As a business owner, credit card terminal rates can seem opaque, fixed, and too complicated to untangle; they can also add up quickly. In 2024, US merchants paid $187.20 billion in processing fees, equating to $1.57 for every $100.00 in card payments accepted. But if you take a closer look, you'll find real opportunities to understand what you're paying for, why rates vary, and how to make smarter decisions that keep more revenue in your pocket. Below, we'll explain what drives your card processing costs and how to take control of them.

What's in this article?

• What are credit card terminal rates?
  
• How do different pricing models compare?
  
• What factors influence the rates your business pays?
  
• How can you lower your credit card terminal costs?
  
• How do you choose the best pricing structure for your business?
  

What are credit card terminal rates?

Every time a customer pays you with a credit or debit card, you pay a fee. This is known as a credit card terminal rate. It's the cost of processing a card transaction through a physical terminal or reader.

Think of it as the toll you pay for using the card networks (e.g. Visa, Mastercard, American Express) and their infrastructures. The full rate is made up of a few different parts:

• Interchange fees: These go to the cardholder's bank and are set by the card networks. They vary by card type (e.g. credit or debit, standard or premium) and transaction method (i.e. in-person vs. online).

• Assessment fees: These are small percentages paid to the card networks themselves.

• Processor markups: Mark-ups are what payment processors charge on top. They're usually the place that you have the most room to negotiate or choose a better deal.

Some processors bundle these costs into a single rate. For example:

• 2.70% + $0.05 per in-person transaction

• 2.90% + $0.30 for online payments

These flat rates are easy to understand, but they bake in a premium to cover higher-cost transactions.

How do different pricing models compare?

The rate you pay per card transaction depends on what you're selling, how you're accepting payments, and how your processor structures its fees. That last factor – the fee structure – determines how costs are passed along to you.

Here's a breakdown of the three most common pricing models.

Flat-rate pricing

Processors using flat-rate pricing charge a single fixed fee for every transaction, regardless of card type or card brand. You might see:

• 2.90% + $0.30 for online card payments

• 2.70% + $0.05 for in-person sales

That fee combines the interchange, network fee, and processor markup into one clean rate.

You always know what you'll pay, so reconciliation and budgeting become easier – which is especially helpful for startups and small businesses.

Keep in mind that flat rates are set high enough to cover the costliest transactions, such as premium rewards cards being used online. That means you'll probably overpay on low-cost transactions, especially debit cards with low interchange.

Interchange-plus pricing

With interchange-plus pricing, the processor charges you the interchange fee (set by the card networks) plus their own fixed markup. For example:

• Interchange + assessment fee + 0.30%
  

If Visa sets the interchange and assessment fee for a particular transaction at 1.65% + $0.10, for instance, you'd pay that amount plus your processor's markup.

With this model, you see exactly what each transaction costs, card by card. Lower-risk transactions (e.g. debit, chip-inserted) cost less than higher-risk ones.

One downside of this model is it's harder to forecast fees – every transaction might cost a different amount. Not all processors implement interchange-plus pricing transparently, and some still tack on opaque surcharges. Without the right reporting tools, monthly statements can be long and confusing.

This model can unlock major savings for businesses with substantial card volume or a mix of transaction types. But it requires more involvement and, ideally, a team member who can interpret statements and optimise accordingly.

Tiered pricing

In a tiered model, transactions are sorted into the following categories:

• Qualified (lowest fee)

• Mid-qualified

• Non-qualified (highest fee)

You're quoted a rate for each tier, but you don't control how your transactions are categorised.

For example:

• A chip-inserted Visa card might be labelled "qualified."

• A rewards card keyed in manually might be "non-qualified."

You don't always see what interchange fee you're being charged, so you can't optimise or negotiate effectively. This form of pricing is still common, especially with legacy providers, but unless you have a very specific use case and a strong relationship with your processor, it's best approached with caution.

What factors influence the rates your business pays?

Even with the same provider and pricing model, your actual cost per transaction can vary. That's because terminal rates are shaped by a mix of technical, behavioural, and business-specific variables.

Here's what drives your effective rate behind the scenes.

Card type and brand

The type of card a customer uses directly affects how much you pay.

• Debit cards carry the lowest interchange fees.

• Basic credit cards fall in the middle.

• Rewards cards, business cards, and premium credit cards come with much higher interchange.

• American Express generally charges higher fees than Visa or Mastercard.

The more premium the card, the more you're covering the perks the cardholder earns. If you have a customer base that skews toward rewards cards or business Amex usage, your average rate will trend higher.

