Every time a customer pays by card, the payment passes through several companies, and each takes a small cut. Understanding who gets what is the first step to lowering your costs.
1. Interchange (paid to the card-issuing bank)
Interchange is the largest part of the fee. It's set by the card networks (Visa, Mastercard, Discover) and paid to the bank that issued your customer's card. Rates vary by card type (debit, rewards, business), how the card is accepted (in person vs. online) and your industry. Interchange is the same no matter which processor you use.
2. Network assessments (paid to Visa, Mastercard, etc.)
The card networks charge a small fee on every transaction for using their network. Like interchange, these are non-negotiable pass-through costs.
3. Processor markup (the only part you can negotiate)
This is what your processor keeps for moving the money, providing support and managing risk. It's where providers differ, and where you can save.
How pricing models package these costs
- Flat rate (Stripe, Square, PayPal): one rate covers everything. Simple, but you overpay on cheaper cards.
- Interchange-plus (Helcim and many merchant accounts): you pay the actual interchange plus a fixed markup. Usually cheapest as you grow.
- Tiered: transactions are sorted into qualified, mid-qualified and non-qualified buckets. Often the hardest to compare.
Read more in Flat-Rate vs. Interchange-Plus vs. Tiered Pricing, or estimate your costs with the processing fee calculator.