Credit cards remain the preferred payment method for American consumers. A May 2025 report from the Federal Reserve Financial Services shows that credit cards account for 35% of monthly consumer payments (by count), followed by debit cards at 30%. [1]Federal Reserve Financial Services. Cash remains relevant in an increasingly digital economy. Accessed February 5, 2026.
Given that credit cards are extremely popular, enabling consumers to pay using their preferred cards is a no-brainer. That said, accepting credit cards may also come with higher fees than methods like debit cards or ACH payments. When not managed properly, those fees can eat into your bottom line.
So, the question is: how can you reduce your credit card processing fees while enhancing profitability in this economy? Let’s explore this in detail.
Key Takeaways
- Interchange and assessment fees are an inevitable part of credit card processing, but there is some room to negotiate the processor markup.
- Several factors affect card processing rates, including your payment provider’s pricing model, your business and industry type, transaction volumes, processing history, and the payment methods you accept.
- Choosing the right pricing model for your business, eliminating junk fees, encouraging low-cost payment methods, and improving transaction quality are ways to lower your processing costs.
- Analyze your monthly statements to check if you’re overpaying, and consider switching to a processor better suited to your business needs.
What Credit Card Processing Fees Include
Credit card processing fees are meant to cover the costs that banks and other entities in the payment ecosystem incur to process your business transactions. Understanding the components can help you lower credit card processing fees and make better business decisions.
- Interchange Fees – This is the fee the merchant’s acquiring bank or processor pays to the customer’s card-issuing bank to cover the costs and risks of processing transactions. Payment card networks like American Express, Mastercard, and Visa determine interchange fees, which can vary by transaction method (online, mobile, swiped, keyed), card type (corporate cards, debit cards, rewards cards), business type, industry type, and several other factors.
- Assessment Fees – These are network fees set by Visa, Mastercard, etc., that ultimately get passed through to merchants to cover the costs of using their infrastructure.
- Processor Markup – This is the fee you pay your payment processor for the services they provide, typically a percentage of each transaction. Some payment providers may also add additional components, such as a monthly fee, an annual fee, a PCI compliance fee, a chargeback fee, an early termination fee, and hardware/software fees.
Interchange and assessment fees are an inevitable part of credit card processing. However, there is some wiggle room with the processor markup. This is why your choice of payment provider matters so much.
What Actually Causes High Credit Card Processing Fees?
As mentioned earlier, several factors affect card processing rates. While you can’t eliminate credit card processing fees completely, you can certainly learn how to get the lowest credit card processing rates for your business. Here are the things to look out for:
- Pricing Model – The pricing model your payment provider uses (tiered, flat rate, or interchange-plus) can significantly affect the processing fees you pay. Sometimes payment providers may tack on “junk” fees, such as early termination fees or monthly minimum fees, that drive up costs.
- Transaction Volumes – Your business’s transaction sizes and volumes directly impact your credit card processing costs. Without the right pricing model, higher transaction volume can actually increase your costs rather than reduce them.
- Industry and Business Type – If your business belongs to an industry that’s deemed high-risk (e.g., casinos, online gaming, travel, etc.) for chargebacks, fraud, etc., chances are your processing rates will be higher.
- Processing History – If your business is new, has an unstable financial history, or has had high chargeback rates in the past, you may have to pay higher processing fees (because of the greater risk).
- Transaction Type – Your processing fees may also vary depending on the payment methods you choose to accept. For example, in-person swiped or contactless payments have lower credit card processing fees compared to card-not-present (online, phone, mail) payments, which are deemed riskier.
- Card Type –The type of card your customers use for transactions also affects processing fees. For example, standard debit cards have low processing fees while premium and rewards cards typically incur higher interchange rates.
Top 4 Ways to Reduce Credit Card Processing Fees
Want to save on credit card fees? Consider the following pointers.
1. Use the Right Pricing Model
To determine the best pricing model for your business, you need to understand how each one works. Analyze your business needs carefully, then decide on the pricing model that’s best for you.
- Flat Rate – One of the simplest pricing models, where you pay a single, fixed percentage (plus a small per-transaction fee) on every transaction, regardless of its value. Its simplicity and predictability make it one of the best choices for small businesses or businesses with low transactional volumes.
- Interchange-plus – In this model, you pay the interchange fee plus the processor markup on every transaction. Its transparency and reliance on actual interchange rates make it an excellent choice for businesses with high-volume transactions or varied payment types. However, statements can be hard to read because of their detailed nature, and costs can fluctuate depending on transactions.
- Tiered – By far the most complex one to understand, it classifies transactions into three tiers —qualified, mid-qualified, non-qualified — with different processing rates for each. This classification can be very hard to decode. Most merchants end up with a majority of their transactions in the higher-cost tiers, making this the least transparent and predictable pricing model.
