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March 8, 2023

Are Credit Card Fees a Necessary Evil? How Your Business Can Lower Credit Card Processing Fees

A business owner celebrating lower credit card processing fees

Are Credit Card Fees a Necessary Evil? How Your Business Can Lower Credit Card Processing Fees

As a business owner, accepting credit cards is a must. Credit card processing fees are part of the cost of doing business, but why are they so expensive?  It’s undeniable that lower credit card processing fees provide greater profits. Below, we break down how branded cards can help reduce the strain of fees on your business.

Can You Lower Credit Card Processing Fees?

Credit card processing fees range between 1.5 to 3.5 percent of each transaction. Here’s a breakdown of the types of credit card processing fees:

  • Flat fees: a set amount paid monthly to the merchant account provider.
  • Transaction fees: paid for every purchase a customer makes with a credit card.
  • Interchange fees: fixed and non-negotiable, charged to e-commerce merchant accounts by credit card networks for credit card processing. Note that banks issuing the credit card receive these fees. They average 1.81 percent for a credit card and 0.3 percent for a debit card.
  • Assessment fees: go to the card brands and are non-negotiable.
  • Markup fees: go to the credit card processor and are negotiable.

An e-commerce business or an enterprise accepting credit cards over the phone will also require a payment gateway. The payment gateway connects the online retailer to the payment processor and sends the transaction request.

Factors Influencing Processing Fees  

Credit card processing fees are not necessarily uniform. Factors influencing processing fees include the type of business and the size of the transaction. For instance, merchants considered high risk–including advertisers, alcoholic beverage sales, credit repair and monitoring, nutrition supplements, and the travel industry–fall into this classification because they experience a higher incidence of fraud and chargebacks.

Standard credit card processors do not service these industries, leaving them to high-risk merchant account providers charging high fees.

Business size also matters. Those with a higher credit card processing volume should pay lower fees than those with fewer monthly transactions. Businesses with 300,000 monthly credit card transactions pay less than smaller enterprises with 40,000 in monthly transactions.

Fees also vary by card type. A high-end reward credit card will charge a higher fee than a standard, no-rewards card. For example, American Express charges higher fees because it serves as both a credit card issuer and a payment network that gives rewards back to customers.

How Credit Card Processing Works

E-commerce payment processing can begin once a business owner establishes a payment gateway or a Point-of-Sale terminal.

The payment processor processes and executes the payment. Funds are taken from the customer and deposited in the merchant account.

E-commerce payments are deposited in the merchant account. Your business does not require an e-commerce merchant account but you could benefit from the added security a merchant account supplies.

If your business has a brick-and-mortar element, your merchant account also provides you with Point-of-Sale capability.  

How Credit Card Processing Fees Affect Business

At the higher end of credit card processing fees, for every $100 in sales, you are paying $3.50 in processing fees. Of course, you price your goods and services with these fees in mind.

Some businesses opt to use a credit card surcharge for customers using this payment option. While legal in many states, this surcharge is not popular with customers and they may choose to conduct their business elsewhere.

How to Lower Credit Card Processing Fees

One of the best ways to lower credit card processing fees is by using closed-loop, branded cards. Traditional payment types charge over 3 percent in credit card fees. Compare that to a closed-loop, branded card fee of just 0.5 percent. Rather than three dollars out of every hundred dollars spent going to credit card processing, you pay just 50 cents on branded card fees. The savings add up quickly!

In addition to considerable savings on credit card processing fees, a branded card helps build customer loyalty and engagement.

Lower Your Card Fees with Tandym

At Tandym, we can lower your credit card processing fees to 0.5% while rewarding your best customers. Start with Tandym for free today!


Nerdwallet: How Much Are Credit Card Processing Fees? - NerdWallet

Business.com: The Small Business Guide to Credit Card Processing Fees - business.com

Valuepenguin: What Are Credit Card Processing Fees and Costs? (valuepenguin.com)

Valuepenguin:: Is it Legal to Charge Customers a Credit Card Processing Fee? - ValuePenguin