Question 1

What are the typical credit card processing fees for merchants?

Accepted Answer

Most merchants pay three layers: interchange set by the card networks for the card issuer, network assessments, and the provider's own markup, plus any monthly or per-item fees. The total varies a lot by card type, how the card is taken (tapped, keyed or online) and your industry, so there is no single typical number. The fair way to judge your own cost is your effective rate: total fees divided by total card sales on a real statement.

Question 2

Who pays credit card transaction fees, the merchant or the customer?

Accepted Answer

The merchant pays them. Card fees are deducted from the business's deposits or billed on its monthly statement, not charged to the cardholder by the card company. Some businesses choose to pass part of the cost on through a surcharge or a cash discount program, but that is the merchant's decision and it has to follow card network rules and local law in your state or province.

Question 3

Can you show me an example of tiered pricing?

Accepted Answer

With tiered pricing, the provider sorts each card sale into buckets, often called qualified, mid-qualified and non-qualified, each with its own rate. A plain debit card tapped in store might land in the lowest tier, while a rewards card or a keyed entry gets pushed into a higher one. The provider decides the sorting rules, which makes your real cost hard to predict and hard to compare.

Question 4

What are the downsides of tiered pricing?

Accepted Answer

The main problem is that you cannot see what the card actually cost. The provider chooses which transactions fall into the expensive tiers, so a quote built around the lowest tier rarely matches the bill. Tiered statements also make it hard to compare offers side by side. Interchange-plus shows the true card cost and a separate markup, which is why many merchants move away from tiers once they grow.

Question 5

Is a 3% transaction fee a lot?

Accepted Answer

It depends on what you sell and how you take payments. A flat rate in that range can be reasonable for a small or mostly-online business that values simplicity, and expensive for a busy store taking mainly tapped debit cards. The only fair test is your own numbers: total fees divided by total card sales on a recent statement, compared with what other providers would charge for the same mix.

Question 6

Do merchants pay more when a customer taps to pay?

Accepted Answer

Usually not. A tapped card or phone wallet in person is generally treated as a card-present transaction, which normally costs less than a keyed or online payment because the fraud risk is lower. What changes the cost more is the card itself, such as rewards, business or foreign cards. If your statement shows higher fees on tapped sales, ask your provider why, or send it to us to check.

Question 7

What is the difference between card-present and card-not-present transactions?

Accepted Answer

Card-present means the card or phone wallet is physically at your terminal and is tapped, inserted or swiped. Card-not-present means it is not: online checkouts, phone orders keyed into a virtual terminal, invoices paid by card and recurring billing. Card-not-present sales typically cost more and carry more chargeback risk, because the merchant cannot verify the card in person. That is why many statements show different rates for each.

Question 8

Why are interchange fees so high?

Accepted Answer

Interchange pays for the card issuer's costs and risks, such as fraud losses, credit, and above all the rewards programs that premium cards offer. The richer the card's rewards, the higher its interchange usually is. Merchants have no direct say, which is why rates have been the subject of lawsuits and regulation. What you can control is the markup your provider adds above interchange and the fees around it.

Question 9

What is the Visa and Mastercard swipe fee settlement?

Accepted Answer

It refers to long-running US class-action litigation by merchants over card swipe fees and network rules. Settlements in that litigation have included payment funds for eligible merchants and, in some versions, rule changes. Details, eligibility and claim deadlines depend on the specific settlement, so check the official claims administrator's website rather than third-party firms that charge to file for you. This is general information, not legal advice.

Question 10

What are the downsides of using Stripe or Square?

Accepted Answer

Both are popular and easy to start with, and for many small businesses they are a good fit. The trade-offs: flat pricing can become expensive as volume grows, you sit under a shared master account so holds can arrive with little warning, and support is mostly self-serve. If your volume or average ticket has grown, it is worth comparing against interchange-plus offers using your own statement.

Question 11

When is flat-rate pricing a good idea?

Accepted Answer

Flat rates suit businesses that value a simple, predictable bill over the lowest cost: new businesses, low monthly volume, small average tickets or mostly online sales. You pay the same percentage regardless of card type, so you overpay on cheap cards to cover expensive ones. Once volume grows, interchange-plus often costs less, which is a good reason to recheck your pricing each year.

