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.

RELATED TERMS
  1. Processing Date

    The month, day and year when a merchant’s bank processes a credit ...
  2. Authorized Transaction

    A credit card purchase for which the merchant has received approval ...
  3. Merchant Discount Rate

    The rate charged to a merchant by a bank for providing debit ...
  4. Settlement Bank

    The entity that facilitates the exchange of money between the ...
  5. Authorization Date

    The month, day and year when a credit card transaction is approved ...
  6. MasterCard Acquirer

    A financial institution that accepts and processes transactions ...
Related Articles
  1. Tech

    How Much Cheaper are Bitcoin Fees than Credit Card Fees?

    Bitcoin transaction fees are starting to rise as the network gets backlogged due to more usage, but are still much lower than typical credit card fees.
  2. Personal Finance

    The Truth About Credit Card Swipe Fees

    Swipe fee legislation will only have a small effect on profit margins for merchants and little to no effect on prices.
  3. Tech

    Bitcoin Transactions Vs. Credit Card Transactions

    We provide an overview of the differences between bitcoin and credit card transactions, and the advantages of using one over the other.
  4. Personal Finance

    American Express's Main Competition

    American Express competes with Visa, MasterCard, and Discover Financial Services in the credit card space. It also competes with banks to draw consumers.
  5. Personal Finance

    Credit, Debit and Charge: Sizing Up The Cards in Your Wallet

    Not all plastic is equal! Learn the difference between the three kinds, and how each can affect your finances.
  6. Personal Finance

    Credit vs. Debit Cards: Which Is Better?

    Be strategic about the card you choose! Learn more about which is better for you: credit cards or debit cards.
  7. Personal Finance

    Debit Cards: Why They're Not As Safe As You Think

    Ditching your credit card can be a smart move, but debit isn't yet an equal alternative.
  8. Personal Finance

    The Dangers of Getting a Paycheck on a Prepaid Debit Card

    Receiving your paycheck on a prepaid debit card may seem like a boon until you discover all the fees that can come with it.
  9. Personal Finance

    8 Ways To Avoid Getting Burned By Prepaid Debit Cards

    These cards have many differences from traditional debit and credit cards that can cost you money if you don't know what to watch out for.
  10. Personal Finance

    Forget Your Bank Account - Use Your Credit Card

    What if you used your credit card as a bank account? Believe it or not, this strange strategy could actually work.
RELATED FAQS
  1. What is the difference between investment banks and merchant banks?

    Merchant banks and investment banks, in their purest forms, are different kinds of financial institutions that perform different ... Read Answer >>
  2. Can a business charge me an extra fee for paying with my credit card instead of cash?

    Learn about credit card surcharges by retailers, in which states this practice is permitted and the judicial decision that ... Read Answer >>
  3. Do prepaid Credit Cards have monthly fees?

    Choose a prepaid debit card with a fee structure that doesn't eat away at the existing balance by considering how you intend ... Read Answer >>
  4. What are the differences between debit cards and credit cards?

    Learn how the major difference between a debit card and a credit card is where the money comes from when a customer makes ... Read Answer >>
Trading Center