The Fee Breakdown
1. Interchange Fee
What San Diego business owners most often ask about fees: whether there is a lower-cost option for high-volume months (yes — negotiate interchange-plus pricing if you exceed $20K/month), whether you can pass fees to customers (yes — surcharging is legal in California but must be disclosed at the point of sale and limited to your actual cost), and whether local banks offer better rates (usually no — major processors consistently beat bank merchant services on price and features).
2. Assessment Fee
Paid to the card network (Visa, MC, Amex). Also non-negotiable. Usually 0.13–0.15%. Small but real.
3. Processor Markup
This is what your processor keeps. On flat-rate (Stripe/Square): baked into the rate. On interchange-plus: shown separately. This is the only fee that's negotiable.
4. Monthly Fee
$0–$99/month depending on processor. Often called "account maintenance" or "statement fee." Many processors waive this if you ask.
5. PCI Compliance Fee
$9.95–$19.95/month. Pays for your annual PCI DSS questionnaire. If your processor charges this AND you've completed your SAQ, it's negotiable.
6. Batch Fee
$0.05–$0.25 per batch settlement. Often overlooked. Adds up for high-volume merchants.
7. Chargeback Fee
$15–$100 per dispute. Non-negotiable per incident, but preventable with better dispute management.
8. Early Termination Fee
$200–$500+ if you cancel before contract end. Never sign a contract with an ETF.
What you thought you were paying: 2.9%
What's actually on your statement: 2.9% + $0.30 + $15 monthly + $9.95 PCI + $4.95 batch + $2.50 statement
Your real effective rate: Divide total fees by total volume. For most SD small businesses: 3.4–4.1%.
How to Calculate Your Effective Rate
Formula: Total processing fees ÷ Total card volume = Effective rate
Pull last month's statement. Add up every fee. Divide by total card volume processed. If it's above 2.8% for in-person or 3.2% for online, you're likely overpaying.
What's Negotiable (And What Isn't)
- Negotiable: Processor markup, monthly fees, PCI fees, batch fees, statement fees
- Not negotiable: Interchange rates, assessment fees, chargeback fees per incident
- Best leverage: Volume above $10k/month. Tell them you're shopping around.
Frequently Asked Questions
- What is an effective rate in payment processing?
Your effective rate is your total processing fees divided by your total card volume. It's the real cost of accepting cards, including all fees — not just the advertised rate. - What's a good effective rate for a San Diego small business?
Under 2.8% for primarily in-person transactions, under 3.2% for primarily online. Most businesses we see are paying 3.4–4.1% when all fees are counted. - Can I negotiate my payment processing fees?
Yes — if you're doing over $5k/month. The processor markup, monthly fees, and PCI fees are all negotiable. Interchange and assessment fees are set by Visa/Mastercard and cannot be changed. - What's the difference between flat-rate and interchange-plus pricing?
Flat-rate charges the same percentage on every transaction. Interchange-plus charges the actual card network cost plus a fixed markup. Interchange-plus is usually cheaper above $8–10k/month. - How do I switch payment processors without losing customers?
Most payment processors handle the migration. Keep your old account open for 30 days during transition. Update any saved card or subscription billing to the new processor before closing the old one.
