Payment processing fees are the costs that business owners incur when processing payments from customers. Businesses that accept credit cards and online payments are charged a small fee per transaction, which is referred to as the payment processing fee.
The fee amount will be a flat rate of $3.75 for debit or ATM/Debit transactions and 2.25% (minimum of $3.75) of the tax liability payment amount for all other payment types. To calculate the convenience fee, select a payment method, card type, and then enter the payment amount below.
When you process a credit card transaction, your customer's credit card is charged for the total amount of the sale including sales tax. Transactions aren't divided into sale amount and taxes. Since the transaction amount is the sum of the total sale and the sales tax, you pay your processing fees on that amount.
Credit and debit card surcharges were banned in January 2018, but retailers, letting agents and even a university have been found breaking the rules. The legislation means customers cannot be charged more for paying by card.
You can charge a convenience fee on both card-present and card-not-present credit and debit transactions so long as: The fee is only charged for a bona-fide convenience outside of the typical payment channels and sales process. The fee is applied to all payment channels, including cash.
How to Avoid Paying a Credit Card Convenience Fee or Surcharge. For the most part, getting around a convenience fee is easy. Since only certain types of merchants charge them, you can simply use a different payment method and continue using your credit card for other everyday purchases.
It's important to note that a convenience fee is different than a surcharge. A surcharge is the ability to charge extra just for the benefit of using a credit card while a convenience fee is for a specific use, such as taxes or tuitions, or payment through alternative channels, such as by phone or online.
A payments processing fee is what you pay your credit card processor for use of the product. Typically, this fee is charged per transaction, , in hidden fees, and monthly fees.
California has a law, California Civil Code section 1748.1, that prohibits retailers from adding a surcharge when a consumer chooses to use a credit card instead of paying by cash.
A quick strategy for how to offset credit card processing fees
- Lower operating expenses.
- Increase sticker prices.
- Set a minimum for using a credit card.
- Avoid manual entering of credit card info (this leads to higher fees)
- Negotiate with your credit card processor.
- Find a cheaper payment processor.
Average credit card interchange fees: 1.5% to 3.3%
| Payment network | Interchange fee range |
|---|
| Visa | 1.15% + $0.05 to 2.40% + $0.10 |
| Mastercard | 1.15% + $0.05 to 2.50% + $0.10 |
| Discover | 1.35% + $0.05 to 2.40% + $0.10 |
| American Express | 1.43% + $0.10 to 3.30% + $0.10 |
The average monthly credit card bill is a minimum payment of $123.88, based on the average American credit card balance of $6,194 and the average minimum payment percentage of 2%.
Some credit card processors will refund the processing fees, but charge you a flat-rate fee for returns. This could be as little as $0.05 or $0.10. These fees might not necessarily appear on your transaction as a “credit card refund fee.†But you may not be getting your processing fees back.
