Merchant fees are charges that businesses must pay when they accept electronic payment methods, such as credit and debit cards. Although they're only a fraction of the total transaction price, they add up at scale. In 2025, swipe fees for processing card payments cost US businesses over US$198 billion.

Below, we'll explore the key elements of merchant fees, including the types of fees that most businesses encounter, how to minimise their financial impact on profit, and what to consider when you choose a payment processing provider.

What's in this article?

• What are merchant fees?
  
• Types of merchant fees
  
• Why merchant fees are so important for businesses to understand
  
• Ways to minimise merchant fees and costs
  
• How to choose a payment processing provider
  
• Stripe's merchant fees
  
• How Stripe Payments can help
  
• FAQs about merchant fees
  

What are merchant fees?

Merchant fees are the costs a business incurs to accept debit and credit card payments. Instead of a single flat charge, these fees are a combination of several processing costs. They generally consist of a percentage-based fee plus a small, fixed fee per transaction (e.g., 2.9% + US$0.30). This combined structure accounts for both the total dollar volume and the number of individual transactions.

Types of merchant fee

Merchant fees encompass a variety of charges that businesses face when they process electronic payments, such as credit or debit card transactions.

Pricing models

Before you look at individual fees, understand the pricing model your payment provider uses. The model dictates how all the underlying costs are packaged and passed along to your business.

• Flat-rate (blended) pricing: The processor charges a fixed percentage and a fixed per-transaction fee (e.g., 2.9% + 30p), regardless of the card type or network. The processor absorbs the underlying differences in cost, offering predictable, simple billing.

• Interchange-plus pricing: The processor passes the exact cost of the interchange fee and network assessment fee directly to the business, then adds a distinct, transparent processor markup (e.g., interchange + 0.2% + 10p).

• Tiered pricing: The processor groups transactions into categories based on risk and card type such as Qualified and Non-qualified. While Qualified rates look lower, everyday transactions often get pushed into higher tiers that are more expensive and less transparent.

Universal fees

Universal fees represent the core operational costs of accepting card payments. They exist across almost all merchant accounts to cover the baseline infrastructure of the payment environment.

• Interchange fees: These are fees that the bank issuer of the customer’s credit or debit card charges. The amount is a percentage of the transaction value and might include a fixed fee. Interchange rates vary based on factors such as the type of card used, the transaction’s risk level, and whether the transaction was in person or online.

• Assessment fees: These fees are charged by the credit card networks (e.g., Visa, Mastercard, American Express) and are usually a fixed percentage of the transaction amount. The business’s bank pays assessment fees to the card network.

• Payment processor fees: The payment processor charges these fees for handling transaction processing on behalf of the business. They can be structured in various ways, including as a percentage of each transaction, a flat fee per transaction, monthly fees, or a combination of these.

• Monthly statement fees: Some payment processors charge a fee for providing a monthly statement of transactions.

Situational merchant account fees

Unlike universal fees, situational fees apply only under specific operational scenarios, business hardware choices, or contractual conditions.

• Payment gateway fees: Businesses often use a payment gateway for online transactions and this service might come with its own set of fees. This can be a per-transaction fee, a monthly fee, or both.

• Setup and equipment fees: These fees are the cost of setting up a merchant account or renting or purchasing necessary hardware such as point-of-sale (POS) systems and card readers.

• Chargeback fees: When customers dispute a transaction, a business might need to return funds. This is known as a chargeback. When a chargeback occurs, businesses are often charged a fee. This fee covers administrative costs associated with handling the dispute.

• Minimum monthly fees: Some processors charge a minimum monthly fee, which is the lowest amount a business must pay in processing fees per month. If transaction fees don’t add up to this amount, the business pays the difference.

• Early termination fees: Some merchant service agreements have a contract term and terminating the contract early can result in fees.

• Incidental fees: These fees can include batch processing fees, penalties for non-compliance with security standards, and fees for additional services such as paper statements.

Why merchant fees are so important for businesses to understand

Merchant fees directly impact a business's profitability. The cost that comes with every swipe of a credit or debit card can decrease a business's margin if it isn't managed properly.

Here's why understanding merchant fees is so important:

• They affect pricing: Merchant fees are a business expense, just like rent or employee salaries. To cover these costs, businesses need to absorb them or pass them on to customers in the form of higher prices. Understanding your merchant fees helps you make informed decisions about pricing strategies and avoid losing money on transactions.

• They can vary substantially: Different types of cards, transaction amounts, and industries have different interchange fees. For example, debit cards typically have lower interchange fees than credit cards, and online transactions often have higher fees than in-store purchases. Learning these variations allows you to choose the payment methods and processing options that are most cost-effective for your business.

• They can be negotiable: While some fees, such as interchange fees, are set by the card networks, others, such as merchant account fees, can be negotiated with your payment processor. Understanding the different types of fees and how they're calculated can give you the power to negotiate for better rates.

• They can help you identify fraud: Some merchant fees, such as chargeback fees, are incurred when a customer disputes a transaction. Learning about the fees associated with chargebacks can prepare you to manage potential fraud and prevent it from lowering your margin.

Ways to minimise merchant fees and costs

While merchant fees are an unavoidable part of processing payments for today's businesses, the right strategy can lower costs and minimise hassle. Here are a few key ways to do this:

• Choose the right payment processor: Selecting an appropriate payment processor means evaluating its fee structures against your business's transaction patterns. Processors have different terms for different transaction sizes and volumes, and some might provide specific benefits for your industry.

• Negotiate lower rates: Businesses with high transaction volumes or established sales histories have the potential to negotiate reduced rates with payment processors.

• Encourage debit card payments: Debit card transactions typically incur lower fees than credit cards. Encouraging customers to use debit cards, possibly through incentives or discounts, can help reduce overall transaction costs.

