Breaking down payment processing fees, interchange costs, and proven strategies to reduce merchant service expenses for DC, MD, and VA businesses.
Every time a customer swipes, dips, or taps their card at your business, multiple parties get paid from that transaction. Think of it like a toll road—everyone who helps move the money from your customer’s bank to yours takes a small cut.
The two main fees you can’t negotiate are interchange fees and assessment fees, often called base costs or the discount rate. The payment network charges these fees on every transaction involving one of their cards. Your processor then adds their markup on top of these wholesale costs.
The merchant discount rate (MDR) typically runs around 1%-3% per transaction. For example, if a consumer pays $100 for a product and the MDR is 3%, the merchant would receive $97.
Interchange fees are charged by card-issuing banks whenever a customer uses a credit or debit card. They cover fraud risk and payment processing costs, including moving funds to the merchant’s bank account. Interchange makes up the majority of processing costs, typically around 80% of the total fee merchants pay.
These fees range from 1.10% + $0.10 to 3.15% + $0.10 in interchange fees, plus 0.14% to 0.165% in assessment fees. The most important factors in what your business pays will be its merchant category code (MCC) and the type of credit card the customer uses.
Here’s what affects your interchange rates: the type of card (rewards cards cost more), how the transaction is processed (card-present vs. online), your business category, and transaction size. Requirements include factors like merchant category, time between authorization and clearing, presence or absence of magnetic stripe data, submission of enhanced transaction data, and a merchant’s sales and transaction volume.
The card networks—Visa, Mastercard, Discover, and American Express—set these rates. Discover credit card processing fees have the lowest range, while Mastercard and Visa aren’t far behind. For many merchants, processing fees will be almost the same whether the customer pays with a Visa, Mastercard, or Discover credit card.
Understanding interchange helps you see why some transactions cost more than others. A basic debit card transaction will always cost less than a premium rewards credit card, regardless of which processor you use.
A smaller portion of the MDR goes to the network, sometimes referred to as a card brand, network access, or brand usage fee. Typically this is a relatively small fee, around 0.1%-0.2% of a transaction, but markups can be added depending on the location of the consumer and merchant banks, the currency used, or other variables. For example, on a $100 credit card transaction, a network may charge a base assessment fee of 0.14% (14 cents) per transaction.
Visa’s and MasterCard’s assessments are fixed at 0.1100% of the transaction value, with MasterCard’s assessment increased to 0.1300% of the transaction value for consumer and business credit volume on transactions of $1,000 or greater.
Assessment fees fund the payment networks’ operations—maintaining the infrastructure that connects banks, processing authorization requests, and ensuring transactions flow smoothly between financial institutions. These fees are non-negotiable and the same for every merchant, regardless of size or processing volume.
What makes assessment fees different from interchange is their consistency. While interchange rates vary based on dozens of factors, assessment fees remain relatively stable. The networks typically adjust interchange fee schedules semi-annually. Assessment fees change less frequently, giving you more predictability in this portion of your processing costs.
Some processors bundle assessment fees into their quoted rates, while others pass them through separately. Understanding this distinction helps you compare pricing proposals accurately and avoid surprises when you see your first statement.
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The remaining amount of the MDR is paid to the payment processor, which accepts the card payment and sends the transaction to the payment network either through a physical card reader or an online payment gateway. Fee structures vary from per-transaction fees to flat service fees, and unlike the interchange and assessment fees over which merchants have little or no opportunity to negotiate, processing fees are often negotiated between the merchant and the service provider.
Your processor’s markup covers their services: providing equipment, customer support, risk management, and handling the technical aspects of payment processing. There are a variety of pricing schemes among hundreds of processors. Commonly known payment processors include PayPal and Square, both of which charge standard processing fees ranging from 2.6% to 2.9% of the transaction plus $0.10-$0.30 per transaction. Alternatively, some processors charge flat rates for services (e.g., $50 per month) or comparatively lower transaction fees, around 0.35% per transaction.
