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Average credit card processing fees can range anywhere from 1.5% to 3.5%. While a few percentage points may seem low, these fees can add up and impact your business’ bottom line.

Whether you’re a merchant who runs your own business or someone with a side hustle, if you accept credit card payments, fees are likely going to eat into your gross profit. Read on to learn more about credit card processing fees and how you can reduce them.

What Is a Credit Card Processing Fee?

A credit card processing fee describes all of the fees charged to accept credit cards as a form of payment. These, which are incurred by merchants that accept credit card payments, can include interchange fees, payment processor fees, and assessment fees.

As noted above, processing fees can typically run from 1.5% to 3.5% of a total transaction. Rates can vary based on the size and location of a business, as well as the types of transactions and cards that are accepted.

Generally, businesses bake credit card transaction fees into their pricing in the form of credit card merchant fees. However, some businesses may provide a discount if a customer pays with cash. Others may set a minimum payment amount they’ll accept by card. Understanding how credit cards work can give insight into why some businesses don’t accept credit card payments.

Types of Credit Card Processing Fees and Costs

Credit card processing fees actually combine several fees. When talking about credit card processing fees, merchants are generally talking about the following:

•   Interchange fees

•   Assessment fees

•   Payment processor fees

Some of these fees, like payment processor fees, can vary depending on the credit card processor a merchant chooses. Others, like interchange fees, are set by the credit card companies and depend on the cards used.

Recommended: Charge Cards Advantages and Disadvantages

Interchange Fees

Interchange fees are collected by credit card issuers from the merchant when a credit card or debit card is used. Interchange rates vary depending on:

•   The type of card used

•   The type of business

•   The amount of the transaction.

Interchange rates can also vary depending on whether the payment was made online or in store.

Generally, interchange rates are presented as a percentage of the sale, plus a flat fee. For example:

•   If Hailey buys $50 worth of groceries with XYZ card, the grocer would have a set interchange rate based on XYZ card, which may be slightly different than ABC card.

•   XYZ card may have a 1.15% interchange rate, plus a flat fee of $0.30. That would mean that, from Hailey’s transaction, the store would owe $0.88 as an interchange fee.

Assessment Fees

An assessment fee is levied by the credit card network (the brand name on the card a cardholder uses, such as MasterCard or American Express). This fee may vary depending on whether the card is a credit card or debit card, as well as on the volume of transactions a business makes. There also may be larger international fees.

Unlike the interchange fee, an assessment fee is standard across transactions. It is also generally lower in amount than an interchange fee.

Card Processor Fees

Payment processor fees go to the payment processor, which facilitates the transaction. The card processor is the intermediary that communicates between the card issuer and the merchant bank. It may also include the point of sale (POS) system and provide the devices to take credit card payments.

The merchant does have some control over the amount of these fees. Credit card processing fees vary depending on the payment model selected. Costs could include per-transaction fees, a monthly service fee, and equipment rental fees.

Average Card Processing Fees in 2025

As mentioned above, card processing fees in 2025 depend on several factors, including whether payments are primarily processed in person or online. That said, average credit card processing fee ranges are provided below for the major credit card networks:

Note that American Express is considered a bit differently than other credit card companies. Unlike the other three credit card companies in the table above, American Express is a closed-loop network. This means that it is not backed by another financial institution, which gives it more control over its practices and charges. American Express calls the fees it charges “discount fees,” which operate similarly to interchange fees.

If you do have an American Express card, this wouldn’t have any impact on things like your credit card limit or credit card minimum payment, but it may affect where your card is accepted due to generally higher fees.

Recommended: What Is a Credit Card Minimum Payment?

Factors That Determine Interchange Fees

Adding to merchant confusion, interchange fees vary depending not only on the merchant, but also depending on what sort of credit card is used in a transaction. Interchange fees are usually between 1.5% and 3.5% of the overall sale, but the actual percentage varies on a host of factors that are discussed below.

Credit Card Type

Credit card type plays a role in determining the amount of the interchange fee — even if all cards fall under the same brand. In general, debit cards have lower interchange rates than credit cards, which are unsecured debt.

Part of how a rate is assigned is based on risk level. For a merchant bank, a debit card can be less risky because the money is already accounted for within your account. (This is also why the process of how to apply for a credit card is more involved than it is for a debit card.)

Merchant Category Code

Shopping at a supermarket? Then you may be paying a different interchange rate than you would at the hardware store or dry cleaners. Every merchant has a category code, and those merchants within the same category will have the same fees.

