Who Pays Merchant Fees?

Fees are never enjoyable to think about let alone pay but the fact is they’re just part of the cost of doing business. After all, when you take payment for a product or service, whether you’re online or at a brick-and-mortar location.

Fees are never enjoyable to think about let alone pay but the fact is they’re just part of the cost of doing business. After all, when you take payment for a product or service, whether you’re online or at a brick-and-mortar location, you are using a whole network of service providers that help get money from A to B and, fact must be faced, they have to get paid.

There are lots of things you can do to reduce your fees however. Before you work on reducing your fees you should understand who pays them and your merchant fees are no different. The simple answer is…well…you do. But there’s more to it. Let’s take a quick look at what kinds of fees we’re talking about and then dive into who pays them, what they cover and what you can do to pay as little as possible.

What is a merchant fee?

Merchant fees are a broad term that encompasses a whole host of different fees that you might be subject to for accepting card payments. Generally speaking, these are charged by your merchant account provider and go to cover the whole lifecycle of the payment from card swipe to cash in your account. Often called swipe fees, merchant account fees help offset the cost of accepting and moving money around the financial system. Broadly, there are a few you should know about.

Authorization Fees

Simple enough, this is a fee that is charged every time your customer’s card is swiped, whether it's a credit or debit card, and if it’s accepted or declined. This is just a charge to start the process.

Assessment Fees

These fees are charged by the cardmember association featured on the customer’s credit card (i.e. Visa, Mastercard, Amex, etc.) and vary from between .13-.15% of the transaction total. They go to cover fraud prevention and maintaining the network.

Transaction Fees

These are the fees that you have some control over. This is the fee that you pay to the merchant account provider for their service. This might come in many forms. Some plans have fixed rates per transaction while others are tiered or sliding scale. It all depends on the kind of business you do.

It’s important to understand that this is in no way an exhaustive list of the fees merchants face. There are statement fees, monthly minimums, payment gateway, address verification fees…the list goes on. The above are simply the fees that 99.9% of merchants will face in some fashion each and every time their customers swipe their cards.

So I have to pay them?

Yes and no. You have to pay them in the sense that you’re the one flipping the bill. You’ll see a line item in your merchant account or on your monthly statements noting how much in fees you’ve paid over the statement period. Your merchant account holder - the bank you use - pays these fees for you to the vendors in question and then they spin that cost around to you in the form of transaction fees. 

There are, however, two main ways you can bypass this fee and pass the cost along to the consumer.

Building It In

We hope you’re doing this already. When you’re pricing your products or services you want to make sure that you’ve accounted for all the costs associated with it. This includes acquisition, in the case of products, or the cost of your time when it comes to services. It also includes any fees that you might have to pay as a result of the transaction, including merchant fees. 


You can offset these merchant fees by adding a surcharge on any purchases that are paid for with a credit card. Some stats restrict surcharges and in almost all cases, the surcharge must be prominently displayed both in the storefront and on the receipt. Visa and Mastercard even require business owners to register their surcharges with them.

It’s important to note that a surcharge cannot be charged on debit card purchases.

Another way you can recoup some of the fees you end up paying your merchant account provider is by either requiring a minimum purchase amount for the use of a credit card or offering an incentive to use cash. In the former case, you might require a $10 minimum purchase to use a credit card - this helps ensure you’re not paying fees for a small purchase of just a few dollars. In the latter case, you can offer a discount for cash payments.

Finally, if you really want to do away with fees, you can decide against accepting credit cards at all. This may seem attractive, but in reality, most merchant service fees are about 2% of the total. You’ll be giving away a lot of business by not accepting credit cards.

Seems complicated

It is. There are lots of fees out there that help keep the financial system running smoothly. Many of them are necessary and ultimately, what you get out of a sale far outweighs the cost of the fee. So how can you navigate this mess?

First, understand exactly what you’re paying. If you’ve got questions, contact the company to which you’re paying the fee. You should never be in a position where you’re paying for something you don’t understand.

Second, create a running list of the fees you do pay, and how much. Ideally, your accounting software can help you do this, but you should understand what and how much you pay so you can notice if things change.

Finally, consider getting a little bit of help. Swipesum partners with business owners nationwide to quickly identify fees and surcharges and help you reduce them. We can also help you find the best vendors for your business and provide crucial chargeback assistance and security help to ensure that you can focus all of your attention on your business.

The title would be Who pays merchant fees? and it would need to link to several existing Swipesum articles, including https://www.swipesum.com/insights/merchant-services-fees-explained

Michael Seaman

Michael Seaman

Michael is the co-founder and CEO of Swipesum. A veteran of the payments industry, Michael and his brother Stephen have led Swipesum since its inception in 2016. In his free time, Michael enjoyes time with his three children.

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