Whether you’re shopping for a merchant account or reviewing your current payment processing fees, it’s natural to wonder how much merchant account fees cost (and how much they should cost).
And you’ve probably realized by now that there’s no straightforward answer to this question.
That’s because merchant account fees aren’t a single fixed charge. They’re a collection of different costs that vary based on your processor, business type, and how you accept payments.
Most businesses pay somewhere between 1.5% to 3.5% in processing fees. But that range doesn’t really tell the full story. Understanding what you’re paying for, where the money is going, and how much is actually going to your merchant account provider can help you avoid overpaying and negotiate better rates.
Does a Merchant Account Cost Money?
Yes, every merchant account comes with a cost.
But it’s not a fixed $100 or $1,000 price. Instead, the cost of a merchant account should largely be based on a percentage of your total processing volume.
The problem is that most merchant account providers structure their fees in a way that makes it incredibly difficult to understand exactly what you’re being charged.
Some fees are legitimate costs that are passed through from the card networks. Others are markups designed to increase the processor’s profit margins. And some are simply unnecessary junk fees because merchants don’t know to question them.
Three Components of Merchant Account Fees
Your total merchant account fees are made up of three categories:
- Interchange
- Assessments
- Processor Markup
Only one of these components goes directly to your merchant account provider (and this should be the smallest amount).
Interchange Fees
The largest component of your processing costs is the interchange fee. These fees are set by the card networks and paid to the issuing bank.
There are thousands of different interchange categories. Every time a credit or debit card is accepted, the interchange category is determined by:
- Card Network: Visa, Mastercard, American Express, and Discover all have their own interchange schedules.
- Card Type: Debit cards have lower interchange rates than credit cards. Rewards cards and corporate cards have higher rates than standard credit cards.
- Transaction Method: Card-present transactions (swipe, dip, tap) cost less than card-not-present transactions (online or manually keyed).
- Business Category: Your MCC code affects your interchange rates, as there are different interchange categories for retail, supermarket, travel, restaurant, etc.
- Transaction Size: Small-ticket transactions can have different interchange rates than large-ticket.
- Total Volume: Some businesses and industries have interchange criteria based on total annual volume through a certain card network.
- Card Data: B2B transactions processed with Level 2 or Level 3 card data can qualify for lower interchange rates, and lack of data can downgrade a transaction to the highest possible interchange rate.
These rates are non-negotiable. They are the exact same for every processor, and no merchant account provider has access to unique or different interchange fees.
Interchange fees typically range from 0.05% + $0.21 per transaction for regulated debit cards to over 3% for premium rewards or downgraded transactions.
Assessment Fees
On top of interchange, the card networks charge assessment fees to fund their operations, fraud prevention programs, and payment infrastructure. Assessments are relatively small compared to interchange costs and processor markup.
- Visa: Roughly 0.14% of transaction volume.
- Mastercard: Roughly 0.13% of transaction volume.
- Discover: Roughly 0.13% of transaction volume.
- American Express: Varies, but typically higher (Amex acts as the card network and issuing bank).
These card brand fees are all fixed and non-negotiable.
Technically, assessments are charged directly to the processor. And processors often pass these fees through to merchants, and they’re supposed to do so without a markup.
Some processors unethically ”pad” assessment fees, meaning the charges are passed through at an inflated rate and itemized as though the entire charge is going to the network (even though the merchant account provider is pocketing the difference).
Processor Markup
This is the only component of payment processing that separates one merchant account provider from another. It’s how much your processor charges you on top of the interchange rates and assessments.
Here’s where you have all the room to negotiate. But it’s also where most businesses overpay without realizing it.
Processor markups can be structured in several different ways. And understanding the difference is critical to ensure you’re getting fair pricing. The way your processor collects their markup from your account is mostly based on your pricing model:
Interchange-Plus Pricing (Best and Most Transparent): You pay the interchange rate plus a predetermined markup to your processor (like 0.10% + $0.05 per transaction).
Flat-Rate Pricing (Simple but Expensive): Flat-rate processors charge something like 2.9% + $0.30 for all transactions, but there’s a ton of markup built into that number to guarantee you’re being overcharged.
Tiered Pricing (Confusing and Expensive): Transactions are categorized into qualified, mid-qualified, and non-qualified tiers with different rates for each. But the processor determines the tier, and they have every incentive to downgrade your transactions to the higher-cost tiers.
How Processors Inflate Your Costs Beyond the Basics
Regardless of your standard per-transaction markups being paid to your processor, every merchant account provider applies different billing tactics to ensure you pay even more.