Method of Processing

How a payment is processed will also affect the rate of interchange fees. Card companies assess the risk of the transaction, considering the potential for fraud, chargebacks, and other things that may go awry.

For this reason, they may assign different interchange rates based on whether a purchase was completed online, in person, or even whether the purchase was made via swipe or tapping technology.

Network

Each credit card network sets its own fees based on the type of merchant. While the majority of the fee goes to the bank that issued your card, a small amount will go to the card network itself. This money will then be used to fund credit card rewards, perks, and protections offered by the card — all key parts of what a credit card is.

Pricing Models for Processing Fees

There are various pricing models for processing fees, and merchants can assess which one works best for them based on how they do business. There are three common models to consider: flat rate pricing, interchange plus pricing, and tiered pricing. Here’s a closer look:

Flat Rate Pricing

Like the name suggests, flat rate pricing provides a fixed rate for all transactions, which is inclusive of processing fees and interchange fees. This can be convenient, as it makes it easy to predict costs. However, it also could mean that your business is overpaying for transactions that have lower interchange rates, such as purchases made with a debit card.

Interchange Plus Pricing

Interchange plus pricing provides a detailed analysis of fees by breaking out interchange fees, assessment fees, and processor fees. This can be great for businesses looking for a level of detail into the fees they’re paying, and it can also help ensure that you’re not overpaying fees. However, some businesses may find this level of detail overwhelming.

Tiered Pricing

With tiered pricing, prices for interchange rates are separated into one of three tiers: qualified, mid-qualified and non-qualified. Tiering is dependent on how payment occurs (for example, in person or online) as well as how the card processing occurs (a payment may be downgraded based on how the card is processed).

While statements can be easier to read with this model, there’s less transparency than with interchange plus pricing. Additionally, because merchants can’t separate interchange fees from processing fees, it can be challenging to see a fee breakdown and understand the costs at a greater level of specificity.

Other Credit Card Processing Fees and Costs

In addition to the credit card processing fees outlined above, you also may pay a monthly subscription fee for processor use. This is independent of the number of transactions and may include customer service, POS equipment, and more. Sometimes, a higher subscription fee may result in a lower fee per payment.

You may also pay a fee for the initial setup when you sign up for a credit card processing company. What’s more, you could owe fees for if a customer disputes a credit card charge, in the instance of any chargebacks, and for non-sufficient funds.

How Often Do Payment Networks Update Their Interchange Fees?

Interchange fees are typically updated twice a year, though some might only do so annually or could refresh their fees more often.

Typically, rates have been rising by a fraction of a percentage point for payments made by credit card. This may not sound like a lot, but this can add up significantly — especially as more consumers are using cards over cash. Just think if your annual percentage rate (APR) on your credit card was to inch up; it’s a similar situation.

Recommended: When Are Credit Card Payments Due

The Takeaway

Credit card processing fees typically amount to between 1.5% and 3.% of a total transaction. Understanding credit card processing fees isn’t only helpful for entrepreneurs and small business owners. It can also help consumers understand why there might be an additional fee charged for certain payments made with cards. It’s all part of being a knowledgeable cardholder and using credit responsibly.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is the typical fee for credit card processing?

The typical fee for credit card processing in 2025 is 1.5% to 3.5% for transactions. The rate is dependent on the type of transaction (in general, debit cards cost less to process than credit cards) and the processing system the merchant chooses. The actual percentage per swipe varies based on a host of factors.

Can I avoid credit card processing fees?

There are no ways to entirely avoid credit card processing fees, but there may be ways to make fees more manageable. One common way for businesses to manage credit card processing fees is to bake them into pricing and to offer cash discounts. Another way to potentially avoid credit card processing fees is to accept ACH payment methods for services.

Can the type of credit card determine processing fees?

Yes, the type of credit card is one factor that determines processing fees. For example, different categories of cards, such as reward cards, can have different fees than other cards, like debit cards.

Photo credit: iStock/tdub303

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

SOCC-Q425-010

When you swipe, tap, or otherwise use your card to pay for a purchase, credit card payment processing is set into motion to authorize and complete the transaction. On the surface, credit card processing may seem instantaneous, but in reality, it’s a complex, multi-step process. It also can be expensive for a merchant, which is why some may have a minimum requirement for a credit card payment or a discount for cash.

Read on to learn about what credit card processing is and the different ways it can work.

What Is Credit Card Processing?

Credit card processing refers to the series of operations so that a charge can get authorized and a merchant can be paid when a consumer pays with a credit card. It is a critical part of how credit cards work to make payments.