• Use address verification service (AVS): AVS helps lower the risk of fraud in online transactions, which can lead to lower transaction fees and reduce chargebacks.

• Set a minimum card transaction amount: Implementing a minimum purchase requirement for card payments can help offset transaction fees, making small transactions more cost-effective and protecting profit margins.

• Batch process transactions: Processing all card transactions in one batch, typically at the end of the day, can be more cost-effective than processing each transaction as it occurs.

• Choose standardised hardware and software: Using widely supported and standard payment processing solutions can be more economical for businesses. Using these kinds of solutions also offers businesses easier access to support and maintenance.

• Avoid chargebacks: Businesses can reduce chargebacks through explicit policies, exceptional customer service, and comprehensive fraud prevention measures. Chargebacks come with additional fees and can increase processing costs for a business.

• Regularly review your merchant account statements: Reviewing account statements can help you identify and address unexpected fees, billing errors, or changes in fee structures.

• Ensure PCI compliance: Maintaining compliance with the Payment Card Industry Data Security Standard (PCI DSS) helps you avoid non-compliance fees and protects against costly data breaches and related fines.

• Use off-peak processing times: Some payment processors have lower fees for transactions processed during off-peak hours, which can be a cost-saving opportunity for batch processing.

• Take advantage of technology for efficiency: Modern POS systems and payment technologies can speed up transaction processing, minimise errors, and provide valuable sales and customer insight.

• Consider alternative payment methods: Providing alternative payment options such as bank transfers and digital wallets can attract a broader customer base and potentially come with lower processing fees compared to traditional credit card transactions.

How to choose a payment processing provider

Choosing the right payment processing provider is an important step for any business that accepts payments online or in person. It can impact everything from customer experience to your profit. Here’s how the selection process works.

Understand your needs

• Transaction volume: How many transactions do you expect to process monthly? Higher volume might require dedicated account managers or different pricing models.

• Business type: Is your business online-only, brick-and-mortar, or hybrid? Each category might require specific features.

• Payment methods: Which payment methods do your customers prefer? Credit cards, debit cards, digital wallets, or Automated Clearing House (ACH) transfers ? Prioritize providers that support your needs.

• Integration: Does your existing software or POS system have compatible integrations with the provider? Smooth integration saves time and resources.

• Industry specificity: Identify whether your industry has specialized needs. Some providers cater to specific industries such as ecommerce, healthcare, and subscriptions.

• Chargeback rates: Certain industries have higher chargeback risks. Factor in the provider’s chargeback prevention tools and fees associated with disputes.

• Global expansion: If you’re planning for international expansion, ensure the provider supports desired currencies and complies with regional regulations.

• Recurring billing: If you offer subscriptions, choose a provider with recurring billing features and reporting capabilities.

Research potential providers

• Popular options: Research industry leaders to fully understand your options.

• Smaller players: Smaller providers might provide niche features or cater to specific industries.

• Reviews and features: Check independent review websites and compare features provided by short-listed providers.

• Specific features: Go beyond basic features and compare specific functionalities such as mobile payments, invoicing, virtual terminals, and data analytics.

• User experience: Look for user reviews and test demos to assess the provider’s platform usability and interface.

• Security certifications: Look for industry-recognised certifications such as PCI Level 1 compliance for secure data handling.

• Integrations and plug-ins: Check compatibility with your existing software and any necessary plug-ins for added functionality.

Consider these key factors

• Fees and pricing: Compare transaction fees, monthly fees, PCI compliance costs, and any potential hidden charges. Look for transparency and flexible pricing models.

• Security: Assess the provider’s security measures such as PCI compliance, fraud prevention tools, and data encryption protocols.

• Customer support: Check availability, quality, and response times of customer support channels.

• Scalability: Can the provider adapt to your future growth needs? Consider transaction limits, account management options, and international capabilities.

Narrow down your choices and compare quotes

• Narrow it down: Select two to three providers that best meet your needs.

• Get a quote: Request detailed quotes that break down all service fees and potential charges.

• Be diligent: Clarify any doubts or questions you have about their services.

• Negotiate rates: Be prepared to negotiate fees, especially for high-volume or long-term commitments.

• Test support: Contact customer support with questions to gauge their knowledge and responsiveness.

• Free trials and demos: Use available trial periods or demos to test the platform’s functionality and compatibility with your workflow.

Make your decision

• Weigh your priorities: Prioritise your most important needs (e.g., security, features, cost) to make the final decision.

• Read contracts carefully: Pay close attention to termination clauses, hidden service fees, and dispute resolution procedures.

• Make a choice: Choose the provider with the best combination of features, security, price, and customer support.

Stripe's merchant fees

Stripe uses a pay-as-you-go model with no setup fees or monthly charges. This means businesses pay only for the transactions they process. Stripe’s fees are charged per transaction at different set rates based on factors such as location and payment method (e.g., credit card, debit card, bank transfer). Here’s a breakdown of Stripe’s primary fees.

Other fees

• Chargebacks: Stripe typically charges a flat rate per dispute that varies depending on location.

• Currency conversion: Stripe charges a fee for converting currencies; the rate depends on location.

• Radar fraud prevention: Stripe’s fraud detection tools are built into the system and relevant fees are waived for accounts with standard pricing. However, some enterprise plans might require more advanced security and come with additional fees.

• PCI compliance: Businesses are responsible for maintaining PCI compliance, which might involve additional costs.

Factors that can affect your Stripe fees

• Business type: Some industries have higher interchange fees (charged by card networks), which Stripe passes on to the business.

• Transaction volume: High-volume businesses might qualify for negotiated rates.

• Customers’ preferred card type: Premium cards might have higher interchange fees.

Learn more about Stripe’s pricing structure.

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 digital 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.

FAQs about merchant fees