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What Are the Average Credit Card Processing Fees and Costs?

What Are the Average Credit Card Processing Fees and Costs?
Jason Steele

Jason Steele

Updated January 19, 2022
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Editor’s note: Lantern by SoFi seeks to provide content that is objective, independent and accurate. Writers are separate from our business operation and do not receive direct compensation from advertisers or partners. Read more about our Editorial Guidelines and How We Make Money.
Credit cards are one of the most popular forms of payment, but they are not without costs. Every merchant that accepts credit cards must pay a portion of their proceeds as a credit card transaction fee, also called credit card merchant fees.  If you are a merchant that is considering accepting credit card payments, or you are already doing so, then you may be wondering how much you should be paying in processing fees and other costs. 

2021 Credit Card Processing Fees

In 2021, credit card processing fees ranged between 1.3% and 3.5% of the amount of each transaction. The average credit card processing fees vary by payment network, as you can see in the table below:

What Is a Credit Card Processing Fee?

There are two components that make up the merchant’s cost of credit card processing. The first is the percentage of the transaction each time a credit card payment is made. Additionally, there are several other kinds of fees that a credit card processing fee may include, such as interchange fees, payment processor fees and assessment fees (more on these in the next section).

3 Types of Credit Card Processing Fees

As mentioned, there are various additional fees that a credit card processing fee may include on top of the percentage of the transaction amount. Here’s more on each of the three types.

1. Interchange Fee

An interchange fee issue is collected by the credit card issuers. So if you are using a Capital One card on the Visa network, then Capital One receives the interchange fees. These fees are typically a percentage amount, plus a small fixed amount (usually up to $0.25). The amount can vary depending on the type of card, the type of business being operated and how the payment is processed, such as whether the transaction is made online or in person.

2. Payment Processor Fee

The payment processor fee is charged by the company that accepts the payments and transfers it to the payment network. This company can either accept cards themselves or by processing online transactions. The payment processor can charge multiple fees including a per-transaction fee, a monthly service fee and charges for the processing terminal. 

3. Assessment Fee

The assessment fee is charged by the payment network, such as Visa, Mastercard or American Express. These fees are generally based on total monthly sales rather than being collected per transaction, and the amount can vary depending on factors such as transaction volume, whether it's a debit or credit card transaction and if it’s a foreign transaction (an important credit card definition to know).

Pricing Models for Credit Card Processing Fees

Credit card processing companies charge fees in different ways including tiered pricing, flat rate pricing and interchange plus pricing. Choosing the right pricing model for your business can be as important as choosing the right credit card as a consumer.

1. Tiered Pricing

With the tiered pricing model, each charge is grouped into one of the processor's tiers, which has a fixed fee. With this model, some transactions will be charged at a lower rate, while others will have a higher rate. If most of your transactions will qualify for the lower rate, then this model can make sense. 

2. Flat Rate Pricing

With flat rate pricing, the processor charges the merchant a fixed percentage of each transaction, along with a small fee. This model can be the most predictable for merchants. 

3. Interchange Plus Pricing

Interchange Plus pricing is when merchants pay the interchange rate plus a preset add-on fee for each transaction. 

Credit Card Processing Fee Example

Let’s say you have a dog sitting business and decide to start accepting credit cards for payment. After looking after the neighbor’s pooch for 10 days, you charge your customer’s credit card $150 using Square as your payment processor. Square is a popular payment processor that allows customers to quickly set up an account and process cards using a simple attachment to their mobile phone. Square will charge a fee of 2.60% plus $0.10. For your $150 pet-sitting charge, this means that Square will take $3.90 plus $0.10, for a total of $4.00 in fees. After fees, you will receive $146.00 for your services.Alternatively, Square allows you to do online transactions, but it does charge slightly more for these. For online transactions, Squire charges 2.90% plus $0.30 per transaction. For this dog sitting transaction, that means your fees would total $4.45 — a $0.45 increase from the fees taken in the example above.

Are There Other Fees to Look Out for?

There are several other potential fees that you need to be aware of outside of credit card processing fees. These can include monthly services fees and fees for equipment purchase or rental. Additionally, you could face fees if a customer were to dispute a charge, as well as fees for chargebacks and non-sufficient funds.

Consider Credit Card Offers With Lantern

As you can see, credit card processing fees can vary by payment network. Additionally, there are various types of credit card processing fees to be aware of and different pricing models that can affect how much you ultimately pay.Whether you’re a business or an individual, it’s important to consider your options when it comes to credit card payments. Alongside our resources for merchants, Lantern by SoFi makes it easy for individuals to compare credit cards and apply online.
Photo credit: iStock/Lyndon Stratford
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Frequently Asked Questions

Does a credit card processing fee get refunded?
How can I avoid paying a credit card processing fee?
What are the transaction fees for credit cards?
How do credit card processors make money?

About the Author

Jason Steele

Jason Steele

Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
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