While the process takes only seconds, it involves multiple steps and entities as well as fees. The costs associated with credit card processing are incurred by the merchant, but they can be passed along to consumers through credit card surcharges or a slightly higher price of goods.

Stages of Credit Card Processing

The time between tapping your credit card and being asked if you’d like a copy of your receipt are action-packed. While the steps may not impact you directly as a consumer, being familiar with them can help you understand what happens if a payment is declined or you’re prompted to re-enter your information (and have a generally better grasp of what a credit card is).

Payment Authorization

When a credit card is tapped or swiped, authorization occurs. The merchant collects the payment information, such as the CVV number on a credit card.

This information is then sent to the credit card processor, who then sends it to the card network. From there, the information is passed to the issuing bank, which confirms the consumer has the funds or credit to complete the transaction.

Sometimes, a merchant may conduct preauthorization. This is a common practice at hotels, where a small amount is charged and held. It may also occur at gas stations.

At this point, the merchant still does not actually have the money. An authorization functions as a kind of IOU, confirming to the credit card company and the merchant that your credit line can cover the charge. (This is another reason it can be beneficial to pay more than your credit card minimum payment each month, as it will free up more of your available credit.)

Payment Settlement

Settlement occurs when money transfers from the issuing bank to the merchant bank through the card network, and the funds are then deposited into the merchant’s account. This process generally takes several days from the point of sale.

The amount deposited into the merchant account is minus any fees that are deducted from the merchant’s payments. Fees may get deducted once a month for all activity that’s taken place during the previous cycle, or the merchant may opt to have them deducted every time settlement occurs.

From the cardholder’s perspective, this is the point in the process when a charge on their credit card account may shift from “pending” to “posted.”

Recommended: What is a Credit Card CVV Number?

Who Are the Players in Credit Card Processing?

Credit card processing depends on a chain of connections to get the job done. Here’s who’s doing what when it comes to credit card processing.

The Cardholder

When you choose to pay with a card, you trigger credit card payment processing. Because different cards charge merchants varying fees, you may find that not all merchants take all cards. If you know there’s a card that is frequently not accepted, this could be a consideration when you apply for a credit card.

The Merchant

The merchant accepts credit card payments in exchange for the goods or services they provide. They have control over which credit card processing services or processing system they use. Often, a processing system is combined with a point of sale (POS) system — the actual mechanism by which a person enters their payment information.

The Merchant Bank

The merchant bank, also known as the acquiring bank, is responsible for sending the card and transaction information to the credit card network. Once approved, funds are deposited into the merchant account, minus any processing fees. The merchant bank may also provide equipment for credit card transactions, such as card readers.

The Issuing Bank

The issuing bank is also known as the cardholder’s credit card issuer. It authorizes the card information, pays the merchant bank, and charges the cardholder for the purchase. It may also attach fees, including international transaction fees, to the purchase.

The Payment Processor

The payment processor is the vendor that facilitates communication between the merchant bank and the issuing bank. It essentially manages all of the processes that have to occur between a card being swiped and a payment being deposited into a merchant’s account. The processor will charge a fee for this service.

The Card Association

A credit card issuer or card association is the card brand on the credit card, such as Visa, Mastercard, Discover, and American Express. You may also hear this called a credit card network. While a credit card is attached to a specific bank, it also has a specific brand; in the case of Discover and American Express, they are both card networks and card issuers.

The card association collaborates with card issuers, merchants, and processors to help facilitate transactions. It will also receive part of the fee for a credit card transaction, called an interchange fee.

Charges Associated With Credit Card Processing

Just like consumers have to worry about APR on a credit card, merchants have to consider charges associated with credit card processing. Many merchants bake the cost of credit card processing fees into their payment structure.

Payment Processing Fees

The processing fee for a credit card transaction goes to the processor, which is the company that is responsible for accepting the credit card payment and sending the information to the payment network.

Interchange Fees

Interchange fees go to the issuing bank. These fees are generally a percentage of the transaction, plus a standard flat-fee per transaction. The amount of interchange fees can vary depending on the type of card used, whether the transaction was completed in-person or online, the amount of the transaction, and the type of business that the merchant is.

Service Fees

Also known as an assessment fee, a service fee is a monthly fee that is charged by the payment network. The amount of this fee can depend on the merchant’s transaction volume as well as their calculated risk level.

Types of Credit Card Processing Models

Beyond the various fee types, there are different types of pricing models that a credit card processing company may offer. While this won’t matter much on the consumer side, a business should consider which pricing model might work best. These options generally aren’t as straightforward to evaluate as identifying a good APR for a credit card.

