We don’t have set rates because our goal is to tailor a solution that will save your organization money no matter your rates. For more information read Credit Card Processing Fees & Rates.
Credit Card Processing Fees & Rates
Rest assured. Credit card processing fees aren't as confusing as you might think. In fact, fees are pretty straight forward once the components of cost are examined individually. In this article we will explain the different aspects that contribute to credit card processing fees to give you a solid understanding of who's charging what and which areas of cost you can control.
After we lay the groundwork, we'll outline exactly how to get the lowest credit card processing rates for your business, keeping in mind that every quote delivered by NMA a complete cost breakdown.
Components of Cost
Regardless of who you use as your credit card processor, you should still understand one very important point, which is:
Not all credit card processing fees are negotiable.
The rate that you pay to process a credit card transaction is a combination of base costs and markups called merchant discount. Think of merchant discount as the retail price of credit card processing, base costs as raw material expenses and the markup as production costs.
Base costs should account for the largest portion of expense (about 75% - 80%) followed by the markup (about 20% - 25%). With that said, we help a lot of organizations here at NMA that are getting abused by their current processor, and their base costs are about equal to the markup they're paying. In cases like this there's a lot of room for savings. Jump down to the Cost Distribution section below to learn more about where your money goes.
Base Credit Card Processing Fees
Base credit card processing fees are made up of interchange and assessments, and they're the same for all processors. No processor can give you a lower rate or a better deal on base costs. For example, First Data (the largest credit card processor) pays the same interchange fees and assessments as a small local broker or bank.
Interchange accounts for the largest portion of credit card processing expense and it's paid to card-issuing banks. Believe it or not, your processor and the card brands (Visa, MasterCard, and Discover) don't see any revenue from interchange.
Here's the short story of interchange…
The stakeholders of Visa, MasterCard and Discover (the banks) get together and decide how much they want to charge when you accept their credit cards.
The banks consider things like processing method (swiped, keyed, e-commerce), card type (rewards, business, consumer), your business type, and a host of other variables to create a long, exhausting list of interchange fees.
Interchange fees are assessed net of refunds and chargebacks, and most are two parts consisting of a percentage and a transaction fee. For example, 1.51% plus $0.10 is the current Visa interchange fee for a swiped consumer credit card.
It's important to note that even though interchange rates don't vary among processors, it is possible to optimize interchange charges to achieve lower costs. Check out these links for more details on interchange rates.
- Visa Interchange Rates & Fees
- MasterCard Interchange Rates & Fees
- Discover Interchange Rates & Fees – Discover does not publish their rates and fees
- American Express Interchange Rates & Fees – Amex does not publish their rates and fees
Visa, MasterCard and Discover make money by charging assessments on every transaction involving one of their credit cards. Like interchange, assessments are exactly the same for all credit card processors and no processor can give you a lower rate or a better deal on assessments.
However, assessments may be charged differently if you have a bundled pricing model. Reason being is that your processor has more control to manipulate pricing on a bundled pricing system.
The assessments for each card brand are listed below along with the details about when they apply. Assessments are changed periodically by the card brands, and this list is updated as changes are announced.
Clarification of Terms: The only true assessment fee from each card brand is the percentage charge applied to volume. The various other fees such as network access, foreign handling, and so forth are charges incurred through processing behavior at the individual transaction level. I refer to card brand charges collectively as assessments because these charges are consistent for all businesses.
- .13% - Debit Assessment - This assessment applies to gross Visa debit transaction volume.
Update: In July 2016, Visa raised its assessment on debit volume from 0.11% to 0.13%.
- .13% - Credit Assessment - This assessment applies to gross Visa credit transaction volume.
Update: In January 2015, Visa raised its assessment on credit volume from 0.11% to 0.13%. The debit volume assessment did not change from 0.11%.
- $0.0195 - Acquirer Processing Fee (APF) - Credit
The Acquirer Processing Fee applies to all U.S.-based credit card authorizations acquired in the U.S. regardless of where the issuer/cardholder is located. If your business is based in the U.S., the acquirer processing fee will apply to all Visa credit card authorizations.
