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Hidden Costs: Why You're Overpaying for Credit Card Processing & How to Stop

Hidden Costs: Why You're Overpaying for Credit Card Processing & How to StopHidden Costs: Why You're Overpaying for Credit Card Processing & How to Stop
Why you're paying more for credit card processing.

Published: December 11th, 2023

Embracing credit card processing, or payment processing, is paramount for modern business as it addresses consumers' changing payment method demands and increases convenience for businesses. However, underneath the presumed transparency of payment processing lies complex implicit fees that can unknowingly deteriorate a business's financials. These credit card processing costs can be confusing and frustrating for business owners, and with so many different fees, it's hard to know what you're really paying for.

In this blog post, we will clarify all the intricacies of payment processing costs, focusing on commonly overlooked charges that often go unnoticed, such as PCI compliance, statements, the monthly minimum, batch processing fees, and more. By revealing these hidden costs, businesses can make well-informed decisions, safeguard their financial health, and ensure they are not paying more than necessary for essential processing services. So, let's dive into the complexities of payment processing and unravel the mystery behind the extra fees that often lurk in the fine print.


Understanding Credit Card Processing Fees

The fees associated with credit card processing.
The fees associated with credit card processing.

The cost of payment processing is determined by various factors and is not solely based on the payment processor's rates. Three factors, charged by different players, affect the amount you must pay when processing payments. These include the interchange fee, assessment fee, and merchant service markup. Credit card networks like Visa, Mastercard, American Express, or Discover issue the interchange fee. The assessment fee, however, is the amount a business must pay and depends on the transaction amount, the type of credit card, and if there are any chargeback fees. Lastly, the merchant service markup is the cost credit card processors charge for their services.

With these costs, knowing the transparent ways a merchant processor can charge you is important. These pricing structures can come in the form of tiered pricing, interchange plus, flat rate, or subscription pricing.

What Are the Types of Hidden Fees?

The types of hidden credit card processing fees.
The types of hidden credit card processing fees.

While we've provided a brief overview of credit card processing rates, it is still vital to stress the need for a deeper understanding as the fundamental insights into credit card processing lie in the hidden fees that are not prominently advertised. 

Non-qualified transaction fees

Non-qualified transaction fees are among the hidden costs businesses may encounter, impacting their overall credit card processing expenses. These come into play when a transaction fails to meet the payment processor's specific criteria. Transactions may be categorized as non-qualified for various reasons, such as the type of credit card used, the processing method employed, the absence of required information during the transaction, or payments made by reward cards, corporate cards, travel cards, cashback, etc. These fees are often higher than standard transaction fees and can significantly contribute to the overall cost of processing credit card payments.

Non-qualified transaction fees are detrimental to e-commerce businesses because cards and signatures are rarely present when making online payments, making the absence of required information apparent. 

Statement fees

Every month, your processor will provide you with a statement that consists of your transactions, settlements, charges, and chargebacks. A monthly statement is valuable as it lays out all your activities, helping you gain insights into your incoming and outgoing payments. While these statements can provide practical advantages, they come at a cost that providers do not explicitly make clear.

Statement fees are essentially costs that payment processors impose for the administrative work involved in compiling and sending the monthly statements to merchants. These statements offer a comprehensive overview of the business's credit card transactions, detailing crucial information such as the number and value of transactions, processing fees, and other relevant financial data.

PCI compliance fees

What are PCI compliance fees?
What are PCI compliance fees?

When dealing with payment processing, it is critical to adhere to industry standards, and one such standard is the Payment Card Industry Data Security Standard (PCI-DSS). The PCI-DSS assures that organizations protect the information obtained from credit card payments in order to limit the likelihood of data breaches, leaks, and fraudulent actions.

Some credit card processors impose a fee called the 'PCI compliance fee' to cover the costs of maintaining a secure environment. These fees contribute to implementing security measures, regular audits, and the overall adherence to PCI DSS requirements. To be compliant, businesses must fill out a form and receive certification, which the processor should help with and support in maintaining this compliance. Your payment processor should assist you with this process and provide ongoing support to ensure your continued compliance.

If you feel as though the necessary support is insufficient, you may want to look for alternatives that charge a reasonable fee and provide PCI compliance with no additional costs.

Monthly minimum fees

The monthly minimum fee a business pays depends on how many transactions it makes each month. The fee isn't fixed, but instead, sets a processing limit that the company must reach every month. If the company meets the limit, there are no extra charges. If the company doesn't reach the limit, it must pay the difference between the minimum and processing fees.