Flat Rate

With this credit card processing model, the processor charges a fixed fee for all credit and debit card transactions. This rate will include interchange fees. This model keeps things simple; a business owner knows how much will be charged. However, credit card fees can be higher under the flat rate model.

Tiered

In a tiered model, the fee charged per credit or debit card transaction will depend on its classification. Often, this processing model will have the following tiers: qualified, mid-qualified, and non-qualified, with qualified having the lowest fees and non-qualified having the highest. Because of all the nuances, this model can be complex and potentially confusing for merchants.

Interchange Plus

This is the most common credit card processing model for pricing. With this model, fees are kept separate, making this a transparent and often cost-effective method. The merchant is charged a percentage of the transaction plus a fixed fee per transaction, with the wholesale fee and the markup fee clearly distinguished.

Subscription

With the subscription pricing model, which charges a flat monthly fee, one has to sign up for this service. Merchants will also pay a low per-transaction fee, as well as a very small payment processor fee. Monthly fees tend to be more than the transaction fees in this model, making it most suitable for businesses with high sales volumes.

Recommended: How Do Credit Card Companies Make Money?

Selecting a Credit Card Processor

Picking a credit card processor is an important choice for a business and one that should involve an assessment of what your business needs and what different credit card processors offer.

•   Just as you’d consider average credit card interest rates if you were choosing a credit card, you’ll want to think over the fees different credit card processors charge.

•   Look at what the fee model is, as different models may be more suitable depending on the type of business. Also consider what cards the processor will allow you to accept.

•   Review the processor’s reliability and customer service availability. You might also think about additional features that are offered, such as a bundled or integrated point-of-sale system or a guarantee of next-day funds.

The Takeaway

Understanding credit card processing is helpful even if you’re not a merchant or entrepreneur. Once you know the costs of credit card processing, you may have insight into why some merchants may give cash discounts, for instance.

However, although fees are involved in these transactions, there are benefits to cardholders for using cards to complete their purchases, such as rewards and protections.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

How much does credit card processing cost?

On average, credit card processing can cost anywhere from 1.5% to 3.5% of the transaction amount. The exact cost will depend on a number of factors, however, including the banks, the credit card network, and the payment processor involved. Merchants’ costs can also depend on the credit card processing model they choose.

Is credit card processing secure?

Yes, it is generally secure. Credit card processing security has come a long way, with innovations on both the processing end as well as the credit card companies that create systems for security, whether people buy in-store or online.

Can I lower my credit card processing fees?

Yes, there are a number of ways merchants can explore lowering credit card processing fees. Comparing processors and credit card processing models can be one way to secure lower fees. You might also apply a surcharge to pass on costs to customers. Or, you could simply ask your current processor if there’s any room to negotiate fees.

Photo credit: iStock/Demkat

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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The Federal Reserve’s recent data says the average credit card interest rate for all accounts is 21.39%, which is a high number by most standards. If you never carry a balance or take out cash advances, it may not be a big deal for you, but if you do, it’s worth paying attention to the average credit interest rate. Doing so could help you anticipate and potentially budget for increased interest payments.

Here, you’ll learn more about credit card interest rates and how they can impact your financial life.

What Is the Average Credit Card Interest Rate?

The average interest rate for credit cards is 21.39%, as mentioned above, as of August 2025. Those accounts that carry a balance and accrue interest showed a still higher rate averaging 22.83%. Rates have been steadily increasing in recent years — in November 2021, the average rate for credit cards was 14.51%, and back in November 2017, for example, it was 13.16%.

Keep in mind, however, that the interest rate for your credit card could be higher or lower than this average depending on factors such as your credit profile, given how credit cards work. So what’s a good annual percentage rate (APR) for you may be different from what a good APR for a credit card is for someone else, as you’ll learn in more detail below.

Interest Rates by Credit Quality Types

Credit card interest rates, or the APR on a credit card, tend to vary depending on an applicant’s credit score. The average interest rate for credit cards tends to increase for those who have lower credit scores, according to the CFPB’s most recent Consumer Credit Card Market Report.

The report measures what’s called an effective interest rate — meaning, the total interest charged to a cardholder at the end of the billing cycle. Here are rates as of October 2025 for new credit card offers:

What this table shows is that the lower your credit score, the more you will be paying in interest on balances you have on your credit cards (meaning, any amount that remains after you make your credit card minimum payment).