Question 12

What is MDR in payments?

Accepted Answer

MDR stands for merchant discount rate: the total percentage a business pays on card sales, combining interchange, network fees and the provider's markup. The term is used more in some countries than others, and in North America people more often talk about the processing rate or effective rate. Whatever the label, compare the total you actually pay against total sales on your statement.

Question 13

What is Level 2 and Level 3 processing?

Accepted Answer

Level 2 and Level 3 refer to extra transaction data, such as tax amount, customer code and line-item details, sent with business, corporate and government card payments. When the right data is included, these cards can qualify for lower interchange categories. It matters mostly for B2B sellers with larger invoices. Your POS, gateway or virtual terminal must support sending the data, so ask before assuming you get the benefit.

Question 14

Interac debit vs Visa Debit: what's the difference for my business?

Accepted Answer

Interac debit runs on Canada's domestic debit network and is usually the cheaper option for in-person sales. Visa Debit and Debit Mastercard run on the card networks, so they also work online and abroad, but they usually cost more, priced closer to cards. Many Canadian bank cards carry both. How each is priced is set by your provider, so check both lines on your statement.

Question 15

How does credit card processing work, step by step?

Accepted Answer

When a customer pays, your terminal or website sends the card data through a gateway to your processor, which passes it over the card network to the customer's bank. That bank approves or declines in seconds. Later, at batch time, approved sales are settled: the card bank sends funds through the network to your acquiring bank, minus interchange and fees, and the money is deposited to your account.

Question 16

Do merchants have to pay a fee on every card transaction?

Accepted Answer

Almost always, yes. Each card sale carries interchange and network fees, and providers add their own markup, either as a percentage, a per-transaction fee or both. Some plans also add monthly fees. Debit, credit, business and foreign cards all carry different costs. The exception is when a business recovers the cost through a compliant surcharge or cash discount program, but the fee is still paid underneath.

Question 17

Does Apple Pay charge merchants a fee?

Accepted Answer

Apple Pay is processed as a card payment; your processor's rate applies. Check your statement to see what you pay.

Question 18

Why do some stores not accept American Express?

Accepted Answer

Historically, American Express has cost merchants more than many Visa and Mastercard transactions, and some businesses chose not to accept it. Acceptance has grown with programs that let smaller merchants take Amex through their regular provider. Whether accepting it makes sense depends on your customers; refusing a card your customers carry can cost more in lost sales than the fee saves.

Question 19

What does a merchant category code (MCC) do?

Accepted Answer

An MCC is a four-digit code that classifies your business type on every card transaction. It affects interchange rates, how card issuers view risk and sometimes whether certain cards, like some corporate or benefit cards, can be used. If your MCC does not match what you sell, you could pay more or see more declines. Ask your provider which MCC you are set up under.

Question 20

What is a merchant cash advance?

Accepted Answer

A merchant cash advance gives a business a lump sum in exchange for a share of future card sales or bank deposits, repaid automatically until a set amount is paid back. It is not usually structured as a loan, so the total cost can be very high compared with traditional financing. Read the total payback amount, not just the factor rate. This is general information, not financial advice.

Question 21

Why do foreign cards cost more to accept?

Accepted Answer

Cards issued in another country usually carry higher interchange and extra network fees for cross-border transactions, and sometimes currency conversion costs. Canadian businesses selling to US customers, and vice versa, see this often. The cost is real, but it is worth checking that your provider is not adding an extra markup on top. Your statement should show these as separate lines.

Question 22

Are Stripe fees too high?

Accepted Answer

It depends on your volume and card mix. Stripe uses a published flat percentage plus a per-transaction fee, which is simple and often reasonable for new or small online sellers. As monthly volume and average ticket grow, a flat rate can cost more than interchange-plus pricing, because you pay the same markup on low-cost debit cards as on premium rewards cards. The fair test is your effective rate: total Stripe fees divided by total sales, compared with a written quote built on the same months.

Question 23

How do I calculate Square fees?

Accepted Answer

Find the rate for the payment type, because Square prices in-person, online, keyed-in and invoice payments differently; its current pricing page lists each one. Multiply the sale amount by the percentage, then add any fixed per-transaction fee. Using an illustrative rate of 2.9% plus 30 cents, a $100 sale would cost $3.20. To see your real cost over a month, add up all fees in your Square reports and divide by total sales. That figure is your effective rate.

