It is pretty much impossible to accept credit card payments online without paying processing fees — to your credit card provider, payment provider or processing gateway. Be wary of companies that claim otherwise.

Fortunately, it is possible to keep credit card processing fees low. You can also avoid fees altogether by passing them on to your customers.

This article explains how to avoid credit card processing fees, lower such fees and choose a payment processor for your online business.

An Overview of Credit Card Fees

Online credit card payments incur higher fees than in-person credit card payments because there is a higher risk of fraud for online transactions.

Here are the fees associated with accepting credit card payments online:

• Interchange fee: Credit card issuers (Visa, Mastercard, AmEx) charge a non-negotiable fee for every card transaction. This fee is paid by your merchant provider or payment processor but passed to you, the business owner. It ranges from 1.29% to 3.5% per transaction and makes up 70% to 90% of the total transaction fee.
• Merchant Services Markup: These are fees that merchant providers or payment processors collect from you to process payments. These are the most variable among all the credit card fees because payment processors use different fee structures. This can also be your basis when deciding which provider to go with—go with one that has the lowest or most transparent markup fee.
• Assessment Fees: Also known as Card Brand Fees, Card Association Fees or Network Access and Brand Usage Fees (NABU), these are set fees collected by credit card networks for using their credit card brand. They typically range from 0.13% to 0.16% per transaction.

Is There a Way to Avoid Credit Card Fees?

Credit card processing fees are unavoidable. However, you can pass on the fees to your customers or choose a different payment method. In some US states, it is legal for merchants to pass credit card processing fees to customers. But make no mistake — these do not guarantee absolutely zero fees.

When providers say they offer zero-cost card processing, you still need to pay merchant processing fees, such as merchant markup fees and transaction fees for debit, ACH and e-check transactions.

Add a Convenience Fee to Online Credit Card Payments

A convenience fee is an amount added to transactions made by phone or online with a credit card. It is usually a fixed rate or a percentage of the total amount. For example, the service fees you see when buying tickets and paying bills online are convenience fees.

Adding convenience fees is legal in all US states, but regulations still need to be observed. All card issuers (Visa, Mastercard and American Express) require that convenience fees be disclosed prior to a transaction but do not require that they be included on receipts.

• Visa: Flat fee
• Mastercard: Can be flat fee, percentage or tiered based on transaction
• American Express: Can be flat fee, percentage or fixed based on transaction

Pass Fees to Customers (Credit Surcharging)

Credit surcharging is when you add the payment processing fees directly to the cost of the product or service you are selling at the point of sale. As of 2023, credit card surcharges are legal in all but two US states—Connecticut and Massachusetts. And unlike convenience fees, surcharges are highly regulated by card networks and state laws.

• Visa: Merchants must disclose the fee prior to the transaction and list it on receipts.
• Mastercard: Merchants must notify Mastercard and the acquiring bank 30 days before implementing card surcharges. Like Visa, Mastercard requires full disclosure and transparency prior to transactions.
• American Express: AmEx is the only card issuer that does not allow credit card surcharges. It also charges some of the highest interchange fees among all credit card issuers.

Credit card surcharges typically range between 2% and 4% of the total price upon checkout. Note, though, that even if you have passed the fees to your customers, you still need to pay for expenses such as verifications, PCI compliance and any monthly fees you have with your payment provider.

Offer Alternative Payment Methods (ACH/E-check Payments)

To avoid credit card fees, you can give more payment options for your customers, such as an ACH (automated clearing house) transfer or accept e-checks. ACH payments have lower transaction fees (0.5%–1.5%*) but take a longer time to process.

It’s also not suited for ecommerce or other businesses that use shopping carts, as ACH transfers require customers to enter their bank account and routing numbers.

How to Lower Credit Card Fees

Since I have already established that you cannot accept credit card payments online for free, there are still ways you can reduce your fees without passing them on to your customers.

Some of my suggestions are:

Offer alternative payment methods: Mobile payments, ACH transactions and peer-to-peer payments are affordable alternatives when it comes to fees. Review their pros and cons before offering them to make sure they are a good fit for your business.

Negotiate new rates with your payment processor: I wouldn’t shy away from asking for more affordable rates with my provider, especially if my business has a longstanding history with its platform, and neither should you. Remember, the bigger your business, the more leverage you have with negotiations.

Minimize chargebacks: Credit card fraud can cost you a lot of money. Secure your payments with chargeback prevention tools and implement workflows to reduce chargebacks and fraud in your business. In addition to the revenue loss from the fraud itself, increased chargeback or fraud rates can result in your processor charging higher fees.

Payment Processors with Low Fees

How to Choose a Payment Processor

Ultimately, choosing a payment processor with low, competitive fees is the solution to paying the lowest possible fees. Here are some of my recommendations for choosing a payment processor for your business.

Check for clear pricing structure and fee transparency

It’s important to go with a provider that has a transparent fee structure, so you know exactly where your money is going. I would avoid providers that offer tiered pricing models, as these are the least transparent pricing methods and come out the priciest. Tiered pricing is when the processor charges different rates and fees depending on the card type.

If you are a new or small business, go with solutions with flat fees and no monthly minimums, as these are the most affordable. However, as your business grows, I recommend looking for solutions that have interchange-plus or membership pricing, as these providers can offer the lowest rates. There are also providers that offer automatic volume discounts for high-volume businesses.

Evaluate payment methods accepted

As a rule of thumb, the more payment methods the provider offers, the more control you will have over the fees you need to pay. As I have said earlier, ACH payments have lower rates than card payments, but not all processors can handle that payment method.

Also, check if you need to pay fees for each payment method separately. A good solution has everything in one place, so you can easily track and manage your online payments.

Evaluate security features and standards

Go with payment processors that are PCI-compliant and come with fraud protection tools, such as tokenization, address and IP verification. These help prevent and minimize fraudulent transactions.

There is a Way to Lower Credit Card Online Payment Fees

While it is not possible to accept credit card payments online for free, there are ways to lower processing fees. It ultimately comes down to choosing a payment processor with low, competitive fees and the features you need for your business.

Meaghan Brophy also reviewed this article