Credit card processing fees are pesky, unavoidable, and costly. The exact amount you’ll pay will vary depending on the size of the transaction, type of transaction, and overall volume. Fortunately, there are ways you can recoup lost profits and pay less in processing fees. 

Let’s start by answering the simple question of what is a processing fee and then explore them in greater detail. We’ll even share some advice on how you can reduce just how much you’re paying in fees as a business and put you on the path to bigger profits. 

What Is a Processing Fee?

To put it simply, a processing fee is a pre-set amount that a business pays every time a customer uses a credit or debit card to pay for their goods or services. The processing fee can be split into two parts: the interchange fee and the assessment fee. 

The interchange fee primarily goes to the credit card issuer, while the assessment fee goes to the network. So, if a customer pays for their purchase using a Citi Mastercard, the interchange fee will go to Citi (the issuer), while the assessment fee will go to Mastercard (the network). 

How Much Do Processing Fees Cost?

More likely than not, your business will contract a merchant service provider (MSP) to handle your card processing, so you’ll likely pay your fees directly through them. If that’s the case, you’ll need to watch for hidden fees. It’s essential to shop around when choosing an MSP to make sure you aren’t overpaying. 

Still, the amount you pay in processing fees depends on multiple variables, including the card network, transaction amount, and type of transaction. The total processing fee combines the interchange fee and assessment fee, so let’s break each part down into average charges. 

The interchange fee is typically a percentage of the customer’s purchase plus a small fixed amount (like $0.25) per transaction. The network, card type, processing method, and merchant category code (MCC) impact the total interchange fee. You can expect the interchange fee to range from about 1.4 percent to 3.4 percent. 

The assessment fee is much smaller than the interchange fee. While it still varies depending on network and other factors, it generally adds up to about 0.13 percent for each transaction

In total, credit card processing fees range from 1.5 percent to 3.5 percent. However, businesses pay more than issuer and network processing fees. If you’re accepting credit or debit cards, you’ll have to pay for terminals, and you’ll need a merchant services provider (MSP) as well, who will likely charge a monthly fee to your business. 

Who Has to Pay Processing Fees?

You might think that customers should pay the processing fee since they’re choosing a credit or debit over cash or check. If you feel that way, it’s good to know that businesses have the option of passing the cost on to the customer by implementing a “credit card surcharge” or another fee that helps cover their back-end processing fees. 

If you’re thinking about passing the processing fees onto your customer, you may need to make some considerations. In some states, you’re not allowed to charge any more than the actual processing fee that you’re paying (i.e., you can’t profit off the fee). Additionally, charging a fee for using a credit card can discourage some customers from choosing your store, especially if alternative stores don’t charge them extra.

Another way to help recoup processing fees is to factor the cost into the pricing of your items and then offer a “cash discount,” which subtracts two to three percent (or however much you add to your retail price) for customers who use cash or check to pay for their purchase. This method of incentivizing non-card transactions could prove effective for your small business, especially if processing fees cut your profits. 

Can I Reduce My Processing Fees?

It doesn’t take long after asking, “What is a processing fee?” and doing some simple math for any business to start wondering how to reduce the amount they’ll end up paying in fees. Unfortunately, processing fees are unavoidable if you plan to accept cards, but there are ways that you can save money.

Many merchant service providers charge a monthly and transaction fee, which means some costs are hidden, and you might end up paying more than you need to. That’s why it’s essential to do your research and turn to a partner you can trust, like NMA.

About NMA

NMA is a merchant advocacy group dedicated to reducing or eliminating the unnecessary fees associated with accepting credit card payments. Since 2004, NMA’s payment processing solutions have delivered tailored solutions, best-in-class customer service, and high-quality service offerings for businesses across multiple industries. Whether it’s high-risk or low-risk, brick-and-mortar or e-commerce, NMA will create the best processing experience for your company.

For more information, visit us at our or by calling (866) 509-7199.