumed risk level associated with your MCC. For example, some businesses — such as routine household services — have a lower risk. Other companies have higher risk levels that can alter the average merchant credit card fee.

Examples of high-risk businesses include vendors like CBD vendors or adult services. These risks are based on the previous history of similar services and the risk of chargebacks. As such, having a high-risk business can increase the fees you pay to a vendor. These higher rates can be even worse if you are dealing with a vendor who does not have experience working with a high-risk business, as they may be unable to help you determine ways to reduce your overall risk – resulting in higher fees and more chargebacks and wasted money.

This makes it very important that you find a vendor — like Zenti — with a history of experience in this area and who knows how to work with a business to reduce their fees, even if they are in a high-risk model. Remember, some merchant account providers may raise your fees if they believe you are a high-risk processor. By working with an expert organization, you can keep these fees to a minimum. 

Can credit card processing fees be negotiated?

Absolutely! This can alter how much credit card companies charge merchants.

However, circumstances — such as being a high-risk business — may result in increased fees. Indeed, this is often vital for small businesses. After all, small businesses are at a disadvantage in many ways when competing with big box stores: They don’t have the transaction volume that these stores have — as such, lowering prices whenever possible is critical to their long-term ability to compete. 

The best way to lower how much credit card companies charge merchants is to engage in merchant practices to reduce your risk of chargebacks and returns. By having a history of lower chargebacks and fraudulent claims, you can negotiate better rates, as you can prove that you are a lower-risk vendor. Ways to reduce your chargebacks include using appropriate POS devices, having clear and transparent sales guidelines, and ensuring a secure website.

Generally, the best way to negotiate credit card fees is to steer your business in person. This can lower the average merchant credit card fee.

Unfortunately, this isn’t an option for many business models, and you have to deal with internet-based payment gateways. In this case, there is nothing you can do. However, many brick-and-mortar stores have a series of options that they can deploy to encourage people to come into the store, including providing high-quality customer experiences or reduced prices. 

You can use address verification services to better secure your account if you have no other option. An address verification service verifies the billing address of a customer paying by credit card, thus providing a vendor with one additional check. Card present transactions can reduce fraud, chargebacks, and chargeback fees. All of this puts you in a better position to negotiate with a vendor regarding reducing the fees associated with debit card and credit card payments. As noted above, increasing your security can lower the average merchant credit card fee.

Credit card processing costs can be expensive and can eat away a decent amount of your profit. Thankfully, many high-quality merchants can work with your business to reduce your expenses and ensure that you are keeping as much of your money in your pocket as possible. Zenti is one such example. At Zenti, we offer various services, integrations, and more. We’re able to work with you to help make sure that you keep your money.

Interested in learning more? Contact Zenti today, and learn more about how our services can help save you money.