If you’re looking through your monthly processing statement and notice line items related to Mastercard’s Transaction Processing Excellence Fee (or TPE Fee), you’re probably wondering what it is and whether you’re being charged correctly.
TPE Fees are legitimate charges from Mastercard that apply when merchants don’t follow proper authorization protocols. But just because it’s legit, that doesn’t mean every processor passes it through correctly, and it definitely doesn’t mean you can just ignore it.
This is one of the more complicated card brand fees, which is why I’m taking the time to fully explain everything merchants need to know about it.
What is the Mastercard Transaction Processing Excellence Fee?
The TPE Fee is part of Mastercard’s broader Transaction Processing Excellence Program, which monitors the accuracy and efficiency of all authorization and clearing activity across its network.
In simple terms, Mastercard tracks how merchants and processors handle things like declined authorizations, pre-authorizations, and settlements. And if your processing behavior is deemed to be excessive, delayed, or inconsistent, Mastercard can hit you with Transaction Processing Excellence Fees.
This is basically Mastercard’s way of penalizing merchants who don’t properly handle authorization requests.
Common scenarios that result in merchants being charged a TPE Fee include:
- Too many authorization attempts on the same card.
- Small “test” (aka nominal) authorizations that are later reversed.
- Pre-authorizations that never get cleared or reversed.
- Mismatches between the authorized amount and settled amount.
It’s similar to Visa’s Misuse of Authorization Fee, but applied on Mastercard transactions with slightly different criteria and charges that trigger a penalty.
Types and Cost of Mastercard Transaction Processing Excellence Program Fees
Mastercard’s TPE Program is actually a suite of compliance initiatives set by the card network to ensure optimal network efficiency.
As a result, there are several different types of Transaction Processing Excellence Fees that could be charged based on the merchant’s authorization behavior.
Let’s take a closer look at each Transaction Processing Excellence Fee below, including how much it costs and when it gets charged.
Pre-Authorization Fee
- $0.045 per transaction
- Charged when the pre-auth isn’t fully reversed or cleared within 30 days of the authorization date.
Pre-authorizations are used in scenarios when the final transaction amount might be different than the authorized amount. It’s common in industries like hospitality, car rentals, restaurants (with tips), and gas stations where the final charge isn’t known at the time the card gets authorized.
The 30-day window gives merchants plenty of time to complete transactions or properly reverse holds for situations when the final amount might change. If not, the $0.045 pre-authorization fee is assessed.
Undefined Authorization Fee
- 0.25% per transaction ($0.04 minimum)
- Applies when undefined authorizations are submitted for settlement and approved, but not cleared within 7 days of the authorization request.
Mastercard has been steadily increasing the fee to incentivize merchants to stop using undefined authorizations altogether.
The current rate of 0.25% was set in July 2025, and Mastercard has already announced that this rate is increasing to 0.30% ($0.05 minimum in January 2026). The fee is jumping to 0.35% (with a $0.10 minimum) in January 2027.
As of June 18, 2025, Mastercard has officially said that undefined authorizations are no longer a permitted type of dual message authorization in most circumstances.
The fee can also be charged when merchants fail to reverse an uncaptured undefined authorization, and the authorization amount must be greater than zero.
Final Authorization Fee
- 0.25% per transaction ($0.04 minimum)
- Charged when final authorizations aren’t reversed cleared within 7 days of the authorization date OR,
- When the final authorization amount doesn’t match the clearing amount or currency.
Final authorizations should be used when merchants know the exact amount of the transaction at the time of purchase, which is common in most retail and ecommerce transactions when the sale amount is fixed.
If the final authorization doesn’t exactly match the clearing amount, Mastercard will penalize you.
Excessive Authorizations Fee
- $0.50 per excess authorization
- Applied for each authorization attempt after 10 previous declines on the same cards within 24 hours.
Mastercard’s Excessive Authorizations Fee is designed to discourage unnecessary traffic on the network, reduce fraud risks, and highlight issues with payment gateways.
The fee has jumped significantly in recent years, at just $0.10 back in 2022 before jumping to $0.15 in 2023, and then $0.30 in 2024. Most recently, Mastercard increased this fee to $0.50 per excess authorization in January 2025.
Nominal Authorizations Fee
- $0.045 per transaction
- Charged to approved authorizations under $1 on card-not-present transactions that are subsequently reversed.
This TPE fee from Mastercard is designed to discourage merchants from running small “test” fees on CNP transactions. It’s common in card verification and $0 authorization scenarios.
So if you test a card by running an authorization in CNP environments, only to reverse the auth, Mastercard will charge you $0.045 each time.
Merchant Advice Code Fee
- $0.03 per transaction
- Applies to declined CNP transactions with specific merchant advice codes that are repeated within 30 days.
Merchant Advice Codes (MACs) are signals from the issuer telling a merchant whether they should retry a declined transaction. This fee is designed to prevent merchants from retrying transactions when they’re told not to do so.
If a merchant re-tries an authorization after receiving a specific MAC decline code 03 (closed account or fraudulent) or 21 (cardholder cancelled agreement), they’ll be charged for it.
