How card fees work: interchange, network fees and the processor's markup
- Interchange goes to the bank that issued your customer's card. It is the biggest part of the cost, and it varies by card type.
- Network fees go to the card brand, like Visa or Mastercard.
- Markup is what your processor keeps. It is the only part you can negotiate.
Debit cards from large banks have a legal cap on interchange: $0.21 plus 0.05% of the sale, plus $0.01 for fraud prevention. On a $50 debit sale, that is at most $0.245. Credit card interchange has no such federal cap.
Pricing models: flat rate is simple, interchange-plus shows the markup
| Model | How you are charged | Watch for |
|---|---|---|
| Flat rate | One percent plus a per-sale fee on every card | Simple, but you pay the same on cheap debit and costly rewards cards |
| Interchange-plus | Actual interchange and network fees, plus a stated markup | The markup and the monthly fees |
| Tiered | Sales sorted into qualified, mid-qualified and non-qualified rates | Many sales landing in the costly tiers |
True cost: at 2.9% + 30¢, a business taking $30,000 a month pays $12,600 a year
Your effective rate is total fees divided by total card sales. The per-sale fee hits small tickets hardest.
| Sale | Fee | Effective rate |
|---|---|---|
| $20 | $0.88 | 4.4% |
| $50 | $1.75 | 3.5% |
Example: $30,000 a month in card sales from 600 sales of $50. Fees are $870 (2.9%) plus $180 (600 x 30¢) = $1,050 a month, an effective rate of 3.5%, or $12,600 a year. Check your own statement with the processing fee analyzer.
Pros and cons of switching processors: lower fees, if the contract lets you leave
Pros
- A lower markup cuts cost on every sale.
- Interchange-plus pricing lets you see what you are paying for.
Cons
- Early termination fees and equipment leases can wipe out the savings.
- New accounts can face holds or reserves while the processor reviews risk.
When switching makes sense, and when it doesn't
It fits when
- Your effective rate is well above what your card mix should cost.
- Your statement has fees you cannot explain.
Look elsewhere when
- Your exit fee or lease buyout costs more than a year of savings.
- You rely on software tied to your current processor.
Red flags: long equipment leases, exit fees and "zero-fee" pitches
Watch out
Equipment leases you cannot cancel. Ask who owns the lease, how long it runs and the buyout price.
Early termination fees, monthly minimums and PCI non-compliance fees left out of the quote.
A rate that is not locked and can drift after sign-up.
"Zero-fee processing". It means your customers pay the cost through a surcharge on credit cards or a cash discount. It never makes the cost disappear, and surcharges are not allowed everywhere.
Surcharge rules: credit cards only, with notice, and not in every state
- Visa: U.S. merchants cannot surcharge debit or prepaid cards. You must tell your processor in writing at least 30 days before you start, and post the surcharge at the entrance and at checkout.
- Mastercard caps a surcharge at the lower of your processing cost or 4%.
- Massachusetts does not allow surcharges on credit cards; cash discounts are allowed.
- New Jersey: a surcharge may not exceed what it actually costs you to process the card, with clear signs before the sale.
- A cash discount is a discount from the posted card price for paying another way.
See the surcharge and cash discount laws by state. This is general information, not legal advice, as of Oct 20, 2026.