2. Improve Transaction Quality
Improving transaction quality reduces the risk profile of your transactions. Here are some ways you can accomplish this so your transactions qualify for lower processing rates:
- Use Address Verification Service (AVS) – AVS checks minimize the risk of fraud and chargebacks by authenticating the customer’s address against the one on the card issuer’s file.
- Use Secure Payment Systems – Ensure your payment systems capture and authenticate card CVV (security codes) to reduce losses and disputes. Systems equipped with advanced encryption techniques, such as tokenization, make payments more secure.
- Use Low-Risk Payment Methods – Card-present transactions are more secure and carry lower risk than card-not-present transactions.
- Settle Payments Faster – Don’t wait too long to settle transactions, as late settlements increase the risk profile. Settle transactions within 24 hours of authorization.
- Provide Level 2/Level 3 Data – If you process B2B transactions, sending Level 2/3 data for those transactions can lower your risk profile and, in turn, your processing costs. Level 2 data includes customer codes, tax amounts, purchase order numbers, etc., while level 3 data includes unit costs, quantities, product codes, etc.
3. Encourage Lower-Cost Payment Methods
Another way to reduce your payment processing costs is to encourage customers to use low-cost payment methods, such as debit cards. Additionally, since card-present transactions cost less to process, encourage in-person payments via credit card terminals that let customers swipe, tap, dip, or insert cards.
You can even offer QR code payments if you can’t use a payment terminal, as they can be cheaper to process than keyed-in payments, depending on how your provider processes them. If your business often processes high-value invoices, consider switching to ACH processing.
Make sure you have enough promotional signage at strategic locations (e.g., points of sale) that recommend the use of these low-cost payment methods. Where legally permitted, merchants can even offer incentives for customers, such as discounts or loyalty points on debit cards and card-present payments, or charging a convenience fee for non-preferred (higher-cost) payment methods.
4. Remove Processor Markup & Junk Fees
When you choose a payment provider, make sure you understand precisely what you’ll be paying for. Look out for hidden fees, such as monthly minimums or early termination fees.
Compare written quotes from different payment processors and be prepared to negotiate processor markup fees. Also, if you’re concerned you’re overpaying, look out for junk fees like PCI compliance fees, payment gateway fees, etc.
How to Know If You’re Overpaying
The key to knowing whether you’re overpaying for credit card processing is to analyze your monthly statements carefully for potential red flags. Red flags could look like any of the following:
Multiple Hidden Fees
- If you come across several junk fees (not related to transaction volumes), that’s a red flag.
High Rates
- Calculate your average fee percentage and compare it with the industry average. If what you’re paying is significantly higher, that’s a red flag.
Tiered Pricing
- If you encounter terms like “qualified,” “non-qualified,” or “mid-qualified,” this often results in higher, less predictable costs for many merchants.
How Kurv Helps Reduce Credit Card Processing Fees
Kurv offers an ecosystem of payment solutions and pricing options that enable you to accept credit cards at the lowest cost.
With our low, flat-rate pricing and zero hidden fees, you can enjoy the simplicity, transparency, and predictability you need in your payment processing. There’s also our zero-cost processing, which lets you offset your credit card processing fees by passing them to the cardholder.
Kurv also gives you access to discount options designed to lower your overall processing costs. With interchange-plus pricing, you pay a small, transparent markup above interchange rather than inflated bundled rates. And if you process a higher volume of transactions, you can qualify for high-volume discounts that reward your growth with better pricing over time.
Enjoy your peace of mind as you focus on what truly matters for your business by switching to Kurv today.
Frequently Asked Questions
Can you eliminate credit card processing fees completely?
Credit card processing fees will always exist; it’s just a question of who pays them. If you’re a merchant, you can “eliminate” processing fees by passing them on to the cardholder through methods like cash discounting or zero-cost processing.
What’s the cheapest way to process credit cards?
There’s no single cheapest option for every business. Interchange-plus pricing is often the most cost-effective because it separates network fees from processor markup. If you process a lot of credit card transactions and higher-value transactions, you can lower your rates by negotiating high-volume discounts.
Can small businesses negotiate credit card processing fees?
Yes. Many processors will negotiate pricing, especially if your volume grows or you’ve been in business for a while. Even small businesses can qualify for better rates by switching providers or choosing transparent pricing.
Are ACH payments always cheaper than credit cards?
Usually, but not always. ACH payments tend to have lower fees than credit cards, especially for large transactions, but they can be more expensive for small, frequent payments or returns.
Does passing credit card fees to customers hurt sales?
Passing credit card fees to customers can hurt sales by increasing shoppers’ costs. That said, if you disclose those fees clearly and are upfront about your approach, customers are less likely to push back.
How often should I review my credit card processing fees?
At least once a year, or anytime your sales volume changes. Fees can creep up as your business grows, pricing models change, or new payment methods are added. When you regularly review processing costs, you can spot red flags sooner rather than later, and you’re less likely to overpay.
