Credit Card Processing Fee Calculator (2022)

Are your credit card processing fees too high? What is a fair rate? Use our calculator tool to see if you are overpaying.

Credit Card Processing Fee Calculator (1)
  • Calculate Your True Processing Rate
  • What Is a Good Effective Rate?
  • What Goes Into Your Effective Processing Rate?
  • How to Lower Processing Rate
  • How to Use Effective Rate to Compare
  • Why Your Processing Rate May Be High

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Your monthly processing statement can be dozens (or even hundreds!) of pages. It's nearly impossible to go through it and decipher just how much your processing really costs.

Our calculator tool will help you determine your true processing rate. We'll help you figure out if it's too high and what you can do to lower it.

Calculate Your True Processing Rate

Your effective processing rate is your rate after adding up all processing costs, including interchange fees, processor markups, and any monthly service fees you're paying. It's the true percentage you're paying for every credit card transaction.

To calculate your effective processing rate, look at your past monthly statement. You will need two numbers:

  • The total processing fee charged
  • Total amount of you processed

Then use our calculator to find your true effective processing rate.

Effective Credit Card Processing Rate Calculator

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If you want to do it yourself, the formula is: (total processing fees / total sales volume) x 100

In other words, the effective rate is how much it costs you to process each credit card sale. For example, if it costs you $450 to process $15,000 worth of card sales, then your effective processing rate is 3%. Each dollar you process costs you 3 cents.

Now you have an idea of what exactly you're paying for each credit card transaction. But what does it mean? Is it good, or high? Let's see.

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What Is a Good Effective Rate?

A fair effective rate is between 2.5% and 3.25% (3.5% at most). If you're paying any more than that, your processor provider markup is likely too high.

In general, physical stores where you swipe credit cards in person will have the lowest effective rate. You want your rate to be on the lower end of that spectrum.

Online stores will have higher rates closer to 3.5%. This is because there's higher risk of fraud when the credit card is not present during transactions.

There are unique situations where your effective rate may be higher than 3.5% and is still considered normal. We'll get into that later.

What Goes Into Your Effective Processing Rate?

To know if your rate is fair, first it's important to understand what it includes. Your effective processing rate includes:

  • Interchange fees: These fees are paid to the card issuing banks and are non-negotiable. The average interchange rates are 1.7% - 2%. They should be the MAJOR BULK of your processing rate, making up 70% - 80%.
  • Assessment fees: These are paid to the card networks and are non-negotiable. The average assessment fee is 0.13% - 0.14%, so it's just a very tiny percentage.
  • Processor markup: This is your merchant account provider's commission for each transaction. This should make up just 10 - 15% of your total processing rate.

    If your effective rate is too high, it's probably because your provider has a high markup. This is where you want to reduce rates.

  • Service fees: This includes any service fees you're paying, like monthly fee, payment gateway fee, PCI compliance fee, statement fee, etc.

    Go through your statement and identify all these types of fees. If they add up to a lot, then you probably have too many "junk" fees. Consider switching to a provider without hidden junk fees.

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How to Lower Processing Rate

If your effective rate is over 3.25%, then you're most likely paying too much.

If you like your current provider, you can try negotiating with them first. Remember that the interchange rates and assessment fees are not negotiable. BUT you can negotiate anything the provider has control over. This includes:

  • The processor's markup
  • Annual or monthly fees
  • Payment gateway / virtual terminal fee
  • Equipment fee / setup costs
  • PCI compliance fee

Reducing any of these fees will help lower your effective processing rate. Ideally, you want your provider fees to be no more than 20% of your entire processing cost.

The key to negotiating is to be a valuable client. The more sales you have, the more negotiation power you have.

It's also important to have a good history. This means always making payments on time and having fewer chargebacks. By being a good client, the provider is more likely to work with you to cut down fees.

Here is the general rule of thumb:

  • If your business has a small average ticket size, negotiate the fixed fee.

    For example, if your processing rate is Interchange + 0.2% + $0.10, getting it down to + 0.2% + $0.05 will save you 5 cents each purchase. That can add up to a lot of savings if you're processing thousands a month.

  • If your business has a large average ticket size, negotiate the percentage markup. For instance, you can cut it down to 0.15% + $0.10.