Keep in mind that these rates don’t include any fees that may also apply, such as those for balance transfers or late payments, which can further increase the cost of borrowing.

Recommended: Revolving Credit vs. Line of Credit, Explained

Interest Rates by Credit Card Types

Interest rates may vary depending on the type of credit card you carry. In general, platinum or premium credits have a higher APR — cards with higher interest rates tend to come with better features and benefits.

Here are details as of October 2025:

Prime Rate Trend

The prime rate is the interest rate that financial institutions use to set rates for various types of loans, such as credit cards. Most consumer products use the prime rate to determine whether to raise, decrease, or maintain the current interest rate. That’s why for credit cards, you’ll see the rates are variable, meaning they can change depending on the prime rate.

As of September 18, 2025, the prime rate is 7.25%. On March 17, 2022, the prime rate was 3.50%. This can be considered an example of how variable this rate can be.

Delinquency Rate Trend

Credit card delinquency rates apply to accounts that have outstanding payments or are at least 90 days late in making payments. These rates have fluctuated based on various economic conditions. In many cases, rates are higher in times of financial duress, such as during the financial crisis in 2009, when it was at 6.61%.

As economic conditions rebound or the economy builds itself up, delinquency rates tend to go down, as consumers can afford to make on-time payments. According to the Federal Reserve, the delinquency rate for the second quarter in 2025 was 3.05%, down from 3.23% a year earlier.

Credit Card Debt Trend

Credit card debt has risen from its previous levels of $926 billion in 2019 and $825 billion at the end of 2020. It has climbed to $1.21 trillion currently, a new high.

This shows an ongoing surge in credit card debt, and these statistics can make individual cardholders think twice about their own balance and how to lower it.

Recommended: How Does Credit Card Debt Forgiveness Work?

Types of Credit Card Interest Rates

Credit cards have more than one type of interest rate. The credit card interest rate that applies may differ depending on how you use your card.

Purchase APR

The purchase APR is the interest rate that’s applied to balances from purchases made anywhere that accepts credit card payments. For instance, if you purchase a pair of sneakers using your credit card, you’ll be charged the purchase APR if you carry a balance after the statement due date.

Balance Transfer APR

A balance transfer APR is the interest rate you’ll be charged if you move a credit card balance from one credit card to another. Many issuers offer a low introductory balance transfer APR for a predetermined amount of time.

Penalty APR

A penalty APR can kick in if you’re late on your credit card payment. This rate is usually higher than the purchase APR and can be applied toward future purchases as long as your account remains delinquent. This is why it’s always critical to make your credit card payment, even if you’re in the midst of requesting a credit card chargeback, for instance.

Cash Advance APR

A cash advance has its own separate APR that gets triggered when you use your card at an ATM or bank to withdraw cash, or if you use a convenience check from the issuer. The APR tends to be higher than the purchase APR.

Introductory APR

An introductory APR is an APR that’s lower than the purchase APR and that applies for a set amount of time. Introductory APRs may apply to purchases, balance transfers, or both.

For instance, you may get a 0% introductory APR for purchases you make for the first 18 months of account opening. After that, your APR will revert to the standard APR. (Note that the end of the introductory APR is completely unrelated to your credit card expiration date.)

Factors That Affect Interest Rate

When you apply for a credit card, you may notice that your interest rate is different from what was advertised by the issuer. That’s because there are several factors that affect your interest rate, which can make it higher or lower than the average credit card interest rate.

Credit Score

Your credit score determines how risky of a borrower you are, so your interest rate could reflect your creditworthiness. Lenders tend to charge higher interest rates for those who have lower scores. Your credit score can also influence whether your credit limit is above or below the average credit card limit.

Credit Card Type

The type of credit card may affect how much you could pay in interest. Different types of credit cards include:

•   Travel rewards credit cards

•   Student credit cards

•   Cash-back rewards credit cards

•   Balance transfer cards

Most likely, the more features you get, the higher the interest rate could be. Student credit cards may have lower interest rates, but that may not always be the case. That’s why it’s best to check the APR range of credit cards you’re interested in before submitting an application.

The Takeaway

The current average credit card interest rate is 21.39%, according to data from the Federal Reserve. However, your rate could be higher or lower than the average APR for credit cards based on factors such as your creditworthiness and the type of card you’re applying for. Your best bet is to pay off your entire balance each month on your credit card so you don’t have to worry about how high the interest rate for a credit card may be. That way, you can focus on features you’re interested in.

With whichever credit card you may choose, it’s important to understand its features and rates and use it responsibly.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What is the average credit card interest rate?

