For most merchants, accepting cards isn’t optional—it’s a necessity. Customers expect the convenience of paying with plastic or mobile wallets, and businesses that don’t offer card payments risk losing sales. But behind the swipe or tap lies a complex web of fees that can quietly eat away at a merchant’s profits. These hidden costs are often misunderstood, miscommunicated, or completely overlooked and they change and have gotten more complex over time.
Interchange Fees: The Biggest Slice
The largest component of credit and debit card processing costs is the interchange fee. Set by card networks like Visa and Mastercard, this fee is paid to the issuing bank every time a customer uses their card. Interchange rates vary depending on card type (e.g., rewards cards typically cost more), transaction size, and how the transaction is processed (in-person vs. online).
While interchange fees are published, they’re incredibly complex—hundreds of different rates exist, each tied to different transaction types and conditions. This complexity makes it difficult for merchants to understand what they’re being charged and why.
As Doug Kantor, general counsel at the National Association of Convenience Stores, told CNBC:
“These swipe fees are the second highest cost of doing business for many retailers, after labor. Most merchants have no ability to negotiate them, and they’re set behind closed doors.”
Processor Markups and “Qualified” Rates
In addition to interchange, payment processors add their own markup, often bundled into pricing structures like tiered pricing. These tiers—commonly labeled “qualified,” “mid-qualified,” and “non-qualified”—sound straightforward but are often anything but. The problem? The criteria for what qualifies as a lower-fee transaction is rarely clear and the merchant rarely has control over that. Merchants may think they’re getting a good deal but end up with most transactions falling into the more expensive tiers.
A more transparent model is interchange-plus pricing, where the processor’s markup is added on top of the published interchange rate. However, not all processors offer this structure by default, and many small businesses are steered toward tiered plans instead.
Monthly and Miscellaneous Fees
Beyond per-transaction fees, merchants are often subject to a long list of recurring charges. These can include:
- Monthly account fees
- PCI compliance fees
- Statement fees
- Batch fees (for settling a day’s transactions)
- Minimum processing fees (if a merchant doesn’t hit a certain volume)
Some providers even charge early termination fees or annual renewal fees, often buried deep in service contracts. These add up quickly, especially for small businesses operating on tight margins.
Chargebacks and Hidden Risk Fees
When a customer disputes a charge, merchants can face chargeback fees, which often range from $15 to $100 per instance—regardless of whether the merchant wins the dispute. Excessive chargebacks can also lead to additional penalties or even the loss of a processing account.
High-risk businesses—like those in supplements, travel, or subscription models—may also face reserve requirements or higher transaction fees, even if their operations are legitimate.
As the U.S. Government Accountability Office (GAO) noted in a report:
“Merchants may not always understand the fees they pay or how they are calculated, limiting their ability to assess the fairness of pricing or to negotiate better terms.”
The Bottom Line
Credit card acceptance is essential, but the costs go far beyond the advertised swipe rate. For merchants, especially those scaling up or operating in lower-margin industries, understanding the full picture is critical. Transparency in pricing, a careful reading of processor agreements, and regular fee audits can help protect profits and ensure your payment processor is truly a partner—not just another expense.
Understanding and addressing these hidden costs could mean the difference between a profitable month and one that just breaks even.