A payment processing fee is the amount a business pays to accept an electronic payment, most commonly a card payment, and it is normally deducted from the sale before the money reaches the business. It covers the cost of the bank that issued the customer's card, the card network that carries the transaction, and the acquirer, processor or payment service provider that handles it for the merchant. Fees are set out in the agreement for the business's merchant account and are usually quoted as a percentage of the sale, a fixed amount per transaction, or both.
The phrase is an umbrella term. In card payments the total charge to the merchant is also called the merchant discount rate; its parts are interchange, scheme fees and the acquirer's margin. Bank transfers, wallets and ACH payments carry their own, usually lower, fees. Fees are set partly by competition and partly by regulation, which caps interchange in the EU, the UK and, for large issuers' debit cards, the United States.
Payment processing fees in plain terms
Think of sending goods with a courier that relies on two partners along the way. The local depot charges a fee, the national hub charges a fee, and the courier you deal with adds its own charge for handling everything. You see one price at the counter, but it is three charges stacked together.
Card fees work the same way. The customer's bank, the card network and the shop's payment provider each take a share. The shop may see one simple percentage on its statement, or it may see each share listed separately, depending on the deal it signed.
What makes up the fee
- Interchange. Paid by the acquirer to the card issuer on each purchase. It is usually the largest part and varies by card type (debit, credit, premium rewards, commercial), channel (card-present or online), merchant category and region. Networks publish their rates, as in the Visa interchange rates table and Mastercard interchange rates table.
- Scheme or network fees. Charged by the card network to both acquirers and issuers for using its system, including assessment fees and cross-border charges.
- Acquirer or provider markup. The acquirer or processor's own margin for authorization, settlement, risk, fraud tools and support, sometimes with separate gateway, chargeback, PCI and monthly fees.
Other costs can be added for specific transactions: cross-border cards, currency conversion, refunds and chargebacks each usually carry their own fee.
Pricing models and the effective rate
Providers package these costs in three main ways. Flat or blended pricing charges one rate for most cards, which is simple but hides the parts. Interchange-plus pricing passes interchange through at cost and adds a fixed markup, while interchange++ pricing also shows scheme fees as a separate line. Tiered pricing groups cards into "qualified" and "non-qualified" bands and is often the hardest to compare. A business can compare offers by working out its effective rate:
Here total processing fees include every charge on the statement for the period, and total card sales are the gross value of card payments accepted in the same period. For a single transaction, the fee itself is:
- is the total fee on the transaction.
- is the transaction amount.
- , and are the percentage rates for interchange, scheme fees and the acquirer markup, written as decimals.
- is the sum of any fixed per-transaction charges.
For example, on a $100 purchase with interchange of 1.80%, scheme fees of 0.14%, a markup of 0.20% and fixed charges of $0.15 in total, the fee is , or $2.29, an effective rate of 2.29%. On a $10 purchase with the same terms, the fee would be $0.364, an effective rate of 3.64%, which shows why fixed fees weigh heavily on small tickets.
Regulation of fees by region
In the EU, the Interchange Fee Regulation (Regulation (EU) 2015/751) caps interchange on consumer cards at 0.2% for debit and 0.3% for credit; the UK kept the same caps for domestic payments after Brexit. In the United States, the Durbin Amendment led to the Federal Reserve's Regulation II, which caps debit interchange for issuers with $10 billion or more in assets at 21 cents plus 0.05% of the transaction, with a one-cent fraud-prevention adjustment; these are known as regulated cards. The Fed proposed in 2023 to lower the base fee to 14.4 cents, but had not finalised that proposal as of November 2026. Meanwhile a federal court in North Dakota found the cap unlawful in 2025, and in October 2026 the Eighth Circuit Court of Appeals upheld that ruling and told the Fed to work out the cap again; the existing cap still applies for now, until that ruling takes effect. Separately, a revised settlement between Visa, Mastercard and US merchants, which would cut average US credit interchange by about 0.1 percentage point for five years, received preliminary court approval in June 2026.
Merchants respond to fees through card surcharging where the law and network rules allow it, cash discounts, steering customers to cheaper methods, and least cost routing of dual-network debit cards, a form of debit routing.
Who bears the cost
Processing fees are a cost of sale for merchants, often among their largest after rent and wages in low-margin retail. Economists and competition authorities have long debated who ultimately pays them: because most merchants charge one price regardless of payment method, customers paying by cash or debit can end up subsidising the rewards on premium credit cards, a pattern discussed as the card rewards cross-subsidy. Card networks and issuers argue that the fees fund fraud protection, guaranteed payment and credit. These questions drive the regulation and litigation described above.