Flute
Every time you buy something with a credit card, a small portion of that sale goes to processing fees. Most consumers don’t see those costs, but for small businesses, merchant processing costs can add up quickly.
Credit card fees usually range from 1.5% to 3.5% of the total sale. As a small- or medium-sized business (SMB), if you sell a $100 item, between $1.50 and $3.50 of that transaction will be divided among banks, networks, and processors before the rest reaches your bank account.
As your volume grows, so will the cost of taking payments. For instance, if your business does $100,000 per month in credit card transactions, between $1,500 and $3,500, on average, will go toward paying those fees.
In 2023, U.S.-based businesses paid $224 billion in credit card processing fees. Although there’s no way to get around card fees altogether, there are opportunities to minimize them. So, let’s break down the different types of credit card processing fees and what you can do to lower them.
Credit card processing fees — or processing rates — are the cost businesses pay to accept credit and debit card payments for their goods and services. Fees are split between a few people in the payments ecosystem, including:
Every time your customer swipes, dips, or taps their card, those organizations take a slice of the sale. Understanding who gets what will help demystify the cost of accepting credit cards and give you leverage when comparing providers.
Card-issuing banks like Citi, Chase, and Wells Fargo collect the largest share of fees, also known as interchange fees. These costs cover everything from assumed credit risk to fraud protection and transaction handling.
Card networks like Visa, Mastercard, Discover, and American Express charge assessment fees for access to their infrastructure. These costs support the secure global systems that make card transactions possible.
Payment processors are the companies that manage transaction logistics, deposit funds into your merchant account, and offer value-added tools like advanced reporting, customer support, or point of sale (POS) integrations. These companies often charge a markup or service fee to cover their services.
During online transactions, payment gateways securely transmit a customer’s payment information to the processor. Gateways are often built into the processor’s platform, but if you’re using a separate, third-party gateway, there may be additional fees.
Credit card fees often go beyond the standard percentage per transaction. Here’s a breakdown of the most common fees you might encounter as a business owner.
Interchange fees are set by the card networks and paid by a merchant’s acquiring bank to the card-issuing bank to compensate issuers for costs like fraud risk, transaction processing, and cardholder rewards. Interchange fee rates can range from 1.15% to 3.25% or more per transaction. These costs vary by card type, transaction method, and industry.
Assessment fees are charged by card networks like Visa and Mastercard for processing transactions through their payment networks. These fees are typically around 0.13% to 0.15% of each transaction. Although they’re more consistent than interchange fees, assessment fees can vary based on factors like transaction type or whether a payment is domestic or international.
Processor markup reflects what payment processors charge for providing the technology and services needed to manage transactions, including payment authorization, transaction routing, and customer support. Processors play an important role in the payments ecosystem by ensuring transactions move securely and reliably from one party to the next.
Processor costs vary based on pricing model, but the most common include:
Gateway fees are the charges payment gateway providers collect to handle online transactions. Gateway pricing often includes one or both of the following:
There are a few more costs to be aware of, ranging from monthly minimums to fraud-related chargeback fees. Here’s a quick look at some of the most common ones:
Payment providers structure their credit card processing fees in several different ways. Here are the three most common models you’ll see.
Flat-rate pricing is a fixed-fee structure in which businesses pay the same rate for each transaction. For instance, a payment company might charge 2.6% + $0.10 every time you take a payment, regardless of what you sold or the final price. It’s the most expensive pricing structure. While it’s convenient for some merchants, flat-rate processing rates can quickly add up and erode profit margins in high-volume businesses.
Here are the pros and cons of flat-rate payment pricing:
Pros:
Cons:
Tiered pricing divides transactions into three categories based on card type and payment processing method. Transactions are categorized as:
In tiered pricing, interchange rates are the lowest for qualified transactions and the highest for non-qualified transactions. This structure also includes a percentage-based fee based on the card type.
Overall, tiered pricing is generally less expensive than flat-rate pricing since you don’t have to pay as much for qualified transactions. Here are the pros and cons of this pricing model:
Pros:
Cons:
This model charges the actual interchange fee plus a fixed markup from the processor. For instance, you might pay 1.8% + $0.10, depending on the card and how it’s used. With interchange-plus pricing, you always pay the underlying rate plus a consistent, clearly defined markup that goes to the processor. This model lets you to cut costs on qualified transactions while knowing exactly how much will be sent to your processor.
Pros:
Cons:
Credit card processing rates aren’t just a transactional expense — they directly impact your total cost of ownership over time. That means a seemingly small difference in fees can translate into thousands of dollars annually, especially for businesses with high sales volumes. Thankfully, with the right strategies, you can lower processing fees and keep more of what you earn without changing how you do business.