Certain processors are more creative and egregious than others.
And while some of these fees are legitimate costs that are tied to a specific service you’re getting, many of these costs exist only to boost your processor’s bottom line (at your expense).
Monthly and Recurring Fees
We find dozens of potential monthly fees on merchant processing statements. Some are small (anywhere from $5 to $15 per month), and others cost hundreds.
Examples include:
- Monthly minimum fees
- Statement fees
- PCI compliance fees
- Gateway fees
- Account maintenance fees
- Location fees
Equipment Costs and Leasing Fees
Any business that accepts card payments in person needs some type of credit card terminal or point-of-sale system. You can either buy these outright or lease them from your processor.
Buying is always the smarter choice because processors make outrageous profits on leases.
A terminal that costs $300 to purchase outright can be leased for $60 per month on a 48-month contract, meaning you’re paying almost $3,000 for something that could have been bought for $300.
Even worse, you don’t even own the equipment after the lease is up. You have to return it or continue leasing.
Other Miscellaneous Fees
Beyond the basic per-transaction fee you’re paying, it’s common for processors to charge you certain fees in specific circumstances.
- Batch fees
- Chargeback fees
- Authorization fees
- Address verification fees
- Voice authorization fees
- ACH/Check fees
- Technology fees
- Account setup fees
- Application Fees
- Early termination fees
Some of these are legitimate and based on a service that’s actually being provided. Others, like account setup or early termination charges, can easily be waived.
But even the legitimate rates can vary widely between providers, and many processors charge way more than they should be for a simple service.
Junk Fees
Here’s what really separates one processor from another. These are the fees that are completely made up, not tied to service, and add zero benefit to your account.
They exist only so your processor can charge you more money.
There are dozens of different junk fees out there, and processors continue to get more clever with these names. Examples include:
- Risk Assessment Fees
- Infrastructure Upgrade Fees
- Annual Fees
- Settlement Funding Fees
- Global VPN Fees
- Transaction Network Access Fees
The list goes on and on.
All of these sound legit, but they’re completely bogus. They are phantom services invented by your processor designed to extract more money from your merchant account.
And we’re not just talking about an extra $50 or $100 here. We’ve audited merchant accounts where these fees total anywhere from $10,000 to $20,000 in bogus fees every month.
The worst part about these fees is that they’re so incredibly deceptive.
It’s one thing if your processor gets you to sign a contract that charges you a higher-than-normal rate per transaction. That’s not ideal, but at least it’s transparent.
With junk fees, they are just hoping you don’t question the charge and assume it’s legitimate. Many of these junk fees are even buried between line items of legitimate card network assessments. So it’s easy for the untrained eye to assume that they’re legit.
What’s a Fair Merchant Account Fee?
Your effective rate (total fees divided by total volume) should be 2.5% or less. That’s a good baseline to gauge how much you should actually pay. However:
- High-volume businesses should pay less.
- Smaller, new, or low-volume businesses may pay more.
- Integrated processing costs a bit more (40-50 basis point markup).
- Retail businesses and in-person transactions should be less.
- Ecommerce businesses pay more because they process card-not-present transactions.
- High-risk industries pay more.
- Processing lots of debit cards should significantly lower your costs.
The reason why you need to look at your effective rate is because it includes everything: interchange, assessment, per-transaction processor markups, other random fees, etc.
So even if your processor claims you’re getting a “good deal” because you’re only paying 0.05% over interchange on every transaction, you can quickly figure out there’s a problem if your effective rate is something like 4%.
Final Thoughts
There’s no single merchant account fee.
We have clients paying $35,000 per month in merchant account fees, which can actually be a decent deal if their monthly volume is $1,500,000 (2.33% effective). Other merchants may pay as little as $2,000 per month in merchant fees, but they’re getting ripped off because they only processed $25,000 (8% effective).
To make sure you’re getting a fair price, focus on what you can actually control:
- Choose the right pricing model (the answer here is always interchange plus).
- Negotiate everything that’s actually negotiable (everything other than interchange and assessments).
- Ask your processor to remove all of the one-off, bogus monthly, and other junk fees from your account.
If you’re having trouble identifying these costs or they just won’t budge, switching merchant services providers is NOT the answer. This can actually be an expensive mistake.
Instead, reach out to a professional for assistance. Our team at MCC can audit your statements and identify savings opportunities before negotiating better terms directly with your current provider.
So you can save money on merchant account fees without changing anything.