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Due to their convenience and advantages over cash, credit cards are becoming more and more popular among consumers nowadays. Retailers who take credit cards and online payments are required to pay a fee known as a payment processing fee for each transaction.

A transaction’s credit card processing fee makes up a very small part of its total value. The total amount isn’t small, though, when all of the transactions are added together. The entire monthly cost of using a credit card processor can be very high when you factor in the monthly fee, authorization fees, and assessment fees. As a result, this post will outline 6 practical strategies for business owners to lower credit card processing costs.

What is the credit card processing fee?

Payment service providers charge store owners a payment processing fee in order to accept consumer payments. This expense pays the following fees:

  • Card issuer
  • Card network
  • Payment processor

There are five key components that go into your credit card processing expenses:

  1. Interchange fees: These are fees charged by the card processor for the issuing bank to handle the transaction from your bank to your customer’s bank and eliminate transaction risks like card fraud. These fees are non-negotiable and vary based on sale volume, card acceptance method, business industry, and type of customers cards.
  2. Assessment fees: These are charges made to the merchant by the card companies to enable the use of a particular card brand and process the card provider’s transactions on the payment network. These fees are non-negotiable and lower than interchange fees.
  3. Payment processor markup fees: If you use a payment processing service like PayPal or Square, you must pay this fee to take credit cards. These fees, which are negotiable, cover processor operating costs and the margin of each transaction on the credit card processor.
  4. Incidental fees: These may include batch fees (a small daily fee for your deposits), AVS fees (a fee for an anti-fraud solution to verify your customer cardholder’s zip code and address), voice authorization fees (a fee for an anti-fraud solution to verify the transaction with the card-issuing bank), and chargeback fees (fees charged if your customers dispute a transaction).
  5. Account service fees: The processor charges an ongoing service fee to maintain your account, which may include a payment gateway fee, monthly minimum fee, monthly statement fee, PCI non-compliance fee, and PCI compliance fee. These fees are negotiable and vary based on the services you receive.

What factors determine credit card processing fee?

There are several factors that determine credit card processing fees at, including:

  1. Type of business: Payment processors apply different credit card processing rates based on the type of business, as determined by the registered Merchant Category Code (MCC). For example, supermarkets, retail stores, travel companies, and fuel stations may have different rates.
  2. B2B businesses: B2B companies, such as large-volume or government suppliers, may be eligible for Level 2 and Level 3 processing, which can result in lower credit card processing fees. However, these discounts are not typically available for companies with traditional ecommerce or physical terminals.
  3. High-risk level businesses: If a payment processor classifies a business as high-risk due to the nature of its products or services, or a high chargeback history, the business may need to open a dedicated account for high-risk sellers. This can result in higher credit card processing fees.
  4. Type of transaction: Card-present transactions, such as those made by swiping a card or hovering an NFC/chip at a POS terminal, generally have lower processing fees than card-not-present transactions, such as online or telephone orders. The higher risk associated with card-not-present transactions may result in higher fees.

What is the average credit card processing fee?

The average credit card processing fee is 1.5–3.5% per transaction.

  • For in-person transactions, the average fee is closer to 2%.
  • For card-not-present and online payments, the average fee is around 3%.

In addition, the average credit card processing fee can vary between different credit card networks. We’d like to provide a comparison table of credit card processing rates of major brands.

6 best practices to reduce credit card processing fees

Here are six best practices for reducing credit card processing fees at

  1. Choose the right pricing model: There are three main pricing models available from payment service providers: flat rate or blended pricing, interchange-plus or cost-plus pricing, and subscription or membership pricing. It’s important to choose the model that best fits your business growth, transaction type, and volume.
  2. Negotiate the markup fee with credit card processors: While you can’t negotiate interchange and assessment fees, you can negotiate the markup fee determined by the merchant account provider. A higher volume usually results in a lower rate, so it’s a good idea to propose your expected sales and demonstrate your annual growth to negotiate a discount. You should also consider how the markup fee is calculated, as a percentage or a flat fee per transaction, and negotiate accordingly.
  3. Reduce the risk of credit card fraud: Payment processors charge higher fees for high-risk merchants, so it’s important to demonstrate that your business is less prone to fraudulent activity and credit risk. This can be achieved through a clear refund and return policy, compliance with PCI standards, use of EMV card readers and other security measures, and stay updated with the latest technology.
  4. Use an address verification service: An address verification service (AVS) can verify the card issuer’s billing address and reduce the risk of fraud, potentially resulting in lower credit card processing fees.
  5. Use a payment gateway with a transparent fee structure: A payment gateway with a transparent fee structure can help you understand the fees you’re paying and potentially negotiate lower rates.
  6. Use a credit card processing service that offers volume discounts: Many credit card processing services offer volume discounts to businesses that process a high volume of transactions, so it’s a good idea to look for a provider that offers this type of discount.


For any business, the credit card processing fee isn’t a small expense. You can negotiate the markup fee, increase your security level, set up standard accounts and terminals, and implement some rules for credit cards to minimize your credit card processing cost.

Each processor has a different pricing model so it’s important that you understand where the charges come from and what factors affect the rates.

  • If you’re a seasonal and small business, you should go with the flat rate pricing model and choose a payment service provider who doesn’t require a long-term contract.
  • If you’re a medium business and handle a high monthly transaction volume, you should opt for an interchange-plus pricing model.
  • If you’re a large business, you may prefer the membership/subscription model to reduce credit card processing fees.

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