Credit Card Processing

Are Credit Card Processing Fees Negotiable?


March 21, 2018

Some credit card processing fees are negotiable, and some aren’t. Please put the spreadsheet aside for a moment and read this article before you call another processor to ask the fateful question, “What’s your rate?”

Before you can negotiate credit card processing fees, you have to know which fees are flexible. Credit card processing is like any other industry in that there are fixed costs and markups. Fixed costs are those that a processor can’t change, and markups are open to discussion.

Understanding the components of credit card processing cost is the first step toward negotiating competitive fees. The second step, as we will explain in a moment, is to not negotiate fees before negotiating pricing. It may sound like the same thing, but there is an important difference.

Components of Credit Card Processing Cost

The three components of credit card processing cost are interchange fees, assessments and markups. Together, interchange and assessments make up the fixed costs, also sometimes called wholesale or base costs.

Interchange Fees (Not Negotiable)

The bulk of cost is interchange fees. Interchange fees remain the same no matter which credit card processor you choose, and no processor can offer you lower interchange rates than another. These fees are charged by the banks that issue credit cards, and only the stakeholders of Visa, MasterCard and Discover (card-issuing banks) can update interchange.

Some processors conceal interchange costs through tiered or flat-rate pricing models, but don’t be fooled: interchange is always the basis of processing costs.

Assessments (Not Negotiable)

Visa, MasterCard and Discover charge various assessment fees when businesses accept one of their credit or debit cards. Like interchange, a business will pay the exact same assessment charges regardless of which credit card processor it uses. All processors pay the exact same assessment fees to Visa, MasterCard and Discover.

Markups (Negotiable)

The only area of credit card processing expense that is negotiable is the markup above interchange and assessments. The processing markup includes the processor’s rates, credit card transaction fees, monthly fees, and any fees associated with software, gateways or processing equipment. The markup is where you want to focus your negotiating power because it’s the only area of expense you can change.

Distribution of Processing Cost

The goal when negotiating credit card processing fees is to get the markup portion of expense as low as possible in relation to fixed components of cost (interchange & assessments). A markup of 12% – 20% is considered very competitive.

The graph below represents the distribution of credit card processing expense for a business that has competitive pricing. A cost distribution such as this is what businesses can expect to see with the instant quotes received through CardFellow.

As you can see, interchange fees that go to card-issuing banks account for the majority of charges, followed by the processor’s markup, and then assessments that go to the card brands (Visa, MasterCard and Discover).

Cost Distribution After Using CardFellow
Your goal is to negotiate processing fees so the distribution of cost looks similar to this graph.

The following graph represents the cost distribution of a business that does not have competitive credit card processing pricing. As you can see, the processing markup accounts for the majority of expense, and it is a negotiable area of cost.

Cost Distribution Before Using CardFellow
This graph represents the typical cost distribution of a business before it uses CardFellow to lower its credit processing fees.

Negotiate Pricing First

Never start negotiations with a processor by focusing on rates and fees. The first step to lower processing costs is to negotiate a favorable pricing model. Interchange pass through is the most competitive form of pricing, and it’s the one you want to secure. With an interchange pass through model, you’ll be assessed the actual cost of interchange.

Avoid “tiered” or “bundled” pricing models, which lump all of the costs together, making it difficult to see what you’re paying and difficult to get truly competitive pricing. Processors that use “qualified” and “non-qualified” rates are using a tiered pricing model.

Related Article: Stay Away from Tiered Merchant Accounts.

Negotiate the Rate Second

Once pass through pricing has been secured, focus on negotiating rates and fees, keeping in mind the most important rate is the effective rate. The effective rate is one number that represents the amount of processing volume paid in fees.

For example, a business that pays $50 in fees in a month where it processed $1,000 in credit card sales has an effective rate of 2.00%.

Focusing on the effective rate ensure that you are negotiating for total cost, not an individual rate or fee.

The effective rate of each quote that you receive through CardFellow is posted in the quote summary panel. This ensures that you can quickly and easily compare various offers. A detailed breakdown of the components of cost is also shown in the detail panel for each quote. This will allow you to compare quotes received within CardFellow to those that you gather on your own.

Ben Dwyer

BY Ben Dwyer

Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing.As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.


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  1. from, on October 16, 2016

    If we were to use Interchange Plus with gateway, what section would processing fees be in? Correct me if I am wrong, they seem to be negotiable.