CC Processing Fees: Info on Avg. Merchant Transaction Costs

Revel Blog | Julie Holkeboer | July 14, 2020 |

Featured Industry Insights and Trends

Whenever your business accepts credit card payment from your customers, it's not actually free. Substantial fees are happening in the background. If you’re not aware of them, they do eat up a sizable chunk of your sales revenue.

Understanding these credit card processing fees can help you reduce them, or at the very least, plan for them. 

What Exactly Are Credit Card Processing Fees?

If you want your business to accept credit card payments from customers, you'll need to get that service from your provider. You should know that these aren't free—there are processing fees involved. These are called credit card transaction fees.

Many fees are involved whenever a customer swipes their card or enters it during an online purchase. Some of them go to your credit card provider, and some go to your bank. Others are charged on a per-transaction basis, while others you need to pay monthly regardless of how many card transactions you did that month.

The average credit card processing fees you can expect is around 1.7% - 3.5% per transaction. Knowing these fees can help you manage your company's finances better by taking into account all expenses involved in credit card transactions. You're also better equipped to compare costs from different providers and choose the best one for your business.

You should also know that there are two types of credit card service providers: payment service providers (PSP) or merchant account providers. Each handles the credit payment processing fee differently.

Payment service providers like Paypal, for example, make things straightforward by charging a flat fee on every transaction. There are also no hidden fees or contracts you need to deal with. The convenience, however, means they might not be the cheapest option available.

Merchant account providers are the opposite. They usually involve complex, variable credit card merchant fees with multiple pricing structures. They also have more requirements and a more extended application period. The trade-off, though, is that merchant account providers offer the lowest overall fees on transactions. If your business experiences a large volume of card transactions, this is the best way to go.

Types of Credit Card Processing Fees

Here are some standard processing fees that you need to be aware of. Note that these will vary depending on which payment processor you pick.


Transaction fees, as the name suggests, are incurred whenever your customer swipes a card with your business. They take up the most significant chunk of credit card processing fees.

To understand these fees, it's essential to know what happens in the background. Credit cards are usually part of one or more major card networks: Visa, Mastercard, American Express, or Discover. Your chosen payment processor sets which of these networks it supports.

Once a customer swipes in your credit card terminal, your payment processor sends a fund request to the cardholder’s issuing bank. Once approved, the payment processor then handles the transfer to your account on the receiving bank.

Every entity involved in the transaction—the card network, payment processor, and the sending and receiving bank—all get a portion of this transaction fee.

Card transaction fees are composed of the interchange fee, assessment fee, and the payment processor markup fee. We’ll discuss the first two later, but the markup fee is worth mentioning now.

The payment processor markup is simply a fee charged by your service provider for their services (and for them to make a profit). It varies significantly from provider to provider, so you have a great deal of control in keeping this as low as possible. Try to look for a provider with low markup fees, and don’t enter into long-term contracts. That way, you can switch providers if your current one decides to ramp up their markup fees.


In contrast to transaction fees that are levied for every card swipe, flat fees are recurring fees charged by your payment processor. Your business pays for them just for using your provider's services. They're fixed expenses you incur regardless of how many transactions you did in a month.

On average, a reasonable monthly flat fee is around $15 - $50. Here are some typical flat fees your provider might be charging:

  • Account fees are what you pay for merely using the provider's processing services and keeping your account open. Some also charge a processing fee, which is what you must pay if your total monthly transactions didn’t reach a certain threshold.
  • Rental fees are what you pay for leasing or renting the provider’s credit card terminal. This one is unavoidable since you won't be able to use any other terminal with specific providers. The good news is that most payment processors can be negotiated to provide this for free, especially if your business has a large volume of transactions.
  • Withdrawal fees are a charge incurred whenever you need to transfer funds from the payment processor to your own account. Most are fixed, so it makes sense to withdraw funds in larger batches.
  • Legal and compliance fees are needed to adhere to specific laws and regulations. It’s usually done by the payment processor on your behalf. Examples include reporting transactions to the IRS or making sure your business complies with the Payment Card Industry Data Security Standard (PCS DSS).
  • One time Fees include payments you need to do once, which is usually charged when you open your account or buy your own credit card terminal. Payment processors also charge a cancellation fee if you decide to terminate your contract early.


Incidental fees are those that are charged on a case-to-case basis. They usually involve special cases, such as when disputes arise or when you request certain services from your provider. Hence, you often won't need to pay for these regularly.

Here are two typical incidental charges you might face:

  1. A non-sufficient funds fee (NSF) is a penalty made against your business if your bank account doesn’t have enough funds to pay your payment processor. Needless to say, it’s something that you can avoid entirely.
  2. Dispute fees are charged whenever a cardholder disputes some charges with your business. Common reasons include charging the wrong amount or accidentally double swiping. If the dispute ends up in a refund to the cardholder, you'll need to pay an additional chargeback fee. On average, these fees can cost you $15 per return.


The interchange fee is charged by the issuing bank for every credit card transaction made. It’s a percentage of the total transaction amount, which depends on several factors. These might involve the type of credit card (low tier or premium), the card network, and what risk level the merchant is.

Because it’s charged by the issuing bank, interchange fees are non-negotiable for every transaction.


The assessment fee is a fee that's charged by the credit card network and is how they profit from card usage. It’s a fixed rate levied on every transaction on the network. The interchange fee and assessment fee is usually bundled into one payment.

Every card has its own corresponding assessment fees and determining it is highly complicated. The actual calculation is a mystery and involves almost 300 different pricing structures, which is updated bi-annually.

What we do know is that the credit card network charges assessment fees, much like how a lender treats loans. High-risk merchants (new businesses or those with a history of fraud) have a more substantial assessment fee compared to more proven companies.

Like interchange fees, assessment fees are non-negotiable, regardless of which payment processor you use.

How to Reduce Credit Card Processing Fees

Credit card processing fees can add up to a significant expense. Fortunately, there are ways to reduce them.

One strategy most businesses use is requiring a minimum amount for card transactions. This can help mitigate some of the card processing costs, which can be relatively higher for smaller purchases.

Online transactions also feature higher fees versus in-person transactions, so go with the latter as much as possible if it applies to your business. The reason is that there are more risks if the cardholder or card is not present during the transaction, so additional charges and steps are required.

Also, be wary of chargebacks. Not only will this incur a charge, but banks might tag your business as a higher risk. They might end up charging you higher fees in the future. You can implement measures like requiring customers to sign an authorization form for recurring credit card charges.

Finally, carefully shop around for your payment processor and pick the one with the lowest fees. If possible, choose ones with shorter contracts so you can easily opt-out if fees get higher. Legacy solutions often lack the flexibility needed to keep up with those expectations and fulfill the requirements for the many channels customers demand. Revel Advantage, Revel's in-house payment processor, empowers businesses with secure, best-in-class processing and industry-low rates. 

Contact us today for a free demo of Revel Advantage. Enjoy lower processing fees paired with a more modern payment solution with Revel Systems' innovative cloud-based POS.