The average interest rate for credit cards is 21.39%, according to the latest data from the Federal Reserve as of August 2025.

How do you get a low credit card interest rate?

You may be able to get a low credit card interest rate by building your credit score, as this will encourage lenders to view you as less risky. Otherwise, you can also aim to get a credit card with a low introductory rate, though these offers are generally reserved for those with good credit. Even if the APR is temporary, it could be beneficial depending on your financial goals.

What is a bad APR rate?

A bad APR is generally one that is well above the average credit card interest rate. However, what’s a good or bad APR for you will depend on your credit score as well as what type of card you’re applying for.

Photo credit: iStock/MicroStockHub

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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If you’ve purchased a product or service using a credit card and never received it, or if the item arrived damaged, then you may be eligible for what’s known as a chargeback. A credit card chargeback is when a bank reverses an electronic payment to trigger a dispute resolution process.

In this guide, you’ll learn more about what a credit card chargeback is, how it works, and when you may be able to request one.

What Is a Credit Chargeback?

Credit card chargebacks usually occur between a merchant and a bank that issued the credit card used for the transaction. Chargebacks are used to reverse a payment after a billing error, unauthorized credit card use, or the failure to deliver a product or service. You can also request a chargeback when the goods or services that you paid for with your credit card you received aren’t delivered as advertised.

For example, if you ordered a red jacket and you received a blue one, you could request a chargeback if the merchant refuses to exchange or refund your purchase.

Chargebacks can be initiated for almost any merchant that accepts credit card payments.

Credit Card Chargeback vs Refund

While both a chargeback and a refund can result in you getting your money back, they aren’t the same thing. Knowing the difference is an important part of understanding how credit cards work.

•   With a refund, it’s the merchant rather than the consumer that initiates the return of funds. Additionally, a consumer typically deals with the merchant to get a refund

•   When a chargeback occurs, it’s the bank issuing the credit card that you’ll work with.

How Does a Credit Charge Back Work?

If you have an issue with a product or service you received or you notice a charge on your credit card statement that you don’t believe was authorized, you can initiate a credit card chargeback. These are some details about how this typically works:

•   You can usually only make a chargeback within 60 to 120 days of the date of purchase, depending on the card issuer.

•   Once you’ve contacted the credit card issuer to dispute the charge, the bank will take over the process and contact the merchant. The merchant will have the opportunity to either accept or refute the chargeback, and you may be asked to provide evidence supporting your request.

•   At the end of the investigation, the chargeback will either be accepted, in which case you’d get your funds back, or it will be rejected.

•   If you disagree with the decision, you can always continue to dispute the charge through a process called arbitration.

When to Use a Chargeback

The Federal Trade Commission (FTC) provides protections to consumers who use credit cards, including the right to accurate billing, protection from unauthorized charges, and the right to dispute credit card charges for goods or services that are different than described. As such, chargebacks are issued for a variety of reasons.

Before proceeding, however, keep in mind that if there was an issue with your service or goods, you may consider giving the merchant the opportunity to make it right before requesting a chargeback.

Fraud or Unauthorized Use

A common reason to request a credit card chargeback is due to fraud or unauthorized use. If you don’t recognize a transaction on your credit card statement or believe someone used your card without your authorization, you may consider requesting a credit card chargeback.

Moving forward, a good way to prevent credit card fraud can be to keep your credit card expiration date and CVV number on a credit card safe.

Incorrect Amount

If an amount on your credit card bill is incorrect, you can file for a chargeback. For example, if the merchant adds an extra zero to your bill and you can’t reach the company to have it corrected, then this would be a good time to request a chargeback — especially if the overcharge has pushed you close to your credit limit.

Recurring Billing Was Not Stopped

If you cancel a subscription service but continue to be billed afterwards, a chargeback can make sense. It can help if you have proof in hand that you had canceled the subscription already.

Goods and Services Not Delivered

Being charged for a good or service that you never received is another reason to file a chargeback. If you order something that never arrives and are unable to get the company to send it or give you a refund, then filing a chargeback may be your best course of action. After all, you don’t want to potentially pay interest on something you never received, even if you do have a good annual percentage rate or APR for a credit card.

Goods or Services Were Not as Described

If you receive a good or service that was substantially different from what was described or agreed to, you can file a chargeback for the cost of that good or service. For example, if you paid to have work done on your house, but it was done incorrectly and the service provider refused to fix it, then you could request a chargeback.

However, remember that the merchant will get the opportunity to prove that the services were provided as described.

