Credit card processing fees, explained

Short answer: every card payment pays three parties — the bank that issued the card (interchange), the card network (network fees), and your processor (the markup). Online, Stripe charges 2.9% + 30¢ per payment and Square 2.9% to 3.3% + 30¢ depending on the plan; Brijee charges 2.8% + 25¢. The quickest way to compare two offers is to add up everything you would pay in a normal month and divide by your sales.

Where the money goes

When a customer pays you $100 by card, the fee comes out before the money reaches your bank account. It splits three ways:

• Interchangegoes to the customer's bank — the one that issued the card. It is the largest part. The card networks set the rates, and they vary by card type (debit, standard credit, rewards, business) and by how the card was accepted.
• Network fees (also called assessments) go to Visa, Mastercard, Discover or American Express for running the network. They are small, a fraction of a percent.
• The processor's markup is what the company you signed up with keeps for moving the money, handling fraud screening, deposits and support. This is the only part that changes from one provider to the next.

Interchange and network fees are the same for everyone for the same card. When two processors quote different prices, the difference is almost entirely the markup and the way it is packaged.

Why online payments cost more than in-person

When the card is not in front of you — an online checkout, a payment link, a number read out over the phone — fraud is more likely, so the networks price those payments higher. That is why nearly every processor has a higher rate for online payments than for tap-and-chip, and a higher one still for cards typed in by hand. On Brijee, an online card payment is 2.8% + 25¢ and a card keyed in over the phone is 3.2% + 25¢.

The three ways processors package the price

Flat rate

One percentage plus a fixed amount per payment, whatever card the customer uses — for example 2.8% + 25¢. It is the easiest to understand and to predict, and you can check your statement with a calculator. On cheap cards you pay a bit more than cost; on expensive rewards cards the processor absorbs the difference.

Interchange-plus

You pay the real interchange and network fees for each card, plus a fixed markup on top (for example interchange + 0.3% + 10¢). It can come out cheaper for businesses with high volume or lots of debit cards, but every statement is different and much harder to read, and the markup is often only one of several monthly fees.

Tiered

Payments are sorted into buckets such as “qualified” and “non-qualified”, each with its own rate. The processor decides which card lands in which bucket, so the low headline rate often applies to only part of your sales. It is the hardest model to compare.

A worked example

Say you sell $10,000 a month online, across 200 payments of about $50 each.

The fixed part matters more than it looks. On small payments it can be a bigger share of the fee than the percentage: on a $10 sale, 25¢ alone is 2.5%. If most of your sales are small, compare the per-payment amounts first.

Fees to look for before you sign

The rate on the front page is rarely the whole price. Ask about each of these:

• Monthly or statement fee — charged whether you sell anything or not.
• Monthly minimum — a floor on your total fees in a slow month.
• PCI fee or PCI non-compliance fee — often yearly, sometimes monthly.
• Gateway fee — a separate charge for taking payments online.
• Setup or application fee.
• Early termination fee — what it costs to leave before a contract ends.
• Chargeback fee — charged each time a customer disputes a payment with their bank.
• Extra fees for subscriptions, invoices or saved cards — some providers add a percentage for recurring billing on top of the card rate.

Brijee has no monthly fee, setup fee, PCI fee or cancellation fee, and no extra charge for subscriptions. The two to know about: a $15 chargeback fee, and a $15 minimum in a month where card sales come to less than $490. See the full list on the pricing page.

What about debit cards?

Debit cards from large banks have a cap on their interchange, set by the Federal Reserve under Regulation II, so they are usually the cheapest cards to accept. On a flat-rate plan you pay the same rate for them as for credit cards; on interchange-plus you see the lower cost directly.

How to compare two offers

1. Take a normal month: total card sales and number of payments.
2. For each offer, add the percentage part, the per-payment part and every monthly fee.
3. Divide the total by your sales. That is your effective rate — the only number that is comparable.
4. Check the contract length and what leaving costs.

If you take bank payments too, see eCheck vs ACH — on large amounts, a capped bank payment can cost a fraction of a card payment.