This is where you have the most control over your processing costs. Smart businesses compare not just the percentage rates, but also monthly fees, setup costs, equipment charges, and contract terms.
Interchange-plus pricing adds the interchange fee, which is set by the payment networks, to the fees charged by the merchant services provider. This is the most transparent type of pricing plan because you can see how much each party charges to process a transaction. It’s also typically the most cost-effective structure—but it can be unpredictable, complex and hard to understand because there are hundreds of interchange rates, depending on card type, issuer, industry and more.
Flat rate pricing allows you to pay a fixed amount for all transactions. For instance, if most of your customers use debit cards or no-reward credit cards in-person, which tend to have the lowest transaction fees, you may not benefit from a flat rate system. On the other hand, if you get a lot of cards or transactions that have high interchange rates, you could significantly benefit.
Interchange-plus pricing often saves merchants around 25% on fees compared to the flat rate pricing model. However, flat rate can be simpler to understand and budget for, especially if you’re a newer business or process smaller volumes.
Tiered pricing groups transactions into qualified, mid-qualified, and non-qualified categories. While the tiered model seems fairly easy to understand because there are limited price points, it is difficult for the merchant to know whether a given transaction is categorized into the correct tier, which can make it hard to compare pricing.
The key is matching the pricing model to your business needs. High-volume businesses with consistent transaction patterns often benefit most from interchange-plus. Smaller businesses or those with unpredictable sales might prefer the simplicity of flat rate pricing, even if it costs slightly more per transaction.
Beyond the basic processing rates, many providers add fees that can significantly impact your total costs. Monthly account maintenance fees, statement fees, batch fees, and PCI compliance charges can add $20-50 or more to your monthly bill.
You’ll also see a $10 per month fee per merchant ID (MID) for the PCI Compliance Program. PCI Compliance is required by card networks and the program includes web tools, breach insurance, and secure data storage.
Equipment costs vary widely. Some processors lease terminals for $15-30 per month, while others sell equipment outright. Leasing might seem cheaper initially, but you’ll often pay much more over time. Some providers don’t charge extra fees for downgrades, chargebacks, voice authorization, or foreign transactions.
Early termination fees can range from $200-500 or more. Setup fees, programming charges, and shipping costs add to your initial investment. Some processors also charge for paper statements, phone support, or even accessing your online account.
The most transparent processors clearly list all potential fees upfront. We operate with no secrets, surprises, or deception—we review applications personally before setup and check in continually while you’re our customer. This approach helps you understand exactly what you’ll pay each month without unpleasant surprises.
Request a complete fee schedule from any processor you’re considering. Add up all the monthly fees and multiply by 12 to see your annual cost beyond processing rates. This exercise often reveals that the lowest advertised rate doesn’t always mean the lowest total cost.
The best pricing structure for your business depends on multiple factors, including the most common types and volume of your transactions. When comparing providers, make sure to review the fee schedule in detail, taking into account one-time and miscellaneous fees, as well as typical monthly costs. Also consider whether the transaction rates are guaranteed for any length of time, and whether there are any termination fees if you decide to go with another provider.
Smart businesses regularly review their processing statements and negotiate with their current provider or shop for better rates. For today’s merchants, it makes sense to keep payment processing costs as low as possible. We endeavor to offer the lowest rates in the industry, meaning businesses get to save more of every hard-earned dollar.
The most effective approach combines competitive rates with reliable service and transparent pricing. We’re committed to evaluating each business situation and custom designing credit card processing approaches that meet specific requirements in the most cost-effective manner possible. This often delivers better long-term value than providers focused solely on the lowest advertised rates.
When you understand how payment processing fees work, you can make informed decisions that support your business growth rather than drain your profits. The right processing partner becomes an asset to your business, not just another monthly expense. For businesses in DC, Maryland, and Virginia, working with us means getting that transparent, cost-effective approach that puts your success first.
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