Question 24

How much does Visa charge for a transaction?

Accepted Answer

Visa does not bill you directly for most of the cost. The largest piece is interchange, which Visa sets but which is paid to the bank that issued the card, and it varies by card type, how the card is taken and your industry. Visa also charges a smaller network assessment. Your processor collects both, adds its own markup and shows the total on your statement. Visa publishes its interchange tables online, but your effective rate is the number to watch.

Question 25

Is Visa a payment processing company?

Accepted Answer

Not in the way most merchants mean it. Visa runs a card network: it sets the rules, routes transactions between banks and sets interchange rates, but it does not issue cards to consumers or open merchant accounts. Banks issue Visa cards, while acquirers and processors such as Fiserv, Global Payments, Chase, Moneris or Stripe sign up businesses and move the money. Visa does process transaction messages on its own network, which is why the question comes up.

Question 26

What are Mastercard transaction fees?

Accepted Answer

Mastercard costs reach you in two parts. Interchange, set by Mastercard and paid to the card-issuing bank, depends on the card level (debit, standard, rewards or business), whether the card was tapped, inserted or keyed, and your merchant category. Then come Mastercard's own network assessments and per-transaction fees, which are smaller. Mastercard publishes its US and Canadian interchange rates online. Your processor bundles these with its markup, so look for the Mastercard lines in the card-type section of your statement.

Question 27

What are the fees for Stripe payments?

Accepted Answer

Stripe's standard pricing is a percentage of each card payment plus a fixed per-transaction fee, with extra charges in some cases, such as international cards, currency conversion, manually entered cards, instant payouts, disputes and add-on products like billing or tax tools. Rates differ between the US and Canada and change over time, so read Stripe's current pricing page rather than an old article. Larger businesses can sometimes request custom pricing. To see what you really pay, divide total monthly Stripe fees by total sales.

Question 28

What is the average interchange rate for a debit card?

Accepted Answer

There is no single average, because debit interchange depends on who issued the card. In the US, debit cards from banks with more than $10 billion in assets are capped by the Federal Reserve's Regulation II at a fixed amount per transaction plus a small percentage, which is usually well below credit card rates. Cards from smaller banks and credit unions are exempt from that cap and cost more. In Canada, Interac debit is priced differently again. Your statement shows the actual debit rates you pay.

Question 29

What is the best credit card processing system for small businesses?

Accepted Answer

The best system is the one that fits how you sell and costs least at your real volume, so there is no single winner. Compare four things: the pricing model (flat rate, interchange-plus or tiered), the monthly and per-item fees beyond the headline rate, the hardware and software you are tied to, and the contract terms, including any early termination fee. A business taking small in-person payments may suit a different setup than one invoicing large jobs. Written quotes checked against your own statement show the real difference.

Question 30

Where is American Express accepted?

Accepted Answer

American Express is accepted at many retailers, restaurants, hotels, airlines and online stores in the US and Canada, but not everywhere. Each business decides whether to take it, and some smaller merchants skip it because Amex has historically cost more per sale than other cards. Many providers now let merchants accept Amex through the same account and statement as Visa and Mastercard. If you are unsure whether a store takes it, look for the Amex logo at the door or checkout, or ask before paying.

Question 31

Who pays Square fees?

Accepted Answer

The business pays Square's processing fees, not the customer. Square takes its fee out of each payment before depositing the rest into your bank account, so you receive the sale amount minus the fee. Some businesses recover part of that cost with a surcharge or a cash discount program where the law and card rules allow it, but the fee itself is still charged to the merchant. Your Square dashboard and payout reports show the fee taken on each transaction.

Question 32

What is a reasonable effective rate for accounting firms?

Accepted Answer

There is no single reasonable number, because the effective rate depends on your card mix, average invoice size and pricing model. Firms whose clients pay with corporate or rewards cards see higher interchange than firms paid mostly by consumer debit. To judge yours, divide total monthly processing fees by total card sales on your statement, then compare that figure with written quotes for the same volume and card mix. Moving large invoices to ACH lowers your overall cost of getting paid, even if the card rate stays the same.

Fees and pricing: 32 questions