Currently, the MAC Code Fee is only charged when the same combination of card, merchant, and transaction amount is declined within the same MAC code within the past 30 days.
But starting in January 2026, Mastercard will begin charging this fee to all declined card-not-present transactions with MAC decline codes 03 or 21, not just on re-try attempts.
Detail Reporting Fee
- $0.012 per transaction
- Applies to every authorization that generates a TPE fee.
Mastercard applies this administrative fee for the documentation they need to provide related to your TPE issues. The fee covers the cost of generating the reports to help merchants identify and fix their authorization problems.
How Transaction Processing Excellence Fees Appear on Your Statement
The way these fees show up on your statement depends on your acquirer or ISO. They’re typically itemized under your Network Fees, Card Brand Fees, or Association Fees.
You’ll typically see them labeled as:
- Mastercard Transaction Processing Excellence Fee
- MC TPE Fee
- MC TPE Program Fee
- MC Accessive Auth Fee
- TPE Nominal Authorization
- MC Undefined Auth Fee
Sometimes we see multiple TPE fees grouped together in a single summary line, while others break them out individually. It all depends on your processor.
It’s also important to understand that these charges typically appear on statements up to two months after the actual authorization took place.
This delay is due to Mastercard’s reporting lag, and it makes sense, since some of the fees aren’t triggered until 30 days after the initial authorization.
So if you’re reviewing your merchant statement and see lots of recurring Mastercard TPE line items, it’s definitely worth digging deeper to understand the problem. These fees are directly tied to your transaction and authorization behavior, and they can add up quickly.
Why Mastercard Charges Transaction Processing Excellence Fees
Mastercard rolled out the TPE program to address several key issues within the payments ecosystem:
Reducing Network Congestion
If businesses are constantly running unnecessary authorization attempts, it creates excessive traffic on Mastercard’s network. So by penalizing certain behaviors, Mastercard effectively promotes more efficient processing through its network.
Minimizing Fraud Risk
Excessive attempts to authorize cards and testing cards with low amounts to see if they’re active are typically associated with fraudulent activity. The TPE program discourages merchants from using these patterns while also helping to identify potential fraud.
Improving the Cardholder Experience
When merchants don’t properly reverse or clear authorizations, cardholders can see holds on their accounts for extended periods of time. This happens even after the transaction has been processed or long after the hold should be lifted.
Driving Compliance Standards
Charging fees and penalties for outdated practices (like undefined authorizations) is Mastercard’s way of pushing merchants toward adopting modern authorization standards. This ultimately helps provide better clarity for issuers and improved security on the network.
Highlighting Processing Issues
Anytime a Transaction Processing Excellence Fee is assessed, it serves as a signal that the merchant is doing something wrong with their processing. Whether it’s faulty retry logic, gateway errors, or simply operational problems, Mastercard can help merchants identify what they’re doing wrong so it can be fixed moving forward.
Are Mastercard TPE Fees Legit?
Yes, Transaction Processing Excellence Fees from Mastercard are legitimate processing charges.
These are effectively penalties imposed by Mastercard from improper authorization activity on their network.
Just make sure your processor is passing them through to you at the correct amount and not padding your rates to put more profit into their pockets.
Are TPE Fees Negotiable?
No, any card brand fee imposed at the network level is fixed and non-negotiable. These fees are charged to processors and passed through to merchants.
And while you can’t negotiate the cost of TPE fees on your statement, you can negotiate any of your processor-imposed fees and transaction markups. So keep that in mind as you’re trying to cut costs and save money on credit card processing.
How to Avoid Mastercard Transaction Processing Excellence (TPE) Fees
As previously mentioned, TPE fees are penalties for bad behavior. So not only does this mean you’re doing something wrong, but it also means that you’re paying extra processing fees that should be easily avoided on certain transactions.
Here are the most effective ways to avoid those charges:
- Limit authorization retries, and make sure your gateway doesn’t automatically retry the same declined card over and over again.
- Make sure you’re using the correct authorization type correctly, as either final or pre-authorization.
- Stop using undefined authorizations altogether.
- If you authorize a card for an estimated amount (like hotels or service holds), make sure to clear or reverse them within the proper amount of time.
- Avoid running small “test” authorizations to see if a card is valid on CNP transactions.
- Always make sure that the authorization amount and final clearing amount match.
If you’re continuing to get hit with TPE fees, you can ask your processor to provide detailed reports of all TPE-related activity.
Remember, these reports are something that you’re already paying for (Mastercard charges you a detailed reporting fee for each instance). So your process should be able to provide you with the appropriate documentation so you can correct the issue.
Final Thoughts
Mastercard’s Transaction Processing Excellence Program and fees might seem complicated, and I agree that they could present this information in a way that’s a bit more merchant-friendly.
But all you need to understand is that this is Mastercard’s way of enforcing cleaner and more efficient authorization processes through its network.
The biggest problem that merchants have is that when a TPE fee appears on their statement, the damage has already been done, and it’s usually two months after the incident occurs.
So if you’re having trouble with these fees and need help getting them removed from your statement, contact our team here at Merchant Cost Consulting for assistance.
We’ll audit your statements to help you figure out what’s going on, while also looking for other bogus fees and overages being charged by your processor.