Most business owners know they're paying something to accept credit cards — but very few can explain exactly what those fees are or whether they're being overcharged. Your monthly processing statement is intentionally confusing. This article breaks it all down in plain English.
The Three Layers of Processing Fees
Every credit card transaction has three cost components stacked on top of each other:
1. Interchange Fees
Interchange is the fee paid to the bank that issued the card. This is the largest portion of what you pay — typically 1.5%–2.5% per transaction — and it goes directly to Visa/Mastercard and the cardholder's bank. No processor can change or negotiate interchange rates. They're set by the card networks and published publicly.
Interchange rates vary based on:
- Card type (rewards cards cost more than basic cards)
- How the card is processed (card-present is cheaper than card-not-present)
- Your business type (MCC code)
- Transaction amount
2. Assessment Fees
Assessment fees go directly to Visa, Mastercard, Discover, and Amex — the card networks themselves. These are very small (typically 0.13%–0.15%) and non-negotiable. Every processor pays the same assessments.
3. Processor Markup
This is the only part that's actually negotiable. The processor markup is what your payment processor (like us) charges on top of interchange and assessments for providing the service, equipment support, and account management. This is where you can save real money by shopping around.
The bottom line: When a processor advertises a rate like "2.6% + 10¢ flat rate," they're bundling all three layers into one number. When they advertise "interchange plus," they're showing you interchange separately from their markup — which is more transparent.
Common Fee Types on Your Statement
| Fee Name | What It Is | Typical Range |
|---|---|---|
| Discount Rate | Percentage of each transaction | 1.5%–3.5% |
| Per-Transaction Fee | Flat fee per swipe/dip/tap | $0.10–$0.30 |
| Monthly Fee | Base account fee | $0–$30/mo |
| PCI Compliance Fee | Annual security certification | $50–$150/yr |
| Statement Fee | Mailed/emailed statement fee | $5–$15/mo |
| Batch Fee | Fee to settle daily transactions | $0.10–$0.50/batch |
| Non-Qualified Surcharge | Extra fee for premium/rewards cards | 0.5%–1.5% |
| Chargeback Fee | Fee per disputed transaction | $15–$35 each |
| Early Termination Fee | Fee to cancel contract early | $200–$500+ |
Flat Rate vs Interchange Plus vs Tiered Pricing
How your processor structures fees matters as much as the rates themselves.
Flat Rate Pricing
One rate for everything — like Square's 2.6% + 10¢ per swipe. Simple, predictable, but you often overpay on debit cards and low-reward credit cards that have much lower interchange rates. Best for very low volume businesses who value simplicity over optimization.
Interchange Plus (Cost Plus)
You pay the actual interchange rate for each card, plus a fixed markup. If interchange is 1.80% and your markup is 0.30%, you pay 2.10% on that transaction. Completely transparent — you see exactly what each card costs and what the processor takes. Best for most businesses doing moderate to high volume.
Tiered Pricing
Transactions are sorted into "qualified," "mid-qualified," and "non-qualified" buckets with different rates. This is the most common and most opaque pricing model. Processors have wide discretion on which tier a transaction falls into, often moving transactions to higher-cost tiers to increase margins. Most businesses on tiered pricing are overpaying.
Red flag: If your processor won't tell you what interchange rate you're actually paying — only your "qualified rate" — you're probably on a tiered pricing model and likely being overcharged.
How to Know If You're Overpaying
The single best thing you can do is send us your last 2–3 months of processing statements. We'll analyze your effective rate (total fees ÷ total volume) and compare it against what you should be paying for your business type and volume. This analysis is completely free and takes about 24 hours.
As a rough benchmark:
- Card-present retail/restaurant: 1.8%–2.4% effective rate is reasonable
- Card-not-present / e-commerce: 2.2%–2.8% is typical
- Over 3% effective rate: you are almost certainly overpaying
What About "Zero-Fee" Processing?
Zero-fee programs — also called cash discount or surcharge programs — pass the cost of processing to the card-paying customer. They're legitimate and increasingly popular. Whether it's right for your business depends on your customer base and industry. Talk to us and we'll give you an honest assessment.
The Bottom Line
You can't control interchange rates. You can control who you work with and what markup they charge. A local processor who knows your business and actually reviews your account regularly will almost always beat a national one-size-fits-all provider on both price and service.
Send us your statement — we'll show you exactly where your money is going and what we can do about it.