Every time a customer makes a purchase with a credit card, a small slice of that sale is carved out in processing rates, typically 1.5% to 3.5%.
Imagine selling a $100 item: your customer swipes, and behind the scenes, about $1.50 to $3.50 is divided among banks, networks, and processors before the rest reaches your business’s bank account. If your business does $100,000 a month in credit card transactions, it will cost your business about $1,500 to $3,500 in fees, on average.
For small businesses, these seemingly small fees add up. In fact, U.S. merchants paid $224 billion in credit card processing fees alone in 2023, according to The Merchants Payments Coalition. That’s why understanding how these fees work—and how to reduce them—is critical to protecting your margins.
As a leading credit card processor, Aurora Payments offers a transparent, low-cost pricing model designed to help businesses understand their credit card processing fees and learn how to keep more of what they earn.
What Are Credit Card Processing Fees?
Credit card processing fees—or processing rates—are the cost merchants pay to accept credit and debit card payments for goods and services.
These fees are split among multiple players in the payment chain:
- The card-issuing bank (like Citi, Chase, or Bank of America)
- The card network (like Visa or Mastercard)
- The payment processor (like Square, Stripe, or Aurora Payments)
Rates typically range from 1.5% to 3.5% of each transaction, depending on the type of card used and method of payment.
How Processing Rates Affect High-Risk Businesses
For businesses in high-risk industries—such as CBD and firearms—processing rates usually skew higher. That’s because these sectors face elevated risks of fraud, chargebacks, or legal restrictions, which increase the cost of underwriting and compliance for processors. As a result, high-risk merchants may see rates closer to 4% to 6%, and they often have fewer processing partners to choose from.
How Processing Rates Affect B2B Transactions
Business-to-business (B2B) transactions often involve high-ticket payments, like invoices for equipment, materials, or services. These transactions are eligible for Level 2 or Level 3 processing, which allows for more detailed transaction data to be submitted (like invoice numbers, tax amounts, and shipping info).
If this enhanced data is passed correctly, the interchange fees charged by card networks can be significantly reduced.
How Processing Rates Affects Seasonal and Nonprofit Businesses
Nonprofits and seasonal businesses often have irregular or low-volume payment activity, which makes flat monthly fees or high minimums costly.
Many processors charge monthly minimums, PCI non-compliance fees, or other surcharges that can eat into limited revenue during off-seasons or donation lulls.
Who Gets a Cut of Each Transaction?
Every time your customer swipes, dips, or taps their card, the multiple entities in the payment chain take a slice of the sale. Here’s where that processing fee goes:
Issuer Bank – Interchange Fee
The card-issuing bank (like Citi, Chase, or Wells Fargo) earns the largest portion of the fee. This interchange fee compensates them for assuming credit risk, fraud protection, and handling the transaction.
Card Network – Assessment Fee
Networks like Visa, Mastercard, Discover, and American Express charge assessment fees for access to their infrastructure. These payment processing fees support the secure, global systems that allow card transactions to occur in seconds.
Payment Processor – Markup or Service Fee
Companies like Aurora Payments, Square, or Stripe charge a markup to manage transaction logistics, deposit funds into your merchant account, and offer tools like reporting, customer support, or POS integration.
Payment Gateway (if separate) – Gateway Fee
In online transactions, a payment gateway (like Authorize.net) securely transmits the customer’s payment information to the processor. Sometimes built into the processor’s platform, this may also be a separate fee if using a third-party gateway.
Understanding who gets what helps demystify the true cost of accepting credit cards and gives you leverage when comparing providers.
Types of Merchant Processing Fees You Might See
Credit card fees go beyond the standard percentage cut per transaction. Here’s a breakdown of the most common fees you might encounter as a business owner:
Interchange Fees
The typical range for interchange fees is 1.15% to 3.25% + $0.10 per transaction.
Paid to the issuing bank, these fees vary by:
- Card type – A standard debit or credit card with no rewards programs will often have lower fees compared to a credit card with a generous rewards program.
- Transaction method – A card that is swiped in person often has lower fees compared to a card manually entered for an online transaction.
- Industry – High-risk industries will typically have higher fees than low-risk ones.
Assessment Fees
The typical range for assessment fees is 0.13% to 0.15% per transaction.
These are paid to the card networks (such as Visa or Mastercard) and remain fairly consistent across most transactions.
Processor Markup Fees
Processor markup fees will vary based on your pricing model. Common options include:
- Flat-rate pricing
- Tiered pricing
- Interchange-plus
We’ll explore these options more in depth below.
Gateway Fees
Gateway fees are usually $10–$25/month or a per-transaction charge (e.g., $0.05–$0.10)
If your payment processor doesn’t include a gateway, you may pay separately for services like Authorize.net or NMI to handle secure online transactions.
PCI Compliance Fees
PCI compliance fees will run you about $75–$150 annually (or spread out across monthly installments).
These fees are charged to cover costs of maintaining PCI DSS (Payment Card Industry Data Security Standard) compliance, which helps protect customer card data.
Monthly Minimums
Some providers require you to process a minimum volume (for example, $25–$50 in fees per month), or you’ll be
Chargeback or Retrieval Fees
Chargeback or retrieval fees can cost $15–$100 per occurrence.