Transaction method

How a payment is made also matters. The options are:

• Card-present: Payments made by swiping, inserting, or tapping cards at a terminal – also known as card-present transactions – generally have a lower risk of fraud and therefore come with lower fees.

• Card-not-present (CNP): Card payments made online, over the phone, or by manually keying details into a terminal are known as card-not-present (CNP). These transactions generally have a higher risk of fraud and thus come with higher fees.

Your industry and merchant category

Card networks assign every business a Merchant Category Code (MCC). Some industries, such as groceries or fuel, qualify for reduced interchange rates. Others, especially high-risk verticals such as travel or adult entertainment, might see higher baseline fees. Non-profits and educational institutions often benefit from discounted processing rates.

Your MCC is assigned during onboarding, but it's worth checking periodically. If your business model has changed or you think you were misclassified, correcting your MCC could lower your rates.
Average transaction size
Because interchange includes both a percentage and a fixed fee (e.g. 1.50% + $0.10), your average sale amount impacts your effective rate.

• Fixed fees can be disproportionately high for low-ticket businesses: If you own a business such as a coffee shop or quick service restaurant, you might have relatively low sales. In that case, a $0.10 charge on a $5.00 sale, for example, would add 2.00% to your costs – before the percentage even kicked in.

• Percentages have a bigger impact on high-ticket businesses: For businesses such as luxury retail or B2B services, which have higher sales, the fixed fee tends to become negligible.

If you run a business with sales that are low to average in value, it's worth exploring pricing plans that reduce your per-transaction flat fee, even if the percentage is slightly higher.

Monthly volume and business size

Depending on your payment volume, the markup your processor charges is often flexible.

• Larger businesses can typically negotiate pricing: Bigger businesses, especially those processing over $100K per month, can usually negotiate lower rates or qualify for custom pricing.

• Smaller businesses tend to get flat-rate pricing: There is usually little ability to negotiate, though some providers still offer tiered discounts based on reaching certain thresholds.

Some processors offer volume-based pricing automatically. Others don't lower your rate unless you ask.

Domestic vs. international cards

Accepting cards issued outside your home country usually means paying higher processing costs. Most processors apply a foreign transaction surcharge to cover currency conversion and cross-border risk. These fees are layered on top of your regular rate.

If you sell to international customers frequently, it's worth tracking how much these surcharges are costing you and whether your provider offers competitive terms for cross-border volume.

Your processor's pricing model and fees

Finally, the way your processor structures fees matters just as much as other factors. Even two businesses with identical transaction profiles could end up paying very different effective rates based on the pricing model of their processor.

• Flat-rate plans tend to even out the costs: However, you might overpay on lower-cost transactions.

• Interchange-plus models show you the cost of each transaction: These models demand more from you in terms of tracking and management, however.

• Tiered pricing often lacks transparency: These models can lead to surprise "downgrades" if transactions don't meet hidden criteria.

You should also factor in non-transactional fees, such as:

• Monthly account fees

• Terminal rental fees

• PCI compliance charges

• Chargeback fees

The combination of how you process transactions, the cards you accept, and how your processor bills you will determine what you pay per swipe or click.

How can you lower your credit card terminal costs?

There's no way to avoid paying to accept cards, but there are many ways to pay less. Many businesses leave money on the table simply because they're on the wrong plan, using outdated terminals, or not tracking how different fees add up.

Here's how to reduce your processing costs without compromising the way you do business.

Negotiate – or switch providers

Processors don't always advertise this, but their markups are often flexible, especially if you're processing at least $50K – $100K per month. Ask directly if you qualify for volume discounts or custom pricing. If you're on interchange-plus, see if the processor will lower their markup. If you're on flat-rate pricing, ask if you're eligible for a lower rate altogether. If the processor is unresponsive or evasive, compare quotes from others, and be ready to switch.

There are costs to changing providers, but if your processing fees are high, the savings can justify the effort.

Steer payments toward lower-fee methods, within reason

You can't dictate how your customers pay, but you can influence the channel and method.

• Always use chip or tap for in-person Payments: Manually keying in card info typically triggers higher fees and surcharges.

• Accept other payment methods: If you're sending invoices, offer direct debits or bank transfers alongside cards, since those fees are lower.

• Offer discounts: Where allowed by card networks and local law, provide discounts for debit or small cash incentives.

• Encourage in-store payment and pickup: If you run both online and in-person operations, encourage in-store pickup and payment for high-ticket items when feasible.

Over time, small shifts in how transactions are routed can meaningfully reduce your average cost per payment.

Cut unnecessary hardware or service fees

Card readers and point of sale (POS) hardware don't have to be expensive, but many providers mark them up or lock you into long-term leases. Buying the hardware outright is often cheaper in the long run. Evaluate whether you need a full POS system, or if a mobile reader or countertop terminal connected to your existing setup would be sufficient.

