Card Payment Fees Explained: Interchange, Assessments and Markups in Plain English

Every card payment you accept costs your business something — but the statement rarely explains what. One percentage disappears from every sale, and most owners cannot say who received it or why. Card payment fees explained properly are three separate charges stacked together: interchange, assessments and a markup. Once you can name the three parts, your statement starts to make sense, and so do the different pricing models providers offer.

Card Payment Fees Explained: The Three Parts of Every Card Fee

1. Interchange: paid to the customer’s bank

Interchange is the largest part of the fee, and it goes to the bank that issued your customer’s card. It compensates that bank for handling the transaction and carrying the risk that comes with card payments. Interchange is set by the card networks’ published schedules, varies by card type and how the payment is taken, and is generally the same underlying cost whichever provider you use. Your provider does not control this part.

2. Assessments: paid to the card networks

Assessments (sometimes called scheme or network fees) are the card networks’ own charges for running the payment systems that connect banks and businesses. They are usually the smallest of the three parts, and like interchange, they are set centrally rather than by your provider.

3. The markup: paid to your provider

The markup is your payment provider’s own charge for its service — the terminal or gateway, support, reporting and everything else it does for you. This is the only part that is truly negotiable between providers, and it is where pricing models create most of the confusion.

A Worked Example in Plain Figures

Imagine a card sale of 100 in your local currency with card payment fees explained in round numbers, and — purely as an illustration, not as any provider’s actual charges — suppose the total fee came to 2.40. That 2.40 might be made up of interchange of 1.70 going to the customer’s bank, assessments of 0.15 going to the network, and a markup of 0.55 kept by your provider. The proportions vary by card and provider, but the structure is the point: of the three parts, only the last one changes when you shop around.

Real figures for your business appear on your own statement, and comparing those — not advertised headlines — is how you judge a deal. With card payment fees explained this way, our fee audit guide shows how to work through your statement line by line: how to reduce bank fees.

The Main Pricing Models

• Flat rate: one simple percentage (sometimes plus a fixed amount) for most transactions. Easy to predict; the provider absorbs the variation between cards, so the simplicity itself is part of what you pay for.
• Interchange-plus: the actual interchange and assessments passed through, plus a stated markup. More transparent, and often cheaper for businesses with the volume or card mix to benefit — but your effective cost varies from sale to sale.
• Tiered: transactions are grouped into tiers at different prices. Tiers can hide which sales landed at the expensive end, so this model needs the closest reading.

What Drives Your Fee Up or Down

• Card type: premium and rewards cards generally cost more to accept than basic debit cards, because their interchange is higher.
• How the payment is taken: in-person chip or contactless payments usually cost less than keyed-in or online payments, which carry more fraud risk.
• Your industry and volumes: providers price partly on risk and partly on how much business you bring them.
• Extras: terminal rental, monthly account charges, reporting tools and chargeback fees sit outside the three parts — always add them in when comparing, just as you would when comparing payment methods for your business as a whole.

Watch the short video below for lowering credit card processing fees and how they are built.

Frequently Asked Questions

Who gets the money when a customer pays by card?

Three parties share the fee: the customer’s bank receives interchange, the card network receives assessments, and your payment provider keeps its markup. The rest of the sale amount settles into your business account.

Can I negotiate card payment fees?

With card payment fees explained, one limit is clear: you cannot negotiate interchange or assessments — those are set centrally. You can compare and negotiate the provider’s markup and the extra account charges, which is why understanding the three parts matters.

Why do some cards cost more to accept than others?

Because their interchange is higher. Cards that fund rewards or carry more risk for the issuing bank generally come with higher interchange, which flows into your total fee.

Is flat-rate pricing a bad deal?

Not automatically — with card payment fees explained, flat rate simply buys simplicity and predictable costs, which many small businesses value. The honest test is your effective rate: total card costs over a month divided by total card sales, compared across providers.

Read Your Statement With New Eyes

Next time your statement arrives, split every charge into the three parts and work out your effective rate. That single number makes every provider conversation clearer. The U.S. Small Business Administration’s guidance on managing business finances also covers keeping on top of regular costs like these. If you would like help auditing what you currently pay, BCC Financial Management Services can walk through your statement with you, line by line.

Disclaimer: This article is general educational information only and is not financial advice. Fee examples are illustrative only; check your own provider’s terms for the charges that apply to you.