These processing rates are charged when a customer disputes a transaction. Some processors also charge for retrieval requests, even if the dispute is resolved in your favor.
Statement or Account Fees
These fees are monthly administrative or “junk” fees (usually $5–$15) for account maintenance or printed statements. These are often negotiable or avoidable with the right provider.
Common Pricing Models Explained
Credit card processing fees are structured in different ways depending on the payment provider. Here are the three most common pricing models you’ll encounter, along with their pros and cons.
Flat-Rate Pricing
Flat-rate pricing is typically offered by aggregators like Square and PayPal, companies that are not considered true credit card processors. An example of a common processing rate is 2.6% + $0.10 per transaction. This is the most expensive pricing structure and while it can be convenient for certain merchants, its processing rates can quickly affect profit margins in high-volume businesses.
Pros and cons of the flat-rate pricing model:
- Pros:
- It’s easy to understand.
- Costs are predictable.
- It’s suitable for small or low-volume businesses.
- Cons:
- It’s often more expensive overall.
- You may end up paying more than necessary for lower-cost transactions.
Tiered Pricing
Tiered pricing divides transactions into three categories based on card type and how the payment is processed.
Transactions are categorized as:
- Qualified — Debit or basic credit cards
- Mid-Qualified — Cards that are entered manually and cards with some rewards, such as the Chase Sapphire Preferred® Card
- Non-Qualified — Premium rewards or corporate cards, such as the American Express Platinum card
In tiered pricing, interchange rates (the largest portion of credit card fees that go to the issuing bank) are the lowest for Qualified transactions and the highest for Non-qualified transactions. This structure also includes a percentage-based fee, but the fee is based on the type of card presented for payment and varies based upon the card. It’s less expensive than flat-rate pricing because you pay less for qualified transactions. As an example, a non-rewards Visa card might have an interchange rate of 1.56% and that’s what you would pay instead of flat-rate price of 2.6%.
Pros and cons of the tiered pricing model:
- Pros:
- It can be more nuanced than flat-rate pricing.
- It involves potentially lower credit card fees for qualified transactions.
- Cons:
- It can be hard to audit or predict.
- It lacks transparency—you often don’t know which tier a transaction falls into until after the fact.
Interchange-Plus Pricing (Aurora’s Model)
This model charges you the actual interchange fee (set by the card networks) plus a fixed markup from the processor. For example, you might pay 1.80% + $0.10, depending on the card and how it’s used.
Pros and cons of the interchange-plus pricing model:
- Pros:
- It’s transparent so you see exactly what goes to the bank and what goes to the processor.
- It scales well with business growth.
- It is typically the most cost-effective model.
- Cons:
- It’s slightly more complex to understand at first.
- Your monthly statements may include more line items.
We know that interchange rates vary based on card brand (Visa, Mastercard, etc.), card type (rewards vs. non-rewards), and method of entry (in-person vs. online). With the interchange-plus pricing structure, you always pay the true underlying rate plus a consistent, clearly defined markup that goes to the processor. You will enjoy the lowest interchange rate based upon the card presented to you with this pricing method and that makes it the best for merchants.
Aurora Payments uses the interchange-plus pricing model, but also offers:
- Cash discounting – lets you offset processing fees by offering a lower price to customers who pay with cash.
- Dual pricing – displays both cash and card prices, giving customers a clear choice at checkout.
- Surcharging – adds a small fee to credit card payments to help recoup processing costs.
Consider Your Total Cost of Ownership (TCO) When Choosing a Pricing Model
Credit card processing rates aren’t just a transactional expense—they directly impact your total cost of ownership over time. A seemingly small difference in credit card processing fees (say, 2.9% vs. 2.3%) can translate into thousands of dollars annually, especially for businesses with high sales volume. Hidden fees, inflated markups, and unnecessary equipment leases can quietly erode margins month after month. Choosing a transparent, cost-efficient pricing model—like interchange-plus—can significantly lower your long-term expenses and improve profitability without changing how you do business.
How to Lower Your Credit Card Processing Rates
Credit card processing fees can add up quickly. But with the right strategies, you can reduce what you pay without sacrificing service. Here are a few practical ways to lower your costs:
- Choose interchange-plus pricing – This transparent model separates the true card network costs from your processor’s markup, so you know exactly where your money is going and can often save more in the long run.
- Negotiate processor markups or flat fees – Many payment processors have wiggle room in their pricing. Ask about lowering the per-transaction fee or monthly service charges, especially if your business has steady volume.
- Avoid equipment leasing; buy instead – Leasing card terminals may sound convenient, but the long-term cost is often much higher. You could pay as much as five times the cost of a terminal if you lease. Purchasing equipment outright usually pays off after just a few months.
- Ensure PCI compliance to avoid extra charges – Being PCI compliant helps protect your customers’ data and prevents costly non-compliance fees that can be tacked on monthly.
- Monitor for junk fees or hidden line items – Watch for vague charges labeled as “regulatory fees,” “service add-ons,” or “batch fees” on your statement. They might be unnecessary or inflated.
- Review monthly statements carefully — Take time to understand your monthly breakdown. If something looks off or unclear, ask your provider to explain or justify the charges.
Small changes can lead to major savings, especially as your business scales. Aurora Payments helps merchants stay on top of processing rate costs with transparent pricing and proactive support.
Email us at sales@risewithaurora.com.