- $0.0155 - Acquirer Processing Fee (APF) - Debit
On April 1, 2012, Visa began charging a separate lower APF of $0.0155 for transactions involving a debit card.
- $0.0195 - Credit Voucher Fee - Credit
In April 2016, Visa began charging a transaction fee for refund transactions involving a credit card. As noted below, a fee also applies to debit refund transactions, but this fee is slightly lower at $0.0155.
- $0.0155 - Credit Voucher Fee - Debit
In April 2016, Visa began charging a transaction fee for refund transactions involving a debit card. As noted above, a fee also applies to credit refund transactions, but this fee is slightly higher at $0.0195.
- $0.0018 - System File Transmission Fee -- Also called a Visa Base II Fee
System File Transmission Fee applies to all Visa transactions and is charged in addition to other transaction-based assessments, such as the Acquirer Processing Fee.
- Transaction Integrity Fee (TIF)
Effective April 13, 2012, Visa will begin charging a Transaction Integrity Fee (TIF) of $0.10 on transactions involving Visa debit and prepaid cards that do not meet CPS requirements.
- Variable - Fixed Acquirer Network Fee (FANF)
Effective April 1, 2012, the FANF is a monthly fee that varies based on processing method, number of locations and volume.
- $0.0047 - Kilobyte (KB) Access Fee
Visa's kilobyte fee is charged on each authorization transaction submitted to Visa's network for settlement.
- $0.09 - Misuse of Authorization Fee
The Misuse of Authorization Fee applies to Visa authorizations that are not followed by a matching clearing transaction (or in the case of a cancelled or timed out authorization, not properly reversed).
On January 1, 2017, Visa raised the Misuse of Authorization fee from $0.045 to $0.09.
- $0.20 - Zero Floor Limit Fee
Visa's Zero Floor Limit applies to cleared transactions that can't be matched to a previously approved or partially-approved authorization. In short, it applies to settlement transactions submitted without a proper authorization.
On January 1, 2017, Visa raised the Zero Floor Limit fee from $0.10 to $0.20.
- $0.025 - Zero Dollar Verification Fee
The Zero Dollar Verification fee applies to Zero Dollar Verification messages (approved and declined). Zero Dollar Verification messages include the verification of the card account number, address verification (through AVS), Card Verification Value 2 (CVV2) and Single Message System (SMS) acquired Account Verification authorizations. The Visa Misuse of Authorization Fee does not apply to these requests. The fee applies when you want to verify a cardholder's information without actually authorizing an amount of their card.
- .80% - International Service Assessment Fee
The International Service Assessment Fee applies to U.S. acquired transactions paid for with a card issued outside of the U.S.
Update: On April 18, 2015, Visa raised the International Service Assessment from 0.40% to 0.80% on transactions settled in U.S. dollars, and to 1.20% on transactions settled in currencies other than U.S. dollars.
- Note: The Cross-Border Assessment Fee (Domestic) and the Acquirer Program Support Fee often both apply to the same transaction bringing the total assessment charge to 1.25%.
- .45% - International Acquirer Fee
The International Acquirer Fee applies under the same circumstances as the International Service Assessment Fee noted above.
- Note: The International Service Assessment Fee and International Acquirer Fee often both apply to the same transaction bringing the total charge to 0.85%.
- $0.001 - Risk Identification fee
Effective April 1, 2012, Visa has eliminated the risk identification fee
- .12% - Assessment (Transactions less than $1,000)
The assessment applies to gross MasterCard transaction volume.
Update: In January 2015, MasterCard increased its assessment by 0.01% on all signature debit and credit transactions with an amount of $1,000 or less from 0.11% t0 0.12%.
- .14% - Acquirer Brand Volume Fee (Transactions greater than $1,000)
This assessment applies to consumer and business credit volume on transactions of $1,000 or greater. This assessment does not apply to signature debt transactions regardless of size.