Also see our 8 ways to lower credit card processing fees for more practical tips.

If you don't have negotiation power right now (or your provider refuses to lower), then consider switching providers. Comparing effective rates will help you to see which one offers the best deal.

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How to Use Effective Rate to Compare

Calculating the effective rate will help you compare among credit card processing providers.

You can't just look at individual fees. One processor may have lower transaction markups but higher service fees. Another one may have higher markups but no miscellaneous fees. It's hard to know without comparing the effective rate.

Take this example. Let's assume you have $10,000 in sales each month, with $50 average ticket size. That's 200 sales total per month.

If you're comparing between these 3 providers, here's what you would get:

Processor 1Processor 2Processor 3
Average interchange rate1.81%1.81%Included
Assessment fee0.13%0.13%Included
Processor markup0.2% + $0.10$0.152.7%
Monthly fee$10$50$0
Payment gateway fee$10$0$0
PCI compliance fee$10$0$0
Total monthly processing cost$264$274$270
Effective rate2.64%2.74%2.7%

In this example, Processor 1 has the lowest overall effective rate. Because each processor has a different pricing structure, you wouldn't know that unless you took everything into account.

Note: We used an average interchange rate of 1.81% in our example. Your rate may differ, though, depending on what type of cards you usually accept.

Why Your Processing Rate May Be High

As mentioned before, there could be good reasons why your effective rate is high. This could be if:

You're a high-risk business
If your business is in the "high-risk" category, it's certain that you will have higher processing rates. In general, you can expect processing rates to be 3.5% - 5%.

High risk businesses can include:

  • Industries with a high risk of chargebacks and fraud
  • Industries with high rate of failure
  • Industries that require a lot of legal regulation
  • If you have a history of bad credit
  • Companies with large transaction amounts

Some common high-risk businesses are: travel companies, auto parts and accessories, financial services, construction, and adult entertainment.

You have a very small average ticket size
If you typically have super-tiny average transactions, then the per-transaction flat fee will drive up your processing costs.

For example, say your rate is Interchange + 0.2% + $0.10. If you're usually processing $10 sales, $0.10 each sale will make a much larger dent for you than for businesses with bigger sales.

You take lots of international payments
If you're an online business that sells your goods or services globally, your rate will be higher. For example, a lot of providers add an additional 1% for international transactions. And if there's a currency conversion fee, then that's another extra charge.

You're a luxury business
Then there's a good chance your customers usually pay with high-end credit cards. For example, if you run a luxury resort, a lot of customers probably pay with a premium travel rewards card.

These types of cards have the highest processing fees because banks use that to make up for the rewards. The overall processing fee can be as high as 4%.

Bottom Line

Knowing your effective processing rate is the first step to determining if you're overpaying or not.

If your effective rate is too high, then consider negotiating with your current merchant account provider or switching. If you're comparing rates between different providers, be sure to compare the overall effective rate instead of individual fees.

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Anna G is a contributing writer at CreditDonkey, a credit card processing comparison and reviews website. Write to Anna G at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

FAQs

How much should I charge for processing fees? ›

Credit card processing fees will typically cost a business 1.5% to 3.5% of each transaction's total. For a sale of $100, that means you could pay anywhere from $1.50 to $3.50 in credit card processing fees. For a small business, these fees can be a significant expense.

How do you calculate processing fees? ›

The first step of calculating your credit card processing fees is finding your effective rate. First, you'll need to pull out your credit card statement. Next, you'll need to take the total amount deducted for processing and divide it by the amount of your total monthly sales that paid using credit cards.

How much are credit card processing fees? ›

According to industry analysts, the average credit card processing fees range from 1.5 percent to 3.5 percent of each transaction, although the final percentage depends on a host of factors. Also, be aware that credit card processing fees are entirely different from the fees consumers pay for carrying a credit card.

What is the average processing fee? ›

Average credit card processing fees: 1.3% to 3.5%
Payment networkAverage credit card processing fees
Visa1.29% + $0.05 to 2.54% + $0.10
Mastercard1.29% + $0.05 to 2.64% + $0.10
Discover1.48% + $0.05 to 2.53% + $0.10
American Express1.58% + $0.10 to 3.45% + $0.10

Can I charge my customers a credit card processing fee? ›

Yes. Merchants can apply varying surcharges by card brand or card product, but not both. For example, a retailer may impose surcharges only on American Express cards or only on certain products, such as Visa Signature cards.

