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What are Credit Card Processing Fees?

Last Updated: May 29, 2024

4 min read

Key points about: credit card processing fees

Merchants pay credit card processing fees to financial institutions that facilitate credit card transactions for the business.
Retailers sometimes pass on processing fees to customers in the form of a credit card convenience fee.
Some states don’t allow retailers to charge you a fee for using a credit card.

Credit cards can make payments easier and more convenient. In exchange for this convenience, merchants pay a credit card processing fee (sometimes called a transaction fee or swipe fee) on every charge. Merchants also incur a swipe fee when you use a debit card, but credit card transactions generally cost more to process.

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 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 fee/rate: This is the largest element of credit card processing fees and is paid to credit card issuers, like Discover^{^®}. An interchange fee 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?

The question of who actually pays for credit card processing fees depends on a few factors, including where you live.

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, or may pass the cost on to customers by raising the prices of the goods or services they sell, according to the office of U.S. Senator Dick Durbin.

Still, some states don’t allow merchants to add a surcharge.

As a consumer, you don’t pay for processing fees in any direct way. However, high processing fees may increase the cost of the things you buy. If you have a cash back credit card, you could earn more rewards if you’re spending more.

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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.

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 offer rewards. But Discover credit cards have no annual fee. 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

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How credit card processing fees work

Credit card processing fees depend on the credit card payment processor 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 credit card 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.

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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