Why a single rate rarely tells the whole story
When someone asks “what’s your rate?”, they are asking for a shortcut. A rate describes only one piece of the cost, and it can describe that piece in different ways.
Payment processing costs are made of several pieces, so two offers with similar-looking headline rates can come out differently once everything is counted.
A better question: what will I pay in total for the way my business takes payments, and what do I get for it?
How payment processing fees are built
Every card payment involves a few layers of cost.
Fees that come from the card networks and banks
When a customer pays by card, the card networks and the bank that issued the card charge fees for handling the transaction. These are often called interchange and network assessments.
They are set by the networks and issuing banks rather than by your processor, and they can vary with things like the type of card and how it is accepted.
Fees a provider adds
On top of the network and bank fees, your provider adds its own charges. These may be a percentage, a per-transaction amount, or both. Providers can also charge for accounts, statements, gateways, support and equipment.
Common pricing structures at a glance
Providers package these costs in different ways. Terminology varies from provider to provider, so treat these as general descriptions.
| Structure | How it generally works | A good question to ask |
|---|---|---|
| Flat rate | One stated price for most card sales | Is it good value for my mix of sales? |
| Tiered | Transactions are sorted into categories, each with its own price | Who decides which category a sale falls into? |
| Interchange-plus (cost-plus) | Network and bank fees are passed through at their actual amounts, and the provider adds its own stated charge | What exactly is the provider’s charge? |
No structure is automatically cheaper or better. It depends on how and what you sell. Ask for the structure in writing, in plain words.
Some providers also offer programs that move card costs toward the customer. These work differently from the structures above; see cash discounting vs. surcharging.
Costs people overlook
The line that gets quoted is rarely the only line.
Value is part of the cost question
A price only means something next to what comes with it. Consider:
- Support: who you call when something breaks, and who owns which problem.
- Reporting: whether you can read your own statements and sales reports without help.
- Tools: whether the setup includes the things you actually use, such as a POS, online ordering, or customer tools like gift cards and loyalty.
- Fit: whether the setup matches how you really take payments, now and as you grow.
A setup that costs a bit more can be reasonable if it provides something your business uses every day. A setup with a low headline rate can turn out to be expensive if it needs workarounds. Neither is a rule. The point is to weigh both sides.
How to read a quote or a statement
A short checklist to keep next to any quote or statement. For a fuller walkthrough of a statement, see how to read your merchant processing statement.
- List every charge, not just the main rate.
- Mark which charges repeat monthly or annually and which are per transaction.
- Note any charge you cannot explain, and ask what it is for.
- Check what is said about equipment, contract length and cancellation.
- Ask how deposits are timed and how they appear on your statement.
- Ask what support is included and how to reach it.
Questions to ask before you compare two offers
For the other half of the decision, see our checklist for choosing a payment processor. If the terms themselves are new, what a processor, gateway and merchant account each do is a good place to start.
Two related guides go deeper on the practical side: what is and is not negotiable in your processing rates and hidden fees and red flags in a merchant services agreement.