Credit Card Processing Fees for your Business

Watch out for those Payment Processing Fees!

It is almost essential that your small business is approved for a merchant account if you want to grow your business. Otherwise, you are stuck with cash, check, and store credit as your only payment processing options. If you plan to have any kind of e-commerce presence, this will not work for you. Even if you plan to grow your brick-and-mortar business, your customers are going to want to use their credit and debit cards.

After you are approved for a merchant account and set up your payment processing system, credit card processing is not free. There are many fees associated with it. Fees can vary widely each month depending on your credit card processing company. They can cut into your profit by hundreds or thousands of dollars per month but can also generate sales many multiples of those numbers. Here is a list of credit card processing fees that may not be exhaustive, but it will give you the basics of everything you need to know about these fees.

Start-up/Annual Fee

Credit Card Processing Fees. Michelle Meiklejohn

After you are approved for your merchant account and have set up all your payment processing equipment, the first fee is usually a start-up fee, which may turn into an annual fee. You will usually be assessed this fee whether you are using a bank or a credit card processing company.

This start-up fee is for approving the merchant account and for the set-up of your equipment. Some credit card processing organizations will leave it as a one-time start-up fee. Others will make it an annual fee. A $25-$50 fee is reasonable.

Monthly Statement Fee

Most credit card processing companies charge the merchant a fee for their monthly statement. The fee usually ranges between $5-$10 per month. The statement shows every credit card transaction that has occurred during the month and the details about each transaction so your company has a comprehensive list.

Discount Rate

The discount rate that a merchant pays is a transactions fee for using credit card processing. The discount fee is a percentage of each credit card transaction and normally varies between 1% and 3.5%. The discount fee is based on many different factors, all of them important for the merchant to understand.

Credit card processing fees can be very expensive and much of the expense can lie within this discount fee. The discount fee itself depends on what type of card you take for payment. A debit card is the cheapest card to accept from your customers. The American Express card is usually the most expensive card to accept for payment. Visa and Mastercard, along with other various cards, lie in the middle.

There are many other fees contained within the discount fee for every credit card transaction.

Transaction Fee

The transaction fee is the minimum fee that credit card processing companies charge per credit card transaction. It depends on the method of payment and is usually a number of cents, which varies based on the amount of credit card business you generate. It is a set fee. The lower the amount of credit card business generated by the merchant, the higher the transaction fee per credit card transaction.

Minimum Monthly Fee

In addition to the per transaction fee charged to you by the credit card processing company, you may also be assessed a minimum monthly fee. If you do not do a certain level of credit card business per month, the company will charge a minimum fee, usually around $25-$50 per month. Be sure to read the fine print before signing a contract with any firm.

Credit Card Processing Equipment Lease Charge

You may consider leasing your credit card processing equipment instead of buying it. Make this decision wisely. It is usually much cheaper to buy your credit card processing equipment than to lease it. A rather large fee will be paid to the leasing agent and the equipment will end up costing you much more than it would have if you had bought it. It is relatively inexpensive for a small business.

Gateway Fee if you have an Internet Merchant Account

If your business is a online business and you have an Internet merchant account, then you may be charged a gateway fee for setting up a shopping cart, a web presence, and accepting debit and credit cards online. Even if you have both an online presence and a brick and mortar location, you will probably have to pay the gateway fee for the Internet merchant account. Depending what is included in your gateway fee, it can range between $10-$50 per month.

Chargeback Fees

The dreaded chargeback fee! When you decide to start accepting debit and credit card charges, you immediately take on the chargeback. A chargeback is the reversal of a debit or credit charge, otherwise known as the void of a transaction. Some credit card processing operations will allow you a few chargebacks per month before they start charging you for them. Some won't. You, as the merchant, will almost certainly be charged a fee for each successful or unsuccessful reversal of charge.

A chargeback is typically defined as a consumer's last line of defense against unscrupulous merchants. They are a form of consumer protection. Chargebacks can become costly to merchants and you want to learn more about them and how to guard against them here.

Address Verification Fee

One seldom thought about credit card processing fee is the address fee is the address verification fee. Some, not all, credit card processing companies, will charge a few cents for each time an address verification is requested during a credit or debit card transaction.

Termination Fees

When you sign a contract with a credit card processing company, you sign it for a given number of years. If you decide to terminate the contract before that time, you usually must pay a rather hefty termination fee. If your credit card processing fee does not specify a termination fee, go back over your contract because those termination fees are somewhere within that contract, often within hidden fees. Use this document as a guideline and read the fine print.


Credit card processing fees has become a large source of income to credit card processing firms and a large expense to merchants who offer credit and debit card payment options to their customers. It is an area ripe for fraud. Study the contracts you are offered. Study the different companies available to you. Make many comparisons between companies before you choose one based on their fee structure.