- .01% - Digital Enablement Fee - Effective January 2015, MasterCard will begin charging a Digital Enablement Fee. This fee will be assessed on MasterCard card-not-present sales volume involving signature debit, consumer credit and commercial credit transactions.
- $0.0195 - Network Access and Brand Usage Fee (NABU)
Update: Effective January 8, 2012 the NABU fee will apply to U.S.-based authorization transactions regardless of whether the transaction is settled. Prior to January 8, 2012 the Network Access and Brand Usage Fee applies to all U.S.-based settled transactions.
Update: Effective June 30, 2013 the NABU fee will be increased to $0.0195, and it will apply to both authorization and refund transactions.
- $15 / $3 - Merchant Location Fee
The Merchant Location Fee is billed annually at a rate of $15 per location. Payment facilitators will incur a Merchant Location Fee of $3 per merchant location. More information about the this fee can be found here: MasterCard Merchant Location Fee.
- $0.0044 - Kilobyte (KB) Access Fee
MasterCard's kilobyte fee is charged on each authorization transaction submitted to MasterCard's network for settlement.
- .0045% - Acquirer License Fee (ALF)
Effective April 2012, MasterCard will begin charging 0.0045% as an Acquirer License Fee assessed on gross MasterCard processing volume. This fee is also referred to by several processors as a License Volume Fee.
- .60% - Cross Border Assessment Fee (Domestic)
The domestic Cross-Border Assessment Fee applies to U.S. acquired transactions paid for with a card issued outside of the U.S. and settled in USD.
Update: On April 18, 2015, MasterCard raised the Cross-Border fee from 0.40% to 0.60%.
- 1.00% - Cross-Border Assessment Fee (Foreign)
The foreign Cross-Border Assessment Fee applies to international transactions settled by U.S.-based merchants in a currency other than USD.
Update: On April 18, 2015, MasterCard raised the Cross-Border fee on non-US currency transactions from 0.80% to 1.00%.
- .85% - Acquirer Program Support Fee (Increased to 0.85% from 0.55% on April 1, 2013)
The Acquirer Program Support Fee applies under the same circumstances as the Cross-Border Assessment Fee (Domestic) noted above.
- $0.01 - AVS Fee (Card-Not-Present)
MasterCard charges a fee each time a merchant accesses the address verification service when processing a transaction. MasterCard's AVS fee is a little higher for card-not-present merchants than it is for card-present merchants. MasterCard's AVS for card-present businesses is listed just below.
- $0.005 - AVS Fee (Card-Present)
- $0.0025 - Card Validation Code Fee Effective October 21, 2013, MasterCard will implement a Card Validation Code 2 (CVC2) transaction fee of $0.0025. This fee
will be charged on transactions acquired in the United States with the CVC2 (three-digit code on the back of the customer's card) included in the transaction for authorization and the CVC2 response value equals ’M’ (Match) or ’N’ (Invalid/did not match). The fee will not apply to Account Status Inquiry (ASI) requests.
- $0.025 - Account Status Inquiry Fee
The account status inquiry fee is charged for transactions where a merchant does actually authorize an amount on a cardholder's account, but instead, validates aspects of her account. Account status inquiry transactions may include requests for address verification service (AVS), card validation code (CVC2), or both. MasterCard implemented the account status inquiry service on June 14, 2011 in place of support for AVS-only transactions.
