Credit card fees and charges (2024)

FAQs

What are the fees for using credit card? ›

The average credit card processing fee ranges between 1.5% and 3.5%. Just where do all these fees come from, and what can a merchant do to minimize them?

Credit card surcharges are optional fees that merchants charge customers who use a credit card to pay at checkout. Surcharges are legal unless restricted by state law and are limited to 4% of the total transaction.

To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.

“Non-qualified” Transaction Downgrades

That's your first red flag that you're falling victim to one of the most expensive hidden fees of credit card processing. Non-qualified transactions are found on what's called “tiered pricing” and mean that you're paying more than you have to.

You can avoid some of the most common credit card fees by choosing the right card, keeping an eye on your credit limit and paying off your balance on time each month.

Each time a merchant accepts and processes a credit card transaction, they pay a processing fee to the appropriate financial institution. A credit card surcharge (or cc surcharge) is a fee enforced by the merchant to compensate for some of the cost of payment processing.

Why are credit card fees so high? ›

Therefore, there's more risk involved, thus a higher fee to cover the unpaid transactions from payment delinquency or fraud. There may be further fees yet to be paid by a consumer. These too answer the question of why credit card processing fees can be high.

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

After a class action lawsuit against Visa and Mastercard, businesses won the right to mark up card-based purchases to help cover their added costs. Surcharges may be up to 4% of the purchase at most but are often around 2% to 3%, in line with the seller's processing fees.

Credit card surcharging

This practice is legal in all but four states — Connecticut, Maine, Massachusetts and Oklahoma — additionally, Colorado caps the surcharge fee at 2%. It is also important to note that surcharging is not allowed for debit cards, even when they are run as a credit transaction.

So Why Does American Express Have Higher Processing Fees? The American Express business model is based on the rewards they offer for using their card brand to pay for purchases. And because they believe they attract a more affluent customer, they claim their cardholders make more purchases and buy higher priced items.

The report found that in 2022 credit card companies charged consumers more than $105 billion in interest and more than $25 billion in fees. Total outstanding credit card debt eclipsed $1 trillion for the first time since the CFPB began collecting this data.

The American Express (Amex) and Visa merchant fee structures necessitate careful consideration for businesses. Visa generally imposes lower interchange fees, ranging from 1.15% plus 5 cents to 2.40% plus 10 cents, in contrast to Amex's higher fees ranging from 1.43% plus 10 cents to 3.30% plus 10 cents.

Visa and Mastercard tend to charge merchants processing fees between 1.5 percent and 2.5 percent to accept their credit cards, whereas American Express charges 2.5 percent to 3.5 percent.