DEFINITION of 'Per Transaction Fees'

An expense a business must pay each time it processes a customer’s credit or debit card transaction. Per transaction fees vary by merchant service provider, but typically range from 0.5% to 5.0% of the transaction amount plus $0.20 to $0.30 per transaction. If a customer charges $100, the merchant’s fee to process the transaction might be as little as $0.70 or as high as $5.30. A merchant who expects to receive lots of credit or debit card payments should shop around for a service provider with low per transaction fees.

BREAKING DOWN 'Per Transaction Fees'

Per transaction fees are partly set by the payment card company — MasterCard, Visa, Discover or American Express — and partly set by the merchant services provider. The payment card company fees, also called wholesale fees, aren’t negotiable and don’t vary, but the service provider fees do. Service provider transaction fees fall into one of three categories: interchange plus, tiered or subscription. The interchange plus structure lists the payment card company fees and service provider fees separately on the merchant’s monthly statement. The tiered structure assesses different fees based on the transaction type, such as in person versus online. Subscription fees are assessed on a monthly or annual basis. Per transaction fees compensate the financial services companies that process payment card transactions.

Per transaction fees aren’t the only fees merchants must pay to accept payment cards from their customers; merchants also might pay annual fees, terminal fees or network fees. It depends on the payment processor’s contract terms and what the merchant is able to negotiate with the processor.

Per transaction fees are the reason why some merchants impose a minimum that customers must spend if they want to pay with a credit or debit card. It doesn’t make sense for a merchant to let a customer charge 50 cents to a credit card when they will pay 30 cents to process the transaction. It’s common, and perfectly permissible, for merchants to set a $5 or $10 minimum for credit and debit card transactions. Smaller merchants who are less able to absorb excess credit card fees are more likely to impose these minimums. Smaller merchants are also more likely to set minimums because they don’t have the volume of transactions required to earn the discounts that payment processors offer to large, high-volume merchants.

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