- $0.055 - Processing Integrity Fee (Card-Present, Card-Not-Present, No reversal)
Effective June 14, 2011 MasterCard began charging acquirers a Processing Integrity Fee of $0.045 to encourage merchants to abide by proper transaction authorization standards. MasterCard increased the Processing Integrity Fee by $0.01 to $0.055 on November 1, 2011. The Processing Integrity Fee will apply in the following instances:
- Card-present: Transactions are not settled, cleared, or reversed within 24 hours of the original authorization transaction/request
- Card-not-present: Transactions are not settled, cleared, or reversed within 72 hours of the original authorization transaction/request
- No reversal: An authorization transaction cannot be matched to a corresponding settlement record after a period of 120 days
- Exempt merchants: Travel and entertainment merchants classified as MCC 3351-3441, 3501-3999, 4411, 7011 and 7512 are exempt from the Processing Integrity Fee
- $0.045 Processing Integrity Fee: Pre-Authorization and Undefined Authorization
MasterCard has updated its definition of an authorization from a single type to three separate types that are pre-auth, undefined-auth, and final auth. As of May 28, 2017, a pre-auth or undefined auth that is not properly cleared or reversed will incur a fee of $0.045.
- 0.25%, $0.04 minimum charge Processing Integrity Fee: Final Authorization
Transactions that do not meet final authorization standards will be assessed a penalty of 0.25% of the transaction amount with a minimum charge of $0.04
The final authorization integrity fee applies to authorizations that are not fully reversed or cleared within 7 calendar days of the authorization date, or to authorizations where the authorized amount does not equal the final clearing amount, or to authorizations where the authorized currency code does not match the clearing currency code.
- $500.00 - Yearly Registration Fee (online e-cigarettes/vaping business)
Effective January 15, 2017, Mastercard will impose a $500 yearly registration fee on ecommerce businesses in the e-cigarettes/vaping industry.
A pre-authorization is an authorization that is not fully reversed or cleared within 30 calendar days of the authorization date.
An undefined authorization is one that is not fully reversed or cleared within 7 calendar days of the authorization date.
- 0.13% - Assessment
The assessment applies to gross Discover card transaction volume.
Note: In April 2016, Discover's assessment increased from 0.11% to 0.13%.
Note: In April 2015, Discover's assessment increased from 0.105% to 0.11%.
- $0.0195 - Data Usage Fee
The Data Usage Fee applies to all U.S.-based authorization transactions.
Note: On April 15, 2016, Discover's Data Usage Fee increased from $0.0185 to $0.0195.
- $0.0025 - Network Authorization Fee
Discover will begin charging a Network Authorization Fee effective October 1, 2013. This fee will apply to all Discover network authorizations and will replace the previously assessed Data Transmission Fee, which applied only to settled Discover transactions. The amount of the Network Authorization Fee and the Data Transmission Fee are the same, but the Network Authorization Fee will apply to a greater number of transactions.
- $0.0025 - Data Transmission Fee (No longer charged)
The Data Transmission Fee applied to all settled Discover transactions, and was replaced by the Network Authorization Fee is October 2013.
- .45% - International Processing Fee
The International Service Fee applies to U.S. acquired transactions paid for with a card issued outside of the U.S.
Update: On April 15, 2016, Discover's International Processing Fee will be increased from .45% to .55%.
- .80% - International Service Fee
The International Service Fee applies under the same circumstances as the International Processing Fee noted above.
Note: On April 15, 2016, Discover's International Service Fee increased from .55% to .80%.
- Note: The International Processing Fee and the International Service Fee often both apply to the same transaction bringing the total charge to 0.95%. This total will be 1.35% on and after April 15, 2016.
The advent of American Express's Amex OptBlue introduced in early 2015 allows us to start listing Amex pricing on this page, as well. Like card brand charges for Visa, MasterCard and Discover, the charges listed below are paid to American Express.
- 0.15% - Assessment / Sponsorship Fee
The assessment applies to gross American Express card volume.
- 0.30% - Card-Not-Present (CNP) Surcharge
The American Express card-not-present surcharge applies to gross card-not-present volume, such as keyed and e-commerce transactions. The CNP surcharge is charged in addition to to the sponsorship fee of 0.15%, making Amex's total assessment on card-not-present volume 0.45%.
- 0.40% - International Assessment
The American Express international assessment applies to gross sales volume involving a card issued outside of the United States.
The markup over interchange and assessments is the only area where you have the ability to negotiate credit card processing costs. Keep in mind that many factors contribute to the markup, so not everything will be negotiable, or it will only be negotiable to a point.
