What am I paying for?

A customer hands you their credit card for a purchase. You swipe it, they sign, and the transaction is approved. Simple, right? But behind the scenes, a complex dance of fees and charges is taking place.

By understanding the basics of credit card processing fees, you'll be able to see what you’re paying for, and how our pricing model distributes these costs to you.

In this article

• Video: credit card processing fees

• Who’s involved in processing a payment?

• What exactly are interchange fees?

• What else am I paying for?

• Conclusions

• Next steps

• FAQ & troubleshooting

Video

Who’s involved in processing a payment?

Every credit card transaction involves a network of players working behind the scenes to move money from the customer's account to yours. Understanding these players and their roles is the first step to demystifying processing fees.   

• 🧑‍💻 Cardholder: The customer making the purchase using their credit card.   

• 🏦 Issuing Bank: The bank that issued the customer’s credit card.   

• 🌐 Card Network: Companies like Visa, Mastercard, American Express, and Discover that communicate and transfer funds between banks.   

• 🏦 Acquiring Bank: Your bank that accepts the funds from the cardholder's bank.   

• 📲 Payment Processor: The company that provides you with the technology and services to accept credit card payments (that's us!).

What exactly are interchange fees?

The largest portion of your processing fees typically comes from interchange. This fee is determined by the customer’s bank to compensate them for the risk and costs they take on for lending money and providing card benefits.

Interchange rates fluctuate, depending on several factors.

• Card type: Credit cards generally have higher interchange rates than debit cards, and premium cards with rewards programs have even higher rates.

• Transaction type: Card-present transactions (where the card is physically present) usually have lower rates than card-not-present transactions (like online orders).

• Business type: Businesses classified as higher risk may have higher interchange rates.

What else am I paying for?

While interchange fees are significant, they're not the only costs involved in processing credit cards.

Assessment fees

Also known as card brand fees, these fees are set and charged by card networks like Visa, Mastercard, and Discover to cover their operating costs, technology investments, and network security.

While generally smaller and more stable than interchange fees, assessment fees can still fluctuate based on market conditions and network upgrades.

Processor markup

Payment processors charge a markup to cover their operating costs, provide valuable services like customer support and fraud prevention tools, and maintain secure payment technology.

This markup decreases as your processing volume increases, rewarding you with lower costs as your business grows.

Conclusions

Here’s a point-form review of what we learned in this article.

• Multiple parties are involved in processing credit card transactions, and each takes part in making up the fees involved.

• Interchange fees are a changing fee set by the issuing banks for the services they provide and the risks they undertake.

• Assessment fees are a smaller fee set by the card networks for using their network.

• Processor markups are fees charged by the payment processor for facilitating the transaction.

Next steps

Now that you have a better understanding of the different fees involved in credit card processing, you might be wondering how these fees are structured and presented to you. That's where pricing models come in.

In our next article, we'll explore interchange plus, the pricing model that we use that provides transparency over your processing expenses.