Return Credit Not Processed

If you returned an item or canceled a service within a merchant’s return policy but never received credit for the return, such as a refund, you can file a chargeback with your credit card. This can help you recoup the funds you were owed (plus any credit card interest that may have accrued in the meantime).

Recommended: How Many Credit Cards Should You Have?

How to Submit a Chargeback

Here are the typical steps for submitting a credit card chargeback:

1. Contact Your Bank or Card Issuer

To submit a chargeback, you first initiate the process with your bank or card issuer, often through its website. Some card issuer websites allow you to initiate or process most disputes entirely online. Otherwise, you can call your card issuer to file the chargeback or request a chargeback by mail.

2. Receive Confirmation of Your Request

After you’ve submitted the chargeback request, your bank will provide written confirmation of your chargeback request. They will then either post a temporary credit to your account to cover the disputed amount or pause required payments and APR on a credit card on the disputed amount while the issue is being investigated.

3. Wait While Your Request Is Submitted to the Merchant

Next, the bank will submit your chargeback request to the merchant. The merchant has a certain amount of time to respond to the bank’s inquiry.

During the investigation, make sure that you continue to pay your credit card bill for the remaining charges. At the least, make sure that you’re making the credit card minimum payment. Otherwise, you’ll end up paying interest on the non-disputed charges.

4. Receive a Decision

If the chargeback is accepted by the merchant, your billing dispute will be closed and your bank will provide an account credit to cover the disputed charge.

However, if the merchant rejects the chargeback request, your bank will evaluate the information and make a decision, which they will notify you about in writing. If you disagree with the bank’s decision, you can dispute your bank’s decision through the bank’s dispute resolution process.

Recommended: What Does Preapproved Mean for a Credit Card?

The Takeaway

Credit card chargebacks allow you to dispute a charge on your credit card. You can initiate a chargeback from a variety of reasons, such as fraud or unauthorized use, being billed for an incorrect amount, or encountering a situation where goods or services either aren’t delivered or aren’t provided as described. To start the process, you’ll contact your credit card issuer, and they will then reach out to the merchant.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

What happens when you submit a chargeback?

When you submit a chargeback, you initiate the process with your bank. The bank contacts the merchant for the request, and the merchant decides whether to accept or reject the chargeback request.

Does a chargeback hurt your credit?

A chargeback doesn’t hurt your credit in itself, but any unpaid credit card bill during the dispute process could temporarily impact your credit score. If the disputed charge or charges are large and comprise a significant portion of your credit limit, this could also negatively affect your credit score temporarily, since your credit utilization ratio will be high.

Are chargebacks always successful?

Chargeback requests are not always successful. The merchant can respond that the charge is valid and provide documentation to support the claim. In this case, the credit card issuer may deny your request for a credit card chargeback.

How much is the chargeback fee?

A chargeback fee only applies to the merchant, not to the customer. The average chargeback fee can be $10 to $100, but businesses with more chargebacks will face higher fees.

Is it worth fighting a chargeback?

Whether it’s worth fighting a chargeback depends on a variety of factors and will vary from person to person. Consider the amount in question, the time it may take, and the reason for the chargeback request. It’s also a good idea to contact the merchant first to give them a chance to correct the problem before requesting a chargeback.

Photo credit: iStock/PamelaJoeMcFarlane

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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If you’re young and looking to access and build credit, opening a credit card can be a great step. However, you need to be at least 18 years old to open your own account. If you’re under the age of 18, you can’t open your own credit card, but you can be an authorized user on someone else’s account.

Even if you’re old enough to get a credit card, when you’re under the age of 21, you may face additional requirements when applying. Read on for tips on getting a credit card when you’re young and options you might consider to be able to start building your credit.

At What Age Can You Get a Credit Card?

To open your own credit card, you must be at least 18 years old.

However, if you’re between the ages of 18 and 20, you may encounter stricter verification requirements, including showing proof of ability to repay, such as through income, or getting a cosigner. This is due to regulations from the Credit CARD Act of 2009, which is intended to protect young consumers from taking on more debt than they can handle.

After age 21, these regulations won’t apply to you, but card issuers may still review your income as part of your application. It’s also important to pay attention to the terms and conditions of the credit card, such as the annual percentage rate, or APR on a credit card, as you consider your credit card options and apply.

If you’re younger and have a limited credit history, you may only get approved for a card with a higher APR. Do your research before applying to have an idea of what is a good APR on a credit card.