Here are seven practical ways to get started:
Interchange-plus is the best pricing model for most businesses. It separates card network costs from processor markup fees, so you always know exactly where your money is going and save more long-term.
No fee payment processing options let you compliantly pass your merchant processing costs along to your customers. When choosing a payment provider, ask if they support cash discounting, dual pricing, or surcharging so you can keep more of what you earn.
Payment processors have more wiggle room in their pricing than you might think. Ask about how you can lower your per-transaction fee or monthly service charges — especially if sales are steady.
Leasing card terminals might sound convenient, but the long-term cost can be up to five times higher than buying hardware outright. Payment equipment usually pays itself off after just a few months.
High-risk businesses (like CBD, firearms, gaming, and travel) often have to pay higher interchange rates to cover the increased risks of fraud, chargebacks, and legal restrictions.
On the other hand, business-to-business (B2B) and business-to-government (B2G) companies may be eligible to apply for Level 2 or Level 3 processing, which offers lower processing fees in exchange for more detailed transaction data.
Understanding what type of business you operate can often help you navigate and even reduce credit card fees.
Being PCI-compliant protects your customers’ data and prevents costly non-compliance fees.
Take the time to fully understand your monthly statements and keep a close eye out for vague charges labeled “regulatory fees,” “service add-ons,” or “batch fees.” These might be unnecessary or inflated. If something looks off or is unclear, ask your provider to explain or justify the charges.
Small changes can lead to major savings, especially as your business grows. At Flute, we’re here to help you get the best deal and keep more of what you earn on every transaction. To learn more, reach out to a member of our team.
You only have a few minutes before your meeting, but it’s your turn to pick up coffee. You drop into a local cafe, place your order, and reach for your wallet — only to realize you left it at home. There’s no time to double back, so you pull out your phone, hold it near the terminal, and in seconds, the payment is done. You grab your drinks and are out the door with time to spare.
As a customer, that kind of payment experience feels effortless. As the coffee shop owner who made it possible, you didn’t just make a sale; you earned a regular.
Consumer expectations are shifting. People are reaching for their phones instead of their wallets, tapping cards instead of swiping them, and choosing businesses that make checkout feel invisible.
Younger shoppers, especially those who’ve grown up with digital payments as the norm, won’t think twice about going elsewhere if a business can’t accommodate how they want to pay. And that’s backed by data: 70% of consumers say the availability of their preferred payment method is very or extremely influential in deciding where to shop.
If you’re a business owner who’s been wondering whether contactless payments are worth the effort, or even what they actually are, this guide is for you. We’ll cover how to accept contactless payments, what consumers expect, the real benefits for your business and your customers, and what they actually cost.
Contactless payments are any transactions completed without swiping a card, inserting a chip, or exchanging cash. Instead, they rely on wireless technology, most commonly near-field communication (NFC), to pass payment data between a device and a reader.
In practice, that looks like a customer tapping a phone or smartwatch near a payment terminal to pay through Apple Pay, Google Pay, or Samsung Pay.
It also includes contactless-enabled credit and debit cards. Most cards issued in the past few years include this feature by default, indicated by the small wave icon on the card’s face. It also includes QR code payments, where a customer scans a code on a screen or printed display to complete a transaction through a mobile app.
Contactless payments are more convenient than traditional methods: the customer taps, scans, or hovers their device, and they’re done. It also allows businesses to accept payments from a much wider range of devices and payment methods than traditional card readers.
Here’s a quick breakdown of the most common types of contactless payments:
The shift toward contactless payments isn’t a trend on the horizon; it’s already the mainstream. Mastercard reported that 70% of all in-person transactions on its network were contactless in the third quarter of 2024, and that number is growing. That means contactless payments have moved from early-adopter territory into everyday use.
Younger shoppers are driving much of this shift; for many of them, using a digital wallet for business and personal transactions is already second nature. Worldpay’s 2026 Global Payments Report found that digital wallets are the most-used online payment method for 39% of 18-to-24-year-olds and 41% of 25-to-34-year-olds. The same report projects that by 2030, $4.1 trillion in U.S. spending will flow through digital wallets, a 64% increase from 2025.
This matters across all industries, not just retail.
Consider a home services contractor who just finished a week-long renovation project. Their customer wants to settle up on the spot, but they don’t have any digital payment options available, so they mail an invoice instead. That invoice takes a week to arrive, only for the customer to then misplace it. Instead of receiving their money on the spot, cash flow stalls, and the contractor has to spend weeks chasing down their payment. It’s not only a bad experience for the customer, but it’s bad for the business, too.
