Credit Card Processing Fees Explained: Interchange, Assessments and Markup

When a processor quotes you "2.9%," that number is really three separate fees bundled into one. Two of them are set by the card networks and the issuing banks, and no amount of negotiating will move them. The third is where your processor makes its money, and it's the only part you can push on. Knowing the split tells you exactly where to spend your energy.

The three parts of every swipe

Every card transaction divides your fee among three recipients. Know who gets what before you try to lower the total:

• Interchange (roughly 60%–70% of the total): Paid to the bank that issued your customer's card. The networks publish it in fixed rate tables, so it's non-negotiable for every merchant. A rewards or corporate card can cost 1.5%–2.5%, while a regulated debit card runs closer to 0.05% plus $0.22.
• Assessments (about 0.13%–0.15%): Paid to the network itself — Visa, Mastercard, and the rest — for running the rails. They're small, fixed, and identical for every merchant.
• Processor markup (whatever is left): What your processor keeps for moving the transaction and servicing your account. This is the only line you can shop, negotiate, or switch away from.

Why your effective rate is what matters

Add up every fee you paid last month and divide by your total card volume. That figure — your effective rate — is the only number worth comparing across providers. For most small businesses it lands between 2.5% and 3.2%, driven by card mix and average ticket. A card-present shop running mostly debit sits at the low end; an online store taking premium rewards cards sits at the high end.

Be wary of a quote that names only the markup, such as "0.3% plus interchange." It looks cheap beside a flat 2.9%, but the two aren't comparable until you add interchange and assessments back on top. Before switching, ask each processor to analyze a full month of your actual statements, not to hand you a headline rate.

What you can actually control

Interchange and assessments are fixed, but three levers move your bill. First, the pricing model: interchange-plus passes through interchange at cost and shows a fixed markup separately, so it's almost always more transparent — and often cheaper — than flat-rate or tiered pricing, where the markup hides inside the bundle. Second, the markup itself: on interchange-plus, a competitive small-business markup runs about 0.15%–0.50% plus $0.05–$0.10 per transaction, and it's fair to negotiate once you can show real volume.

Third, how you accept cards. Keying a card by hand or taking more rewards cards pushes interchange higher, so favoring tap or chip transactions and keeping your business correctly categorized can save real money over a year. Surcharging and cash-discount programs shift the cost to customers, but state rules on them vary, so confirm what's legal where you operate before switching them on.