Progressive Payment Solutions

Why Are Credit Card Processing Fees So High?

Understand what is behind credit card processing fees, how much they cost on average, and where you rank in comparison. You can also see how you can reduce high processing fees.

Paying with a credit card offers almost endless advantages: ease of use, simplicity, accounting convenience, fraud protection—we could go on all day. 

But with these advantages comes some downsides, and credit card processing fees are among them.

However, that’s not to say everyone pays the same fees. In fact, the more you learn about processing fees, the more you’ll see how these fees vary from business to business. 

Let’s take a closer look at what payment processing fees are and why they exist to see how you can save your business money.

Why do processing fees exist

You might look at the name “Visa” or “Mastercard” on your credit card and assume any fees related to accepting these payments goes entirely to them.

That’s just part of the story, however. As we outlined in our “How does credit card processing work” article, there’s a whole list of players carrying out a number of processes every time a credit card is swiped. 

These parties need to take a small cut from the fees in order to make this work. That’s why fees exist: to keep the use of credit cards reliable, safe, and secure.

How much can you expect to pay in fees?

What are the average credit card fees

The key word here is “average”, which implies that they do vary. However, there are upper and lower ranges of credit card processing fees that you can expect to see.

  • The upper range is 3.9% of the transaction total 
  • The lower range is 1.5% of the transaction total

These fees are mostly paid to the card networks, which include Visa, Mastercard, Discover, and American Express. But as mentioned earlier, there are other parties at work. We’ll see who they are next.

Who receives the fees

Within seconds of swiping a card, multiple parties have already communicated with each other to make the credit card transaction take place safely, quickly, and securely. 

And as we established earlier, each one takes part of the credit card processing fee to play their part in the process. 

They are:

  • The card network. These are the big brands like Mastercard and AMEX that take a small assessment fee for using their network. This fee ranges from .13%-.14% and is non-negotiable.
  • The card issuer. These are banks that supply the consumer with the card itself, such as Capital One or Chase. By charging an interchange fee, these banks cover their operating costs and fraud protection which is between 1.7%-2% and is also non-negotiable.
  • The payment processor. As the name suggests, these companies are the ones responsible for processing credit cards. In order to cover their operating costs, they charge a varying fee of 1%-2%.

There are exceptions to these fees, however. Debit cards, for example, function differently than credit cards. Read on to learn how.

Credit vs debit

“Debit or credit?” This question gets asked countless times a day by merchants. That’s because they accrue different costs to process. Why? Because they are less risky.

With a debit purchase, the only approval needed is from the customer’s bank: do they have enough money for the purchase, yes or no? It’s a simpler transaction.

This contrasts with a credit purchase, which the card issuer has to first cover themselves while they wait for the customer to reimburse for via their monthly bill—assuming they actually pay their bill, that is. Therefore, there’s more risk involved, thus a higher fee to cover the unpaid transactions from payment delinquency or fraud.

There may be further fees yet to be paid by a consumer. These too answer the question of why credit card processing fees can be high.

Merchant fees

You can see that even though credit card payments are easy, they are by no means simple. And sometimes these complex systems that offer convenient payments cost the merchant extra, which they recoup by passing a small fee onto the customer. 

Here are two sources of processing costs for merchants: 

  1. Equipment

Whether it’s a fully-customizable POS system or a simple, mobile on-the-go reader, one thing’s certain: someone has to pay for the equipment. While the merchant covers that cost up front, they may slowly recoup it by charging a small fee to the consumer.

  1. Software

Online transactions can be among the most expensive due to the high levels of fraud. Thus, Card-Not-Present (CNP) transactions carry a higher payment processing cost—which may be slowly charged back to the consumer via extra fees.

There’s another important source of fees that we touched on earlier: payment processor fees. What separates them from the others?

Payment processor fees

By now, you might feel like everything is out of your control when it comes to lowering high credit card processing fees. And the truth is, a lot of it is.

However, that’s not the case for one key component to this whole system: payment processors. That’s because, unlike the card networks and issuers, the fees payment processors charge are negotiable. 

While you’ll never pay zero to them to process a credit card, you can negotiate down this fee. They can also help you not pay for what you don’t need. To find out more about how to reduce your payment processor fees, take a look at our article on what payment processing fees a business can avoid.

How cash discounting reduces processing fees

One way that smart business owners can reduce high credit card processing fees is by motivating consumers to avoid paying with a credit card altogether.

This is accomplished by a program called “Cash Discounting”. This is a program that enables the merchant to legally display a reduced price for payments made with cash or check. This system is capable of eliminating every one of the fees mentioned above, thus reducing a merchant’s processing fees down to zero.


With all of the parties and systems in place, it’s no wonder that there are credit card processing fees needed to keep everything running efficiently and securely. 

However, high credit card processing fees are avoidable. There are important ways you can save money, such as negotiating a better rate with your payment processor or implementing programs like cash discounting. 

Want to find out how your business can lower your credit card processing fees? A PPS customer agent is ready to answer your questions. Contact us today. You’ll be glad you did.

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