Credit cards can make payments easier and more convenient. In exchange for this convenience, merchants pay a credit card processing fee on every charge. Credit card processing fees are typically considered a part of business costs, but some businesses offset these fees through surcharges on credit card purchases. Here’s what you need to know about credit card processing fees and how they affect you.
What are Credit Card Processing Fees?
Published June 10, 2023
3 min read
Key points about: credit card processing fees
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Merchants pay credit card processing fees to financial institutions that facilitate credit card transactions for the business.
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Retailers sometimes pass on processing fees to customers in the form of a credit card convenience fee.
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Some states don’t allow retailers to charge you a fee for using a credit card.
What is a credit card processing fee?
A credit card processing fee is a charge all businesses pay whenever they accept a credit card payment. The credit card processing fee is further broken down into payments made to different financial service providers involved in enabling credit card payments.
- Interchange rate/fee: This is the largest element of credit card processing fees and is paid to credit card issuers, like Discover®. Interchange is usually a small percentage of the transaction plus a flat rate.
- Assessment fee: An assessment fee is a smaller fee sent directly to credit card networks for operational services. Discover is an example of a credit card network–Discover is both a credit card issuer and card network–but other examples are Visa or Mastercard.
- Payment processor fee: This fee goes to the companies that manage card payments through payment processing software or hardware.
Who pays for credit card processing fees?
Businesses that accept credit card payments pay credit card processing fees. However, some merchants offset these fees by adding a surcharge on all credit card transactions.
Surcharges and convenience fees
Credit card processing fees can add up quickly and eat into a company’s profits. Some retailers choose to counteract processing fees by adding a small convenience fee when you use a credit card. As explained by the General Services Administration, surcharges on credit card transactions are legal unless state law prohibits them.
Credit card processing fees shouldn’t be confused with other types of fees credit card users may pay, which include annual fees, late payment fees, and over-limit fees. Card issuers charge late payment fees when you miss your payment due date, and over-limit fees when you exceed your credit limit. Some card issuers charge card users an annual fee for using a credit card.
Did you know?
Many credit cards charge annual fees, especially when they provide rewards such as cash back. But Discover has no annual fee on every credit card. Plus, we’ll automatically match all the cash back you’ve earned at the end of your first year. There is no limit to how much we’ll match.1
How credit card processing fees work
Credit card processing fees depend on payment processors and the pricing structure they use. Each has its own way of calculating the processing fee for a business. For example, one pricing structure may charge a certain percentage or flat fee on every transaction, while another may determine the processing fee based on the type of card used.
How much are credit card processing fees?
When it comes to credit card processing fees, there’s no set amount. Fees largely depend on credit card issuers, payment processors, and payment networks. Another contributing factor is which issuers the merchant accepts payments from. Network and processor fees vary by provider and may affect the merchant’s bottom line. Typically, the total processing fee will be just a few percentage points. According to the Congressional Research Service, most credit card processing fees, reflected in something called the merchant discount rate, range from 1-3%. This means that when you buy something for $100 with a credit card, the merchant will likely receive $97-$99.
Credit card processing fees impact both vendors and customers, but most merchants account for them when setting prices. If you shop in a state that doesn’t allow credit card surcharges, you may be able to dispute a credit card surcharge that a merchant adds to your bill.
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- Cashback Match: We’ll match all the cash back rewards you’ve earned on your credit card from the day your new account is approved through your first 12 consecutive billing periods or 365 days, whichever is longer, and add it to your rewards account within two billing periods. You’ve earned cash back rewards only when they’re processed, which may be after the transaction date. We will not match: rewards that are processed after your match period ends; statement credits; rewards transfers from Discover checking or other deposit accounts; or rewards for accounts that are closed. This promotional offer may not be available in the future and is exclusively for new cardmembers. No purchase minimums.
- Legal Disclaimer: This site is for educational purposes and is not a substitute for professional advice. The material on this site is not intended to provide legal, investment, or financial advice and does not indicate the availability of any Discover product or service. It does not guarantee that Discover offers or endorses a product or service. For specific advice about your unique circumstances, you may wish to consult a qualified professional.