• Review your statements for hidden costs, too: PCI compliance charges, inactivity fees, or minimum monthly processing fees. If you're being charged for services you're not using, ask to have them removed.
  

Avoid chargebacks and unnecessary refunds

Every chargeback comes with a fee. Even when you win the dispute, you've spent time solving the issue, and you've risked your dispute ratio creeping up.

To avoid chargebacks:

• Use clear product descriptions and recognisable billing descriptors.

• Provide proactive support and an easy-to-understand return policy.

Preventing chargebacks and unneeded refunds can be just as valuable as trimming a few basis points off your rate.

Make sure your merchant setup is optimised

Sometimes your business is paying more than it should due to back end issues that are easy to miss.

• Check your MCC: If it's incorrect or outdated based on your current business model, you might be missing out on lower rates for your industry.

• Use terminals that support inserting and tapping: Make sure you have a terminal that supports Europay, Visa, and Mastercard (EMV) chips and near-field communication (NFC). If you're still swiping cards, you could be incurring extra fees or being penalised for not following security standards.

• Ask your processor about Level II and Level III card data: This is relevant if you accept a lot of business or government credit cards. Sending more data can qualify you for lower interchange on those transactions.

Make it part of your annual financial review to confirm you're not getting penalised by outdated setup choices.

Review your statements

Interchange rates change twice a year, typically in April and October, and processors sometimes quietly add new fees. You might not notice unless you're looking for them.

• Track your effective rate (i.e. total fees divided by total card volume) each month.

• Compare that against what you were paying six months ago. If it's gone up, figure out why.

• If you don't understand something in your statement, ask your processor.

A monthly review can help you catch overbilling, rate hikes, or outdated pricing plans.

How do you choose the best pricing structure for your business?

The best pricing model is the one that fits your transaction patterns, growth stage, and capacity. The right structure will minimise fees while fitting the way your business works.

Here's how to think it through.

Start with how much you process (and how often)

Your monthly volume sets the baseline for what's available to you.

• Low volume: Flat-rate pricing is usually the simplest and most cost-effective option.

• Mid- to high volume: Once you're consistently processing higher amounts, look at interchange-plus. You'll probably pay less per transaction and can negotiate processor markups.

• Very high volume: You should be negotiating custom rates, no matter the pricing model.

If you've outgrown your pricing tier, your processor might not tell you. You'll need to ask or initiate a change yourself.

Match your model to your transaction mix

Average ticket size, card type, and payment method all affect how well a pricing model serves you.

• If you process lots of small-ticket sales: A plan with lower per-transaction fees might cost you less overall, even if the percentage is higher.

• If you primarily process debit cards in person: You'll benefit from interchange-plus, where those low-cost transactions aren't averaged into a higher flat rate.

• If you have high rates of online or keyed-in payments: You'll want to compare how different models handle CNP risk. Some surcharge it separately, while others bake it into the rate.

Factor in your administrative capacity

If you have the time to manage interchange-plus – or you have someone on your team who can do it – this model could be a good choice; it offers you more control, it's transparent, and it allows you to optimise based on what's really driving costs.

If you have a lean team and need predictability, flat-rate pricing might be worth the trade-off in precision. You'll always know what you're paying, even if some transactions cost more than they would with a granular model.

Choose a model that you can realistically manage. The model with the lowest theoretical cost won't help you if it's too complicated.

Consider your tech stack

If your POS system or e-commerce platform locks you into a particular processor, you might not have full control over pricing model options. But you do have control over how well those systems are integrated.

A single processor for both in-person and online sales simplifies reporting and reconciliation. Some payment providers, such as Stripe, offer fully integrated flat-rate pricing across channels, which can be a worthwhile trade-off. Think about how your payments infrastructure supports the rest of your business.

Watch out for contract restrictions

Be cautious of:

• Tiered pricing with multiyear contracts

• Early termination fees

• Monthly minimums that penalise slow seasons

Modern processors generally don't require long-term commitments. If you're being asked to sign a multiyear deal, make sure you're getting something substantial in return, such as reduced rates, custom integrations, or hardware subsidies.

Flexibility is often worth more than a marginal discount.

Think about your next 12 months

Your current volume and setup might support a flat-rate plan today. But if you're growing quickly or changing how you sell (e.g. adding B2B, Subscriptions, or international customers), you might need a more adaptable model soon.

Pricing structures aren't permanent. Re-evaluate them the same way you'd revisit a supplier agreement or marketing budget – as something that should evolve alongside your business.