Key Takeaways:
- Interchange fees are the biggest piece of your rate. Set by the card networks, they’re non-negotiable but can shrink based on how a card is accepted.
- Flat-rate processors are simple but rarely the cheapest. Interchange-plus pricing usually saves money once your volume grows.
- A processing calculator makes comparison shopping concrete. Run your actual sales through a rate calculator before switching providers.
- Your statement hides savings. Regular audits catch fees you didn’t agree to and rates that crept up over time.
Every card swipe costs you money before it ever reaches your bank account. The good news is that most of that cost is negotiable, and comparing processors side by side is the fastest way to find out where you’re overpaying.
Take Danny, who runs a small hardware store and has used the same processor for six years without checking competitors’ rates. A quick comparison showed he could save over $2,000 a year just by switching to interchange-plus pricing. This guide breaks down what makes up your rate, how the major processors compare, and what you can do to cut costs.
Compare Processing Rates Side by Side
| Processor | Pricing Model | In-Person Rate | Online Rate | Best For |
|---|---|---|---|---|
| Helcim | Interchange-plus | Interchange + 0.40% + $0.08 | Interchange + 0.50% + $0.25 | Retail and eCommerce wanting transparency |
| Square | Flat-rate | 2.6% + $0.15 | 3.3% + $0.30 | Small to medium retail and food service |
| Clover | Flat-rate | 2.3% + $0.10 | 3.5% + $0.10 | Retail, restaurants, service businesses |
| Stripe | Flat-rate | 2.7% + $0.05 | 2.9% + $0.30 | Online and eCommerce-first businesses |
| PayPal | Flat-rate | 2.29% + $0.09 | 2.99%–3.49% + $0.49 | eCommerce, freelancers, small businesses |
| PaymentCloud | Interchange-plus | 2.95%–5.00% | 2.95%–5.00% | High-risk industries like CBD, vape, and liquor |
Rates shown are starting prices and can vary by industry, volume, and negotiated terms. Square, Stripe, and Clover base rates apply to their standard or free-tier plans; higher-tier plans often lower the in-person rate.
What Makes Up Your Processing Rate?
Every transaction fee breaks down into four parts, and only one of them is negotiable:
Interchange Rate
The interchange rate is the largest portion of the processing fee for any transaction. These rates, set by the major card networks and paid to the issuing bank, cover the risk of processing transactions. Riskier transactions will have higher interchange rates.
While interchange rates can’t be negotiated with your processor or the card networks, they can be reduced by your store’s policy. For example, you can choose not to accept certain cards or allow keyed transactions, as these are higher-risk transactions with higher fees. For a more in-depth look, check out our guide to interchange fees.
Assessment/Network Fees
While the interchange fees go to the consumer’s bank, the card networks also take a small cut of every transaction for their role in regulating the industry and setting the interchange standards. These fees are the smallest of any transaction and are non-negotiable.
Your credit card processor has no control over these rates. For instance, the assessment fees for MasterCard, Discover, and VISA range between .11% and .13%.
Processor Fees
The credit card processor will also take a small percentage of any transaction they facilitate. Your processor is responsible for ensuring that all parties communicate and that the transaction is quickly and successfully approved or denied.
Your processor also ensures the transaction follows all industry standards, including PCI compliance. These fees are negotiable and vary widely by each processor. Businesses can request lower rates from competing processors. These are key to finding the cheapest merchant services solution.
Additional Fees
Tied to your processor fees can be many additional or hidden fees. Not every processor charges their merchants for all of these, and the best don’t charge for any of them. Below is a list of potential additional charges some processors tack on the final total.
- Chargeback – For transactions that get a chargeback request
- Payment gateway – Providing an eCommerce payment gateway
- PCI compliance – Extra fees for following PCI rules
- Hardware rental – For those that rent or lease hardware, these fees will be bundled into your total
- Batch – Surcharges for daily batching
- Support – Some processors don’t include customer support or only include a certain amount and charge for additional use
- Minimums – Card minimums, such as an additional fee for any transaction less than $5, ensure the processor makes a profit on every transaction
- Cancellation – Fees for canceling are entirely avoidable
- Wireless access – Additional charges for providing cloud access to the payment machines
Processors that charge a flat rate for their service advertise themselves as void of any of these fees. In reality, these are bundled into a flat rate percentage that is far higher than a typical interchange rate, plus normal processor and network fees. More on that below.
