Taking Card Payments: Comparing Processor Fees
Payment processing pricing is deliberately hard to compare, and businesses frequently choose on a headline percentage that bears little relation to what they actually pay.
What makes up the cost
Interchange is paid to the card-issuing bank and varies by card type. Consumer debit is cheapest; commercial and premium rewards cards are considerably more expensive.
Scheme fees go to the card networks.
The processor's margin sits on top of both.
Interchange-plus pricing shows these separately and is the most transparent model. Blended pricing quotes a single rate that averages across card types, which is simpler and usually more expensive for businesses taking many debit transactions.
Where the real cost hides
Fixed per-transaction fees matter enormously for low average transaction values. A small fixed fee on a modest sale can exceed the percentage component.
Monthly terminal rental, gateway fees, PCI compliance charges and minimum monthly service charges all add to the effective rate and rarely feature in sales conversations.
Non-qualified or downgrade fees apply when transactions do not meet certain criteria — keyed rather than swiped, missing data, delayed settlement — and can be a substantial share of the bill.
Chargeback fees are charged per dispute regardless of outcome, and international or currency conversion fees apply on foreign cards.
The only comparison worth making
Take a real month's statement, total everything the processor charged, and divide by total card turnover. That effective rate is comparable between providers; nothing on a rate card is.
When getting quotes, provide your actual transaction mix — volume, average value, card types, online versus in person — and ask for a projected total cost rather than a rate.
Settlement timing and reserves
How quickly funds reach your account affects cashflow materially. Next-day settlement is common; some providers hold longer, particularly for newer accounts.
Rolling reserves, where a percentage of takings is held back, are applied to higher-risk sectors and can be a genuine cashflow problem. Ask whether one applies before signing.
Contract terms
Terminal leases are frequently separate agreements with long terms and expensive early exit, and they are sold alongside processing without much emphasis. Buying a terminal outright is often cheaper over three years.
Check the processing agreement term, notice period and any early termination fee. Long tie-ins are common and negotiable.
Practical steps
Review annually. Rates in this market move and providers rarely reduce prices unprompted.
Consider surcharging or minimum spends where legally permitted, noting that rules on card surcharging vary considerably by jurisdiction and some prohibit it.
For very small volumes, flat-rate providers are simpler and often cheaper once monthly fees are counted. For higher volumes, interchange-plus almost always wins.
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