Contactless options solve this problem, allowing the contractor to process the transaction immediately rather than waiting weeks (or months) for their customer to pay a paper invoice.
The data makes it clear what’s at stake. A 2024 Applause Digital Payments Survey found that 76% of consumers are likely to abandon a transaction if they can’t pay the way they want. And research from PPRO found that 42% of U.S. consumers said they’d walk away from a purchase if their preferred payment method wasn’t accepted.
These aren’t customers who reconsidered and came back. In most cases, they went somewhere else.
For growing businesses, there are three places you’ll see the greatest benefits: checkout completion rates, the ability to serve shoppers without adding more time, and more customers.
Fewer abandoned sales: Payment friction is notorious for quietly draining your revenue. When customers can’t pay the way they want, they often don’t say anything; they just don’t complete the transaction. Removing that barrier is one of the best ways to improve your conversion rate without changing anything else about your business.
Faster service: A tap takes seconds. Compare that to inserting a chip and waiting for approval, counting out change, or flipping through a wallet for the right card. For businesses with consistent foot traffic, like cafés or retail stores, that speed adds up fast. Straightforward transactions mean more throughput, shorter lines, and a better experience for everyone.
A broader customer base: Gen Z and Millennial shoppers have strong preferences when it comes to paying for goods and services. Offering the payment options they already use will help you reach more people and build lasting loyalty.
On the other side of the counter, the benefits to your customers are just as tangible. They’re the kind that build goodwill and bring people back.
Speed and convenience: This is what customers feel most immediately. Worldpay’s 2026 Global Payments Report notes that consumers are drawn to digital wallets because they’re fast, safe, and easy to use. A smooth, fast transaction is a small thing that leaves a lasting impression.
Better security: Contactless payments are more secure than magnetic stripe swipes, which surprises a lot of people. NFC transactions use tokenization, so instead of transmitting a customer’s real card number, the terminal receives a one-time token that applies only to that specific transaction. There’s no static data to intercept and no card number to copy, so your customers are protected at every step.
Payment flexibility: Not every customer carries the same thing. One shopper might have their phone, another might have a contactless card, and another might only have a smartwatch. When your business accepts a range of contactless options, customers can pay with whatever they have on hand. That kind of flexibility is easy to offer and hard for customers to forget.
Security is often the first question business owners raise, both about protecting their operations and their customers. It’s a fair question, but fortunately, contactless payments are among the most secure payment types available.
NFC payments use end-to-end encryption and tokenization to secure each transaction. That means when a customer taps their phone or card, the terminal receives a unique encrypted token in place of their actual card information. Because tokens don’t represent specific card numbers, even if that data were somehow intercepted, it would be useless to fraudsters.
Let’s compare that to magnetic stripe cards. The data embedded in a magnetic stripe is static, so it’s the same on every single swipe. That makes it possible for fraudsters to copy data using special equipment, which is why mag stripe card fraud has historically been so common.
NFC-based payments don’t carry that vulnerability.
The biggest fraud risk for most businesses today isn’t contactless transactions; it’s outdated hardware that doesn’t support modern encryption standards. Upgrading to contactless-enabled devices will not only make it easier to meet customer expectations but also help keep your business safe.
Contactless payments, including NFC-enabled cards and digital wallets like Apple Pay and Google Pay, have the same interchange rates as standard chip card transactions, so your rates depend on your payment processor and the type of card being used, not on how the customer pays.
The main upfront consideration is hardware. If your current device doesn’t support NFC, you may need to upgrade. That said, most modern point of sale systems include NFC capabilities as a standard feature, so most businesses just need to enable the functionality rather than buy new equipment.
For businesses looking to reduce costs even more, zero-cost processing programs allow you to accept all payment types without dealing with processing fees. When set up correctly, these programs compliantly shift the cost to customers who choose to pay by card, keeping your margins intact regardless of how they pay. With the right provider, that can mean offering more flexibility while spending less on processing.
The way people pay is constantly changing. Consumers (especially younger ones) are making decisions about where to spend their money based in part on whether a business offers the payment experience they’re used to. That’s a real consideration, and one that growing businesses can’t afford to ignore.
When you make it easy to pay, you make it easier for customers to choose your business over someone else’s.
Flute makes contactless payments simple. With transparent pricing, NFC-ready hardware, and built-in zero-cost processing options, our platform is designed for growing businesses that want powerful payment tools without a high price tag or complicated setup.
Getting started is easier than you think. Talk to our team, and we’ll find the right setup for your business.