Credit card payments, online transactions and bank transfers incur processing fees that affect pricing, margins and the checkout experience for customers. For example, interchange fees, a type of processing fee that's also referred to as a swipe fee, increased by 50% from 2020–2023. At scale, that can significantly raise operating costs for companies that accept card payments. Understanding how payment processing fees work, what they cover and how they're structured can give businesses more control over the true cost of accepting payments.

Below, we'll explore what processing fees are and how they function across modern payment systems.

What's in this article?

• What is a processing fee?
  
• What types of processing fees do businesses commonly encounter?
  
• How are processing fees calculated?
  
• When are processing fees paid by customers vs. the business?
  
• How should businesses disclose processing fees to customers?
  
• How Stripe Payments can help
  

What is a processing fee?

A processing fee is the cost of moving money from a customer to a business. When a customer pays by card, bank transfer, or another electronic method, that payment passes through a network of financial systems that charge money to authenticate the payment, check for fraud, authorise the transaction and settle the funds. The processing fee covers those costs.

What types of processing fees do businesses commonly encounter?

Processing fees generally cover the costs associated with receiving payments: how money is moved, how accounts are maintained and how exceptions are handled when something goes wrong. Here are some common fees:

• Transaction fees: Transaction fees are incurred when payments are accepted. They're typically charged as a percentage of the payment amount plus a fixed per-transaction fee. This charge covers bank interchange fees, card network fees and the payment processor's fee for routing, authorisation, settlement and risk management.

• Card network and bank fees: These charges are set by card networks and issuing banks and vary by card type, region, transaction method and risk profile. They account for a large share of total processing costs.

• Payment gateway fees: These pay for the technology that securely transmits payment data from a website or application to the payment processor. Some setups bundle this cost into the transaction fee; others keep it a separate per-transaction or monthly charge.

• Monthly or account fees: Monthly or account fees are flat fees charged to maintain a payment account or access certain features. These might cover reporting tools, customer support, compliance monitoring or account administration, and they apply regardless of transaction volume.

• Equipment and hardware fees: These are costs associated with card readers, point-of-sale (POS) terminals, or other in-person payment hardware. They might include one-time purchase costs, monthly rental fees, or usage-based charges, depending on the setup.

• PCI compliance fees: Payment Card Industry (PCI) compliance charges are the cost of maintaining compliance with payment security standards. These fees often fund the security tooling, audits, or monitoring required to protect cardholder data and reduce fraud risk.

• Chargeback and dispute fees: These fixed fees are applied when a customer disputes a transaction. They cover the administrative work involved in reviewing the dispute and processing the reversal, regardless of whether the business ultimately wins or loses the case.

• Cross-border and currency conversion fees: Additional fees are applied when payments involve foreign cards or currencies. These charges reflect the added complications of international settlement and handling exchange rates.

• Incidental or conditional fees: These charges are less frequent and don't affect every business. They include setup fees, minimum monthly fees, paper statement fees and early termination fees.

How are processing fees calculated?

Processing fees are the sum of multiple cost layers. How they're calculated depends in part on what model is used: flat-rate, interchange plus, tiered, or subscription-based pricing. That determines how transparent underlying costs are and how predictable the final fee is from one transaction to the next.

Percentage-based fees reflect factors such as transaction risk, card type and network costs, while fixed fees cover the additional work required to process payments, including authorisation, settlement and reporting. Processing fees often pair a percentage-based fee with a fixed one to balance proportional cost with a minimum per-transaction charge. A card transaction fee, for example, includes the baseline fees set by card networks and issuing banks, plus any additional applicable fees.

The transaction type can also impact how fees are calculated. Card-present transactions often cost less than online or keyed-in payments because they have a lower risk of fraud. Higher-risk transactions (both in terms of fraud risk and the general level of financial risk the processor takes on) are sometimes priced at a premium to account for fraud prevention, chargeback exposure and compliance overhead.

Industry category, chargeback rates, fraud levels and the business's maturity can influence pricing. And at high transaction volumes, some providers offer lower marginal rates or negotiated pricing based on overall processing volume. Businesses with stable volumes and strong risk performance often qualify for more favourable fee structures over time.

When are processing fees paid by customers vs. the business?

Many businesses treat processing fees as a standard cost of doing business and build them into pricing. This keeps the checkout process simple and predictable for customers, with no additional line items or surprises.

Some companies add a separate fee for certain payment methods such as credit cards. This approach is typically used when margins are tight or transaction values are large enough that fees materially affect profitability.

Local laws and payment network requirements determine whether fees can be passed on to customers. Some regions prohibit surcharges entirely, while others allow them under strict conditions, including caps and disclosure rules. In competitive or customer-facing markets, visible fees can create friction or reduce conversion. In other contexts, especially B2B or regulated payments, customers might be more accepting of explicit processing charges. Some businesses avoid surcharges by offering cash or bank transfer discounts instead, while others adjust list prices to reflect average processing costs.

How should businesses disclose processing fees to customers?

If customers are paying a processing fee directly, they should be aware of it before they commit to a purchase or enter payment details. Clearly label the charge as a processing or payment fee and explain what it covers. Separating fees on invoices, receipts, or checkout pages makes the cost visible and minimises confusion. Businesses should also ensure that their language, placement and fee amounts meet regulatory and card network standards, and that staff can accurately explain the fee when customers ask.

How Stripe Payments can help

Stripe Payments provides a unified, global payments solution that helps any business – from scaling startups to global enterprises – accept payments online, in person and around the world.

Stripe Payments can help you:

• Optimise your checkout experience: Create a frictionless customer experience and save thousands of engineering hours with prebuilt payment UIs, access to 125+ payment methods and Link, a wallet built by Stripe.

• Expand to new markets faster: Reach customers worldwide and reduce the complexity and cost of multicurrency management with cross-border payment options, available in 195 countries across 135+ currencies.

• Unify payments in person and online: Build a unified commerce experience across online and in-person channels to personalise interactions, reward loyalty and grow revenue.

• Improve payment performance: Increase revenue with a range of customisable, easy-to-configure payment tools, including no-code fraud protection and advanced capabilities to improve authorisation rates.

• Move faster with a flexible, reliable platform for growth: Build on a platform designed to scale with you, with 99.999% historical uptime and industry-leading reliability.

Learn more about how Stripe Payments can power your online and in-person payments or get started today.