Credit card processing fees are made of four components: interchange (paid to the issuing bank), network assessments (paid to Visa/Mastercard), the processor margin (paid to your acquirer), and a gateway fee (paid to the gateway software). Interchange and assessments are set by the card networks and not negotiable. The processor margin and the gateway fee are. That distinction is where most of the savings hide on any merchant statement.
The four parts of a processing fee
Every card transaction generates a fee that breaks into four lines, even if your statement lumps them together as a single percentage.
Interchange
Paid to the cardholder's bank (the issuer). Set by Visa/Mastercard, varies by card type, channel, and merchant category. 70-90% of total cost. Not negotiable.
Assessments
Paid to the card networks (Visa, Mastercard, Discover). Fixed at roughly 0.13-0.14% of volume. Not negotiable.
Processor margin
Paid to your acquirer (Fiserv, Worldpay, TSYS, North, etc.) as a percentage and/or per-transaction fee. Negotiable.
Gateway fee
Paid to the gateway software (NMI, Authorize.Net, etc.) — usually a flat monthly fee plus a small per-transaction fee. Negotiable.
What a typical statement looks like
Take an e-commerce business doing $50,000/month on cards with an average transaction of $80. A realistic breakdown:
Interchange: ~$900 (1.8% blended, set by networks)
Assessments: ~$67 (0.13%)
Processor margin: ~$150 (0.30%) — negotiable
Per-transaction processor fees: ~$62 ($0.10 × 625 transactions) — negotiable
Gateway: $25 monthly + $0.05/txn = ~$56 — negotiable
Effective rate: ~2.47%
The same merchant on flat-rate Stripe pricing (2.9% + $0.30) would pay $1,450 + $187.50 = $1,637.50, or 3.28% effective. The roughly 80 basis points of difference is the hidden flat-rate margin — material money at any volume above a few thousand dollars per month.
People also ask about credit card processing fees
What is a typical credit card processing rate?
Blended effective rates for US small businesses land between 2.0% and 3.5% depending on channel and pricing model. Card-present retail with debit-heavy mix runs 2.0-2.5%; e-commerce on rewards cards 2.5-3.0%; B2B on corporate cards 2.5-3.0% without Level 3 data and dramatically less with it. Flat-rate services advertise 2.6-2.9% plus a per-transaction fee.
Is interchange-plus cheaper than flat-rate pricing?
For most merchants above roughly $10,000-$15,000 in monthly card volume, yes — because interchange-plus passes the (cheap) interchange through at cost and adds a small, transparent margin. Flat-rate pricing bundles a hidden margin that especially benefits the processor when you accept regulated debit (where interchange is only 0.05% + $0.21). Below that volume, flat-rate's simplicity often wins.
Can credit card processing fees be negotiated?
The processor margin and gateway fee, yes. Interchange and assessments, no. The leverage is your monthly volume and your willingness to quote competitors. On volume above $20-30K/month most processors will reduce margin if asked with a credible alternative quote.
What is a "qualified" rate?
Old tiered-pricing terminology used by some processors. "Qualified" is the cheapest tier (regulated debit), "mid-qualified" covers most credit cards, "non-qualified" covers rewards and corporate cards. The tiers exist to obscure the underlying interchange cost. Avoid tiered pricing in favour of interchange-plus.
Where merchants actually overpay
- Flat-rate pricing above $15K/month volume. Switch to interchange-plus; expect 30-80 bps savings.
- Tiered pricing. Almost always hides 40-100 bps of margin vs. interchange-plus equivalent.
- Not capturing Level 2 / Level 3 data on B2B. On commercial cards, supplying additional data fields (purchase order, tax, line items) drops interchange from ~2.95% to ~1.75% on qualifying transactions.
- Surcharging without checking the gateway supports compliance. Properly disclosed surcharging shifts the fee to the customer where state law allows.
- Multiple gateways/processors for different channels. Consolidating onto one processor-agnostic gateway like NMI usually reduces gateway fees.
If your statement shows a single percentage and no itemization of interchange, you are almost certainly paying tiered or flat-rate margin — ask for interchange-plus.
FAQ
What are credit card processing fees made of?
Four components: interchange, network assessments, processor margin, and a gateway fee. Only the last two are negotiable.
Typical rate?
2.0-3.5% effective for US small business; card-present cheaper than e-commerce, flat-rate more expensive than interchange-plus above ~$15K/mo.
Can I negotiate?
The processor margin and gateway fee, yes. Volume and competitor quotes are the leverage. Interchange and assessments are fixed by networks.
Best pricing model?
Interchange-plus for most merchants above $10-15K/mo volume. Flat-rate only if volume is low and simplicity matters more than basis points.
What about NMI specifically?
NMI is the gateway layer; processing pricing comes from the reseller's acquirer relationship. See NMI pricing.