Ways to Reduce Credit Card Processing Fees
- Negotiate as you grow. Higher volume is leverage. Revisit your rate with your processor every year.
- Switch to interchange-plus pricing if you’re on a flat-rate or tiered plan. It’s usually the cheaper option once you’re processing consistent volume.
- Settle transactions daily. Batching within 24 hours helps you qualify for the best interchange rates.
- Audit your statement quarterly. Look for fees you don’t recognize and rates that have crept above what you agreed to.
- Avoid switching processors too often. Renegotiating with your current provider is usually more effective than chasing a new one.
- Tighten security. EMV-compliant terminals and PCI DSS compliance lower your fraud risk, and a lower risk profile can qualify you for better rates.
- Add a surcharge where it’s legal. Dual pricing passes some of the cost to the customer, though check your state’s rules and weigh the impact on customer perception first.
How a Card Transaction Works
It only takes a few seconds for a card to be approved, but four separate parties are involved behind the scenes: your processor, two banks, and a card network. Here’s what happens on a typical sale:
- A customer taps, dips, or swipes their card (or keys it into your online payment gateway).
- Your processor sends the card data to the card network (Visa, Mastercard, and so on) to assess the interchange fee.
- The network forwards the request to the cardholder’s bank to confirm the card is valid and funds are available.
- Your processor verifies the transaction meets PCI compliance standards.
- The issuing bank sends an approved or declined response back through the network to your terminal.
- At day’s end, you batch your transactions to move funds from the customer’s account to your business’s acquiring bank.
- Your processor deducts its fees from the deposited amount.
Understanding this chain matters because it explains why the fee exists. You’re paying for fraud protection, verification, and settlement, not just card acceptance.
Choose the Right Rate Structure
Rate structures fall into two camps: pass-through, where wholesale costs are separated from markup, and blended, where everything is bundled into one number.
Interchange-Plus (Pass-Through)
Each card network determines its interchange rates based on factors including the type of card, how the card information was entered, the transaction amount, and the type of business. American Express and Discover typically have higher rates, which is why some retailers don’t accept them.
While interchange rates can’t be negotiated with your processor or the card networks, they can be reduced by your store’s policy. For example, you can choose not to accept certain cards or allow keyed transactions, which are higher-risk and carry higher fees. For a more in-depth look, check out our guide to interchange fees.
Subscription (Pass-Through)
Like interchange-plus, this separates the wholesale costs of each transaction from all markup fees. The markup comes as a simple monthly fee that is your subscription or membership in addition to the non-negotiable interchange and network fees.
If you check Shopify POS pricing or Square POS pricing, you’ll realize these two solutions fall into that category. This model offers the same transparency as interchange-plus but is better suited for businesses that process large average transactions.
Tiered (Blended)
Sadly, most businesses are on a tiered processing plan. These plans use many tactics to manipulate pricing and gouge small businesses. The structure’s opacity lets them raise rates for reasons only the most informed business owners will know.
The tiered aspect of this plan means that each transaction will fall under a certain pricing tier, with “qualified” transactions having the lowest rates. Conveniently, what makes a qualified transaction is anyone’s guess.
Flat-Rate (Blended)
Flat-rate pricing is slightly more transparent than tiered. It bundles all fees together but doesn’t use the dubious tiered system. Instead, each transaction is assigned the same percentage rate, or percentage plus a flat fee, no matter the wholesale costs (interchange and network fees).
These flat rates seem simple and low, but they’re not. For most transactions, the wholesale fees are a small percentage of the flat rate, leaving the processor with a large portion of each fee. Customers never receive a breakdown on monthly statements.
Get Your Own Rate Comparison
KORONA POS isn’t a payment processor, so we have no stake in which one you use. We’ll run your current processing volume against major providers and show you exactly where the savings are, itemized fee by fee.
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Frequently Asked Questions
Is a lower percentage always the cheaper option?
Not necessarily. A processor with a lower percentage but a higher fixed fee per transaction can cost more if you run a lot of small-ticket sales, so compare your actual average transaction size against both parts of the rate.
Can I negotiate interchange fees?
No. Interchange and assessment fees are set by the card networks and issuing banks, not your processor. Only the processor’s own markup is negotiable.
Why did my rate go up without notice?
Tiered and flat-rate processors can shift what counts as a “qualified” transaction or quietly raise their markup, which is why a quarterly statement audit catches changes that a fixed-rate mental model would miss.
