Understanding Payment Processing Fees
Break down interchange, assessments, and processor markups to know your true cost.
The Three Layers of Cost
Payment processing fees typically include interchange fees (set by card networks and paid to issuing banks), network assessments (set by Visa, Mastercard, etc.), and the processor's markup. Understanding each layer helps you identify where your money goes.
Interchange-Plus vs. Flat Rate
Interchange-plus passes the actual interchange cost plus a fixed markup, offering transparency. Flat-rate pricing typically uses preset rates, sometimes with per-transaction fees and different rates by acceptance channel. It may cost more or less depending on your actual mix.
Understand Pricing Model Differences
Interchange-plus separates interchange and network costs from the provider markup. Flat-rate plans may charge a percentage plus a per-transaction amount, with different rates for in-person and online payments. Tiered pricing groups transactions into provider-defined qualified categories. Compare actual totals rather than assuming one model is always cheapest.
Hidden and Ancillary Fees
Watch for monthly account fees, PCI compliance fees, batch fees, chargeback fees, and tiered-pricing downgrade fees. These can add up significantly. Always ask for a complete fee schedule before committing.
Separate Pricing Tiers From Surcharging
A processor's non-qualified pricing tier is not a customer-facing surcharge. Cardholder surcharging and cash-discount programs have separate card-network, legal, disclosure, and payment-method requirements; do not apply them without confirming program eligibility and compliance.
Calculate Your Effective Rate
Effective rate equals total processing-related fees for a period divided by card sales volume for the same period, multiplied by 100. For example, $780 in fees on $30,000 in card sales is 2.60%. Include relevant monthly, per-transaction, and gateway fees consistently when comparing offers.
Review a Statement for Cost Drivers
Compare card-present versus card-not-present mix, average ticket, transaction count, refunds, assessments, processor markup, and recurring fees. Check for new line items or volume changes before concluding a pricing increase occurred.
Frequently Asked Questions
What is a non-qualified transaction?
In tiered pricing, non-qualified is a processor-defined category that may have a higher rate based on transaction characteristics or the provider's pricing rules. It is not a card-network interchange category, and the difference is not the same as a cardholder surcharge.
How can I lower my processing costs?
Strategies include using interchange-plus pricing, ensuring proper transaction data (like address verification), encouraging lower-cost payment methods like ACH, and reviewing your statements regularly. ONKORE offers a free statement analysis to identify savings.
Understand what you are paying
Request a payment processing review with ONKORE.
- Expert guidance
- Transparent pricing
- Terms reviewed upfront