Merchant Services Fees Explained

Swipesum details all you need to know about merchant account fees! Find out more on understanding merchant service fees & merchant account rates.

As a merchant, whenever someone swipes, taps or inserts their card, you will be charged a fee based on the cost of the transaction. The amount you are charged is determined by several factors: the merchant account provider who you opened the account with, your bank and the customer’s bank, the company that issued their credit card, and how you accept the card (whether the card present or not). 

Some merchant account providers charge a fixed fee per transaction without charging any additional fees, Others charge a little more than what the credit card issuer would charge directly. Some providers have a tiered pricing system that depends on card type and other variables.

Different Types of Fee Pricing

There are three different types of pricing models that influence what fee you will be charged. 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. This pricing model is the best for small businesses because it’s very transparent.

An Interchange pricing model (usually called Interchange Plus or Cost Plus) is when companies like Visa and MasterCard charge a processing fee for each transaction, called the rate of interchange. Some merchant account providers will mark this up a little and charge you extra, but luckily SwipeSum can help decrease these unnecessary fees for you. 

Finally, Tiered pricing has a more diverse array of cost structures, and it’s the least transparent. Tiered pricing depends on the type of card being used- whether it’s credit, debit, or prepaid- and includes a bunch of different costs that, while they can be beneficial, might not even show up on your statements. It can also depend on how you accepted the card- like if it was present or not, and if it was keyed in or swiped. Overall, this pricing model is the most complicated and the least worth your time, especially if you run a small business.

Universal Merchant Account Fees

No matter the pricing model you use, there are account fees that will always show up on your statements. These fees including the following:

Authorization Fees: There is a fee that is charged every time a card is swiped, even if the card is declined. When any transaction is processed, information is sent back and forth between the acquiring bank (your business account) and the issuing bank (Visa, MasterCard, etc.). 

Transaction Fees: Merchant service providers use transaction fees to describe the per transaction fee they collect. Depending on your plan, it may also include the percentage applied or authorization fee. 

Assessment Fees: These fees are charged by the cardmember associations for various expenses including fraud prevention and network operations, and merchant service providers often pass them along to their customers. 

Rates per transaction are typically around:

Amex: 0.15%

Discover: 0.13%

MasterCard: 0.13%

Visa: 0.14%

It is important to note that for flat rate pricing structures, most of the time the only thing on the statement is the transaction and authorization fee. For example, Stripe is 2.9% + $0.30, and they do not have any other fees.

Scheduled Fees

There are also “flat” merchant account fees, which vary widely by amount. 

Monthly or Annual Fee: Some providers simply charge a percentage of your transactional revenue for a fee, others charge monthly. That depends on who you work with.

Monthly Minimum Fee: If a processor charges on revenue and you don’t reach a certain minimum, they may charge you a fee for not reaching this floor.

Processing Commitment Fee: Like the monthly minimum fee, if you fail to transact a certain number of times per month, you might be charged a processing commitment fee. 

Statement Fee: This fee is charged to cover the printing and mailing costs for credit card statements if you don’t receive them virtually. 

Payment Gateway Fee: Some merchant service providers have their own gateways or third-party services. Your MSP may or may not charge for this.

Situational Merchant Account Fees

These are also known as incidental fees, and are oftentimes included in the fine print of your contract. 

PIN Debit Transaction Fee: This can occur if you accept a transaction that requires PIN verification. 

Address Verification System Fee: This can occur if you have to verify a user’s address for security reasons. It usually costs $0.01 per transaction.

Retrieval Request Fee: If a customer doesn’t recognize a transaction and they flag it, you’ll be charged because the issuing bank will have to collect receipts/evidence to corroborate the transaction. This fee is usually small.

Chargeback Fee: When a customer wants to return something, you’ll be charged this fee, in addition to the fee that accompanies processing a transaction. 

Batch Fee: You can be charged a flat fee for settling a lot of transactions at once. 

Cancellation or Termination Fee: You can be charged a fee for terminating your agreement early. 

Voice Authorization Fee: If you have to make a call in order to authorize a transaction, you can be charged a fee.

PCI Non-Validation Fee: This fee applies when you aren’t PCI-compliant and/or your system isn’t sending along that PCI verification to the participating banks in a transaction.

Application/Setup Fee: Some MSPs charge you to get set up. 

Some unethical merchants will include even more hidden fees than the ones listed above. It’s important to carefully read your terms and sign with someone you trust. We know it should not have to be like this, but since it is, we’re here to help you through finding an MSP that works for you.

Fees That Are Red Flags

“Creative” Processor Fees: Sometimes processors make up their own fees. Ridiculous, we know.

Jacked-Up Assessment Fees: It doesn’t hurt to double check that you’re being charged what the card association (Visa, MasterCard, etc.) actually charges.

Fluctuating Discount Rates: Some companies may inflate their discount rates until you question them. Many companies will say that their costs went up, but they might not tell you if you don’t ask. 

ERF/Integrity Fees: These fees mean you’re doing something wrong when processing a payment, like swiping a chip card. 


In conclusion, the fees you’ve been charged aren’t set in stone

If you’re not being charged a flat-rate, then your fees are up for negotiation with every statement you receive. Sometimes even flat-rate processors will negotiate with you if you have enough volume. 

When you negotiate, your goal is to lower either the credit card processing percentage or lowering the markup on the interchange-plus plan. Some providers may bring both down. SwipeSum not only has years of experience negotiating for you, but we developed our own software called Staitment that can detect any unnecessary fees and save you money. 

One more thing to remember about merchant services fees is that your price may vary based on how you process payments. Your payment gateway is either a point of sales system in the store, a mobile phone reader, or an online portal. Fees vary based on the risk of fraud posed by each type of gateway, with online being the riskiest and therefore the priciest. Pick your merchant services provider carefully – you don’t want unnecessary costs when you can be saving money! 

Izzy Gillman

Izzy is a rising senior at Washington University in St. Louis studying Creative Writing and Psychology. She has been working as a Content Marketing Intern at Swipesum since June of 2020. In her free time, she enjoys journaling, running, and reading memoirs.

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