This monthly fee has no bearing on firms with high transaction volumes. Unfortunately, a firm with low transaction volumes, typically a small business, may accumulate these costs over time, raising the price of a processing provider above the value and benefits they deliver.

Monthly settlement fees

Instead of processing each transaction individually, businesses usually opt for batch processing, which involves grouping multiple transactions and sending them out for simultaneous processing. Typically, this batch consists of daily transactions or over a period of time that the processor determines. While this type of fee is valid, some providers establish a method requiring the client business to pay more than necessary through monthly settlement fees.

Using batch processing in your business can help avoid per-transaction fees. However, if your processor adds a monthly settlement fee, it can create a contradiction. This fee is charged once a month and is a total per-transaction fee for all transactions, even if you have already paid for batch processing.

When you are charged a batch processing and monthly settlement fee, the costs can quickly add up, causing you to lose more than you make. As a result, understanding what you are being charged can help you make more cost-effective business decisions.

Termination fees

Early termination fees in credit card processing refer to the charges imposed when a merchant decides to end their contract with a payment processor before the agreed-upon term expires. Essentially, it's a penalty for terminating the partnership prematurely.

Early termination charges come in two forms: a flat rate or liquidated damages. A flat rate is an amount agreed upon between you and your provider beforehand that states that, in the event of early termination, you are required to pay a certain amount, meaning no hidden fees exist.

However, some providers charge liquidated damage fees when terminating, which is a fee that is calculated based on the estimated revenue your business would have made if the contract were completed. This fee is determined by averaging your monthly processing fee and multiplying it by the remaining contract duration, potentially resulting in substantial costs.

Unfortunately, some providers combine flat rates with liquidated damages without disclosure, making canceling the contract extremely costly and confusing.

Non-compliance fees

A significant number of providers will charge a PCI compliance fee, while others will refuse to supply services to non-compliant businesses. However, if you are not compliant and require the services of a processor, you should beware of any non-compliance fee.

If you fail to provide proof of compliance, your credit card processor could impose a monetary fine based on your PCI level, which can be even higher if any security or data breaches occur. Since the PCI compliance fee does not actually ensure compliance, your provider could be charging you both compliance and non-compliance fees.

Authorization and transaction fees

The pricing structure of payment providers can vary, with charges based on either each transaction or each authorization. An authorization fee is incurred each time any payment is approved, while a per-transaction fee is applied to only completed transactions. It is important to note that both methods are standard in the industry.

However, some providers may implement a dual charging system, applying both per-transaction and authorization fees. This method may result in businesses paying a higher overall amount than agreed, and processors will not explicitly state this when implementing this dual charging system, making it an unethical practice.

Fees for additional services

When exploring payment processors, you may come across the different features each one provides. Unfortunately, some providers charge for these features without making them immediately evident, contributing to increased expenses. These fees cover various extra services, from specialized reporting tools and fraud protection to enhanced security features and customer support packages.

While some services may be beneficial, others might be unnecessary or redundant, and without realizing it, you may be charged extra for these services, believing that they come with the overall service, contributing to the increased costs.

How Can You Avoid These Fees?

To stay clear of hidden fees in payment processing, it's crucial to begin by understanding the different types that may be lurking. Once equipped with this thorough knowledge, begin by examining the fine print of potential providers, comparing them meticulously to ensure transparency. 

If you discover deceptive pricing, initiate negotiations with the processor to eliminate it. Furthermore, since some of these hidden fees are legal and you are obligated to pay them, you can opt for a provider with reasonable or, better yet, no hidden fees.

For existing providers, a diligent review of monthly statements is essential. If any mysterious fees arise unexpectedly, negotiate for their removal, and if transparency remains an issue, consider switching to a provider with clearer terms. Proactive awareness and negotiation empower businesses to lower payment processing fees with clarity.


This blog unravels the intricacies of credit card processing fees, shedding light on commonly overlooked charges that impact business finances. It delves into costs like PCI compliance, non-qualified transactions, statement fees, monthly minimums, batch processing, termination fees, non-compliance fees, authorization and transaction fees, and charges for additional services.

By understanding these complexities, businesses can ensure transparency in payment processing and avoid unnecessary expenses often hidden in the fine print. For the best credit card processing companies, take a look at our detailed reviews and comparison tool. Additionally, you can learn more about the industry by reading our blog pages.

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