Furthermore, the markup isn't all profit. it's split among all of the organizations that facilitate the processing of your business's transactions such as the acquiring bank, processor, ISO(s), gateway or software provider and others. The markup must cover cost as well as profit for all of these entities.
Markups differ significantly from one processor to the next both by amount, pricing model and the types of fees charged. These inconsistencies are why it's difficult to accurately compare credit card processing on the open market.
Types of Fees
Credit card processing fees are either flat fees, transaction fees, or based on volume. Assessments are listed above, and interchange fees (or at least a portion of them) are published by Visa and MasterCard. The only inconsistent portion of cost is the processor's markup. Unfortunately, the scope of different fees and pricing models utilized in the marketplace makes accurately comparing markups a daunting task.
Trying to list the various fees that individual credit card processors charge is like herding cats. When comparing processing quotes, it's easier (and more useful) to break fees down into three general categories and then compare each offer based on the estimated effective rate.
With interchange plus pricing (the best kind) the volume fee will be a single number such as 0.25%. With tiered pricing the volume fees will be in the form of a qualified, mid-qualified and non-qualified rate, and there may be more than one set of tiers.
Volume-based fees are levied against your business's sales volume. The competitiveness, consistency and transparency of the volume-based markup are dependent on the pricing model that your merchant account utilizes.
Credit card transaction fees often contribute more to total cost than volume fees. So, don't ignore transaction fees to focus just on the volume markup (processor's rate over interchange).
Transaction fees are charged each time your machine or gateway contacts the processor to get or give information, and they are a pre-determined fixed dollar amount regardless of the type or size of the transaction.
Flat fees are consistent regardless of sales or transaction volume. Monthly and annual charges are examples of flat fees.
- Retrieval Fee
- PCI Compliance Fee
- PCI Non-Compliance Fee
With competitive pricing the majority of credit card processing costs are paid to your customers' issuing banks through interchange. The remaining costs are split among a varying number of players such as the acquiring bank, processor, ISO(s), and equipment or software provider. Exactly how many players there are depends on the provider and your business's processing needs.
Here's an example that illustrates how credit card processing costs are distributed. Let's pretend that you're processing a $50 transaction by swiping a customer's (consumer, non-reward) Visa credit card through your credit card machine. For this example, we'll assume that you used NMA to obtain a competitive interchange plus merchant account with rates of 20 basis points and $0.10 per transaction.
1.54% plus $0.10 = $0.87 goes to the issuing bank
0.11% plus $0.0195 to Visa when the transaction is authorized and another $0.003 when it's settled = $0.07 goes to Visa
.20% plus $0.10 to the processor = $0.20 goes to the processor
You are left with:
$50 - $0.87 - $0.07 - $0.20 = $48.86 (2.28% overall effective rate)
Getting the Lowest Rates
Now that you know where processing fees come from, you know that the best credit card processor is the one that offers you the lowest markup over interchange and assessments. As we outline in this article, you shouldn't be shopping for the lowest rates. Instead, you should be shopping for the lowest overall markup over base cost. Furthermore, you want to look at the whole picture and consider the effective rate. Don't just focus on the interchange markup or another single fee.
Interchange and assessments account for the majority of processing expense, and they're not negotiable. Separate costs into interchange, assessments and markups when shopping for a merchant account and focus solely on getting the lowest markup.
Of course, you can make your life easier by letting NMA review your statements and give you an interchange plus quote.
Simplicity is Expensive
Simplicity is expensive when it comes to credit card processing. Companies like Square and PayPal Here are making nice profits by offering flat rate pricing to organizations that don't spend the time to learn how processing fees really work.
For most organizations, credit card processing fees are second only to rental and real estate expense. All business people and entrepreneurs are busy, but the time invested in learning about credit card processing fees will pay off in spades.
Simple and competitive are two very different things, and for most businesses, credit card processing fees are either one or the other.