When a customer pays by card, the fee you see on your statement is not one charge. It is three, collected together and paid to three different parties. Knowing which is which tells you what is worth shopping around for and what is fixed no matter who you sign with.
The three fees inside every card payment
| Fee | Who keeps it | Roughly |
|---|---|---|
| Interchange | The bank that issued the card | 1.5% – 2.1% |
| Network assessment | Visa / Mastercard / Discover | 0.13% – 0.15% |
| Processor markup | Your payment processor | The remainder |
Interchange
Interchange is set by the card networks and paid to the issuing bank — the bank that gave your customer their card. It is the largest of the three, and it is the reason a premium rewards card costs you more to accept than a basic debit card: the rewards are funded out of interchange.
Crucially, no processor can discount interchange, because no processor receives it. Any provider claiming to beat interchange is describing something else.
Network assessments
A small percentage kept by the network itself for operating the rails. It is a fraction of interchange, it is the same for everyone, and it is not negotiable either.
Processor markup
What is left over is the processor's own margin — the only part of the three that anyone can actually compete on. When a provider advertises a lower rate, this is the component moving.
The fixed fee is the part people underestimate
The flat per-transaction fee looks trivial next to the percentage, and on a large sale it is. On a small one it dominates.
- 5.90%
- Effective rate on a $10 sale at 2.9% + 30¢
- 3.50%
- The same rate on a $50 sale
- 3.02%
- The same rate on a $250 sale
Same published rate, three very different costs. If your average ticket is small, a provider with a lower fixed fee will beat one with a lower percentage — which is why comparing headline rates alone is close to meaningless.
Work out your own effective rate
Take these three numbers from a single monthly statement so the period matches.
- Average transaction
- $25
- Cost per transaction
- $0.80
What to actually compare
- Your effective rate: total fees divided by total volume, from one month's statement.
- The fixed fee, weighted against your real average transaction size.
- Situational surcharges — international cards, premium and corporate cards, currency conversion.
- Monthly, gateway and dispute fees, which rarely appear in a headline quote.
Add those together and you get a number you can compare between providers. Anything less and you are comparing marketing copy.
GOOD QUESTIONS
Frequently asked
Who sets interchange fees?+
The card networks — Visa, Mastercard, Discover and American Express — publish interchange schedules. The fee is paid to the bank that issued the customer's card. No processor can negotiate it, because no processor receives it.
Can I avoid interchange fees?+
Not on card payments. You can influence which interchange category a transaction falls into by passing richer data at authorisation and by encouraging debit over premium credit cards, but the fee itself is unavoidable.
What is a good effective rate?+
It depends almost entirely on your average transaction size and card mix. For card-not-present ecommerce with a healthy ticket, mid-to-high 2% is common. Below a $15 average ticket, effective rates above 4% are normal for everyone.
Why is my statement higher than my quoted rate?+
Usually the fixed per-transaction fee on small tickets, plus international or premium-card surcharges and any monthly or dispute fees the quote never mentioned. Divide total fees by total volume to get the figure that actually compares.