What is a good effective rate for credit card processing? ›

Calculating Your Effective Rate

Effective rates for most merchants should average between 1.70% and 2.1%; depending upon your average ticket, card mix, and monthly volume. If your effective rate exceeds 2% ( or . 02 based on the calculation above) you are likely paying too much!

How are credit card surcharges calculated? ›

Deduct the sales tax fee for the product (if it is a taxable item) based on the tax rate for the state where you purchased the item. If the sales tax rate is 7 percent, the sales tax fee in this example is $0.21 ($3 times . 07). The total amount of the credit card surcharge is $2.00 less $0.21 or $1.79.

How do you offset credit card processing fees? ›

A quick strategy for how to offset credit card processing fees
  1. Lower operating expenses.
  2. Increase sticker prices.
  3. Set a minimum for using a credit card.
  4. Avoid manual entering of credit card info (this leads to higher fees)
  5. Negotiate with your credit card processor.
  6. Find a cheaper payment processor.

How are merchant service fees calculated? ›

A flat-rate pricing model is when the merchant account provider charges you either a flat rate fee for each transaction, a fixed percentage on each transaction, or a mixture of the two each time a card is swiped. The fixed percentage is usually between 1.75% - 3% and includes a per transaction fee.

How much commission do credit card companies charge merchants? ›

Credit card processing fees can typically range from 2.87% to 4.35% of each transaction, not including merchant service provider fees. As a small business owner, these fees can add up and take a bite out of your profits.

How much is square processing fee? ›

The Square standard processing fee is 2.6% + 10¢ for contactless payments, swiped or inserted chip cards, and swiped magstripe cards. Payments that are manually keyed-in, processed using Card on File, or manually entered using Virtual Terminal have a 3.5% + 15¢ fee.

Can a business charge a credit card fee? ›

No prohibition for credit card surcharges and no statute on discounts for different payment methods. Sellers may impose a credit card surcharge of no more than five percent of the purchase price. Surcharges must be clearly posted and communicated before payment.

What is the average credit card processing fee in 2022? ›

The typical fee for credit card processing in 2022 is 1.40% to 4.35% for transactions. The rate is dependent on the type of transaction (in general, debit cards cost less to process than credit cards) and the processing system the merchant chooses. The actual percentage per swipe varies based on a host of factors.

Who sets credit processing fees? ›

Who decides on credit card processing fees? Generally, there are three parties involved in credit card processing — the card issuer, the card network, and the payments processor.

How is convenience fee calculated? ›

How to Calculate Credit Card Convenience Fee?
  1. Add a line item for credit card surcharge to the invoice and add a standard amount to each invoice.
  2. Calculate to offset the 2.9% + $0.30 charge per invoice.
Mar 28, 2019

Are convenience fees legal? ›

Are convenience fees/surcharges illegal? Convenience fees and surcharges are legal, as long as they stay under a certain percentage of the purchase price and aren't assessed in a state that bans them.

Does Visa allow merchants to charge credit card fees? ›

Yes. U.S. merchants may assess a surcharge on credit card purchases that does not exceed the merchant discount rate for the applicable credit card surcharged*. More information can be found at www.visa.com/merchantsurcharging.

How is 3 processing fee calculated? ›

if $100 is to be credited, $100 + 3% fee = final amount. However, $3 is only 2.91% of $103, not 3%: $3 / $103 = 0.0291 so the processing fee would be short by 0.09%.

How are convenience fees calculated? ›

How to Calculate Credit Card Convenience Fee?
  1. Add a line item for credit card surcharge to the invoice and add a standard amount to each invoice.
  2. Calculate to offset the 2.9% + $0.30 charge per invoice.
Mar 28, 2019

How are PayPal processing fees calculated? ›

How do you calculate the “You should ask for” amount? We take your original invoice total and add in the PayPal processing fee (3.49% + $0.49 per transaction). If you choose for your client to cover the cost of this processing fee, this number reflects the total amount you should invoice.

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