The one-paragraph answer:

Every card transaction has three fees stacked on top of each other: interchange (1.5–2.5%, set by Visa/Mastercard, non-negotiable), assessment (~0.14%, also non-negotiable), and the processor markup (the part that varies — this is where you either win or lose). Flat-rate processors like Square and Stripe bundle all three into one rate (2.6–2.9%) and make it simple. Interchange-plus processors charge the real interchange + a small markup and are cheaper at higher volumes. Most small businesses under $50k/mo: just use flat-rate and move on.

How Credit Card Processing Fees Work

Every fee on your merchant statement broken down — what it is, who gets it, and how to pay less of it.

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The three layers of every transaction

1. Interchange fee — paid to the card-issuing bank 1.5% – 2.5%

2. Assessment fee — paid to Visa / Mastercard / Amex 0.13% – 0.15%

3. Processor markup — paid to Square, Stripe, your bank, etc. 0.1% – 0.5% + per-transaction fee

Total on a typical in-person transaction 2.0% – 3.5%

Layers 1 and 2 are non-negotiable — every processor pays them. The only thing that varies is the processor markup in layer 3. That's where you have leverage.

Flat-rate vs interchange-plus — which saves money?

Pricing model	How it works	Best for	Example cost on $1,000
Flat-rate (Square, Stripe, PayPal)	One blended rate covers all fee layers. Simple, predictable.	Under $50k/mo. Simple to understand and reconcile.	$26 (at 2.6%)
Interchange-plus (most banks, Helcim)	You pay actual interchange + a small fixed markup.	Over $50k/mo. Saves money on debit cards and basic credit cards.	$18–22 depending on card type
Tiered / bundled (old-school processors)	Transactions sorted into "qualified," "mid-qualified," "non-qualified" buckets.	Nobody. This model benefits the processor, not you.	Unpredictable — often highest total cost

Why some cards cost more to accept

Rewards cards cost more — the cashback/points come from higher interchange. That Amex Platinum costs you ~2.5% vs a debit card at ~0.8%.
Keyed-in transactions cost more than tap/swipe — "card not present" is higher risk, so interchange is higher.
Corporate cards cost more than personal cards — typically 0.3–0.5% higher interchange.
International cards add 0.8–1.5% on top of standard rates.

How to actually pay less

Encourage tap-to-pay Contactless transactions are processed as "card present" — cheaper than keyed-in. Put the reader where customers can tap without asking.

Switch to interchange-plus at volume If you're processing $50k+/mo, interchange-plus through Helcim or a local bank can save $200–800/mo vs flat-rate.

Avoid tiered pricing contracts If a processor quotes you "qualified/non-qualified" rates, walk away. You can't predict your cost and they always win.

Negotiate on volume Both Stripe and Square will negotiate custom rates above $80k/mo. Call them directly — don't wait for them to offer.

Batch at end of day Some older terminals charge more for transactions not batched within 24 hours. Auto-close your batch nightly.

Pass surcharges legally In California you can add a credit card surcharge (up to 3%) if disclosed at point of sale. Many contractors do this for large jobs.

Confused by your merchant statement?

Text me a screenshot or describe what you're seeing — I'll tell you if you're overpaying and what to do about it.

💬 Text PJ — 858-461-8054