The Ultimate Small Business Guide to Credit Card Processing Fees

Credit card processing fees can be one of the greatest nemeses for your small business. This is because you’re likely to get a fixed rate charge through your credit card processor on every purchase, which can amount to a crippling cost for a small company. There are different strategies for reducing these fees so that you can capitalize on your goods and services. You can find out how these best approaches can improve your business income. 

Ultimate Small Business Guide to Credit Card Fees

It is important for you to know your options when you are getting ready to work with a credit card processor. You can negotiate a contract that fits your needs. 

The Difference Between Fees and Rates

Credit card processors will offer a variety of fees and rates. However, they are vastly different categories. A fee is a cost that you pay for the maintenance of your business account with this provider. A rate is an amount charged for credit card processing. It is made up of two areas, which are the per-transaction fee and a discount rate. The percentage of every transaction a customer makes to your account is paid as the discount rate. The per-transaction fee is a flat price that you pay for every purchase.

Interchange fees depend upon the type of card your customer pays with, making up the majority of the discount rate. Also part of this rate are assessment fees, and these are what credit card companies such as Mastercard, Visa, and American Express charge. The processor’s markup is negotiable and is set by your credit card processing company. 

Account maintenance fees can include recurring charges that are called monthly, gateway, monthly minimum, PCI compliance, PCI non-compliance, and batch fees. Incidental credit card fees that occur based on triggered activity include AVS, retrieval request, voice authorization, chargeback, nonsufficient funds, data usage, and more. 

Models Credit Card Processors Offer

Credit card companies typically provide different pricing models so that you can pick from a variety of transaction rates.

Interchange Plus

This pricing model adds in a markup percentage that is just above the interchange rate for every purchase. You can see what percentage of your costs go to the processor. It’s cost-effective for small businesses and is offered by most credit card processors.


Most mobile credit card processors offer this but not traditional ones. You are charged a percentage of every transaction regardless of the card or the purchase. If you have a low volume of purchases every month, this is a better approach. 

Tiered Pricing

This payment model places you in different tiers. Depending on the tier you are in, you receive a certain payment. This includes Qualified, Mid-qualified, and Non-qualified. The qualified tier is for verified purchases that are low risk. The customer swipes their card then provides a pin to authorize the payment. The mid-qualified tier is for manually keyed-in transactions. You use an address verification service (AVS) to verify the cardholder. The non-qualified transactions are for purchases that don’t use an AVS service. These are considered more high-risk. The most inexpensive rates are qualified ones. 

Find Out More

You can find out more information to reduce processor fees on credit cards. Work with a team of professionals to learn more.

Adam Hansen

Adam is a part time journalist, entrepreneur, investor and father.