Merchant Account Fees Explained

Credit card processing costs are made up of several separate fees from multiple parties. Understanding who charges what — and why — helps you read your statement accurately and have informed conversations with your processor.

The three parties in every card transaction

When a customer pays by card, three parties are involved in processing: the card network (Visa, Mastercard, Discover, or American Express), the issuing bank (the bank that issued the customer's card), and the acquiring processor (your payment processor or merchant account provider). Each collects a share of the transaction cost.

Interchange fees

Interchange is paid to the card-issuing bank and is set by the card networks, not by your processor. Rates vary based on card type (debit, standard credit, rewards credit, business credit, corporate card), how the card is accepted (card-present, card-not-present, contactless), and the merchant category code (MCC) assigned to your business.

Interchange is typically the largest single component of processing costs. On an interchange-plus pricing model it is listed separately; on a flat-rate model it is bundled into one percentage.

Network assessment fees

Card networks (Visa, Mastercard, Discover, Amex) charge their own fees for the use of their networks. These are sometimes called assessments, dues, or network fees. They are set by the networks and are generally not negotiable. They are a smaller portion of total cost than interchange.

Processor markup

This is what your payment processor charges on top of interchange and assessments as its margin. On interchange-plus pricing, it is listed as a fixed basis-point markup (for example, interchange + 0.25% + $0.10 per transaction). On tiered or flat-rate pricing, it is bundled into the advertised rate.

The processor markup is generally the most negotiable portion of your total fee.

Per-transaction fees

A fixed dollar amount charged for each authorization or settled transaction, regardless of the transaction value. Per-transaction fees have a larger impact on low-ticket businesses (coffee shops, fast food) than on high-ticket businesses (dentists, contractors) where the percentage rate dominates.

Monthly and recurring fees

PCI compliance fees

Payment Card Industry Data Security Standard (PCI DSS) compliance is required for all businesses that accept cards. Processors may charge a monthly or annual fee to help manage the compliance questionnaire process. Some processors charge a separate non-compliance fee if you have not completed validation — this can be avoided by completing the annual Self-Assessment Questionnaire (SAQ).

Gateway fees

A payment gateway is software that authorizes card transactions for online, keyed-in, or virtual terminal payments. Gateways may charge a monthly fee, a per-transaction fee, or both. If your gateway is a separate vendor from your processor, these fees appear on a different invoice and must be added separately to get your true total cost.

Equipment and terminal fees

Costs for card terminals, POS hardware, or card readers. You may purchase, lease, or rent equipment. Leasing terminals is typically far more expensive over time than purchasing — compare total lease payments against the purchase price before signing.

Chargeback fees

When a customer disputes a transaction and the issuing bank initiates a chargeback, your processor typically charges a fee per chargeback, regardless of outcome. Chargeback fees are in addition to the refunded transaction amount. High chargeback rates can also result in additional monitoring fees or account termination.

Batch and settlement fees

Some processors charge a small fee each time you close a batch (submit the day's transactions for settlement). This is more common in older pricing structures.

See Flat-Rate vs. Interchange-Plus vs. Tiered Pricing to understand how these fees are packaged in different pricing models.