The Impact of Average Interchange Fees on Small Businesses

Accepting credit cards is a given for most businesses of all sizes. But a small business owner may need to know the numerous processing fees involved. These include interchange and assessment fees. The interchange fee goes to the bank that issued the card, while, typically, the payment networks will keep the assessment fee (Visa, MasterCard, Discover). These fees are most often passed on to merchants.

Interchange Rates

Interchange fees are percentage-based fees charged to merchants for each credit or debit card payment they accept. These fees are charged by card-issuing banks, credit card networks (like Visa and Mastercard), payment gateways, and the bank that processes the payments for the merchant. These fees are typically bundled together and appear on the merchant’s monthly statements as one total amount, and they’re the bulk of overall credit card processing costs.

While these pesky fees aren’t within a merchant’s control, they can be reduced with a processor offering curated rates and transparent pricing. To find the best credit card processing company, check out our guide on saving money with a trusted merchant service provider.

Another factor that determines your average interchange fees is what kind of payment method you use. For example, in-person card-present transactions at your point of sale usually carry lower interchange fees than card-not-present payments (like online and over-the-phone purchases). Similarly, debit cards are often more reliable and have less risk than credit cards.

Finally, the merchant category code (MCC) assigned to your business determines how much you’ll pay for each type of transaction. If you operate a high-risk industry or you’ve been hit with chargebacks in the past, your MCC will be higher and could lead to higher interchange fees. However, there are ways you can do to prevent credit card chargebacks and stop them from ruining your business.

Payment Method

Credit card payments are a staple of small business payments, allowing customers to complete purchases quickly and securely. Whether you have customers who exclusively use debit cards or a mixture of credit and prepaid cards, your average transaction size will impact your processing fees. Other contributing factors include the number of transactions, ticket size, and payment methods. Using an online payment processing guide like ours can help you understand the cost structure of various processors and find one with affordable rates for your business.

Interchange fees are the most significant transaction cost for merchants accepting card payments. These fees, also known as swipe fees, are paid by the merchant to the card issuing bank every time a customer uses a credit or debit card at their business. While these fees can’t be avoided, you can make informed decisions to reduce them. For example, encouraging customers to pay with Apple Pay may result in lower swipe fees due to the platform’s measures to secure transactions. You can also take steps to optimize your payment processing based on ticket size, average credit card fees, and the types of cards used by customers. Lastly, consider surcharging to offset some of the higher costs associated with card payments. However, these charges must be weighed carefully to avoid driving away your customers and creating friction in your relationships.

Ticket Size

Ticket size is a metric many businesses use to help them understand sales trends and performance. Retail companies, credit card vendors, and brokers/dealers typically report this figure.

The ticket size significantly impacts the overall average credit card processing fees your business pays. The reason is that transaction fees are a percentage of the sale amount and are charged on debit and credit transactions. Minor transaction amounts cost more than larger ones because they require more processing time.

Your average credit card transaction fees will decrease as monthly transactions and total processing volume increase. However, your debit and credit interchange rates will still vary by payment method — for example, swiped transactions cost less than keyed ones.

Understanding how your ticket size affects your processing costs and shopping around for the best rates is essential. For instance, if you have an interchange-plus processor, they’ll add a percentage markup to your interchange cost — where most of their profit comes from. A better option is a flat monthly fee, which some payment processors offer through membership pricing. This structure removes the processor markup and can save you thousands of dollars annually. To compare apples to apples, look at each provider’s fee structure.


Credit card surcharges and convenience fees are popular ways businesses recoup processing costs. However, it’s essential to understand the difference between the two. While both are ways to pass processing costs onto customers, several rules and regulations must be followed.

In addition, surcharges must be listed as a separate line item on the receipt for customers to see. If your business chooses to implement a tax, you must notify significant credit card institutions and follow their protocols to ensure transparency. Businesses often use surcharges to offset other costs imposed on them by the government or other organizations, like regulatory recovery fees or fuel taxes. This helps them avoid passing these additional expenses directly to consumers through higher prices or lower service levels. Examples include airline surcharges for checked baggage, telecommunication and cable company surcharges, or resort surcharges for extra amenities. While many small business owners consider implementing surcharges to recoup their transaction fees, it can sometimes be practical. Consumers tend to resent these charges, and 7 in 10 feel paying more for the same product or service is unfair. Try to find a more transparent way to cover your processing costs by building them into your products or services.


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