Tips for Getting a Credit Card When You’re Young

Once you understand what a credit card is and how credit cards work, you may see the appeal of a credit card and want to open one. If you’re under the age of 18, the best things you can do to work toward being able to get your own credit card are to start building credit and to learn the basics of financial management.

Start Building Credit

Building credit when you’re young may be hard, especially if you’re under 18 and not yet eligible for your own credit card. One way to do so, however, is by becoming an authorized user on a credit card account.

A responsible parent or guardian can add you as an authorized user for their account, even if you’re still under the age of 18. Being added to the primary cardholder’s credit history can help build your credit.

Learn the Basics of Financial Management

It’s also important for young people to learn the basics of financial management. Learning about things like budgeting, credit card interest, and credit scores before you even own a credit card can help put you on the path to financial success. That way, when you do eventually get your own credit card, you’ll know how to stay on top of credit card minimum payments and avoid debt.

This can also be a good time to familiarize yourself with common financial scams, such as credit card skimmers, so you’ll know what to be aware of when you do get your own card.

How to Get a Credit Card If You Are 18 to 20 Years Old

Many young people between the ages of 18 and 20 are attending college or trade school or working. They may not have a lot of income yet, and their credit history may be limited. Still, first-time cardholders do have options for getting a credit card, which can be an important step toward building their credit history and score.

Secured Credit Cards

One option is secured cards, which are a type of credit card that require the cardholder to make a refundable security deposit. The security deposit typically becomes the amount of the card’s credit limit.

Secured cards are often marketed toward people who want or need to build their credit, so they can be a great choice for young people who are age 20 and under. Once you make the initial minimum security deposit (which usually serves as your credit limit), you can use your secured credit card in the same way that you would use any other credit card. Like any other credit card, your credit card will have a credit card expiration date and a CVV number.

A few points to note:

•   Since your credit limit is often equal to the amount of your security deposit, secured credit cards often don’t have very high credit limits compared to the average credit card limit. However, having a lower credit limit can help prevent young people from overspending.

•   With a secured card, your money is tied up temporarily in the security deposit. While you get your security deposit back when you close or upgrade the account, that’s money you otherwise can’t use in the meantime.

Become an Authorized User

Young cardholders could also become an authorized user, which is someone who’s added to a credit card account with authorization to use that account. The authorized user typically has their own card and can use it to make payments as usual. However, only the primary account holder is held responsible for payments.

The authorized user benefits from this arrangement because the primary cardholder’s account history and activity are reported on the authorized user’s credit report, which can help build their credit history.

Apply for a Student Credit Card

Student credit cards are designed and marketed for students roughly between the ages of 18 and 22 years old. Students generally have different needs than other credit card customers, so it may make sense for them to get a credit card designed specifically for them.

As an added bonus, some students may qualify for credit cards with rewards, such as cashback on categories that students may spend more on, like restaurants and grocery stores.

Consider Credit Builder Credit Cards

There are also some credit cards that are available to applicants with poor credit who are looking to build their credit. Responsible use of a credit card can be a great way to positively impact credit, as your payment history will be reported to all three major consumer credit bureaus. Just keep in mind that these cards can have higher than average credit card interest rates and more fees due to their availability to those with lower credit scores.

Get a Cosigner

Another option for young applicants is to get a cosigner for a credit card. Indeed, applicants within the 18 to 20 age range must get a cosigner if they can’t provide proof of employment or income when applying. Also, people in this age may not have much of a credit history, if any, which can be a downside.

A cosigner can be a parent, guardian, or other family member who assumes legal and financial responsibility for the applicant if they are unable to pay off the balance of the card. Ideally, the cosigner should have a solid credit history to improve the chances of the credit card application getting approved. If the cardholder fails to repay a card or falls in debt, it will negatively affect the credit score of both the cardholder and the cosigner, so this is an important responsibility.

Check with your bank or credit card issuer before using a cosigner, since not all banks allow cosigners on credit cards.

The Takeaway

Once you reach the age of 18, you will likely be able to get a credit card of your own. You can make sure you’re ready for this responsibility by building your credit history, getting down the financial basics, and knowing how to apply for a credit card when the time comes. You’ll have options as a young credit card applicant, from secured credit cards to student credit cards to credit builder cards and more. Learning how to use a credit card responsibly is an important part of your financial life.

Looking for a new credit card? Consider credit card options that can make your money work for you. See if you're prequalified for a SoFi Credit Card.

FAQ

Can I get a joint card?

Some card issuers allow cosigners on credit cards. If you’re not able to qualify for a credit card on your own, you could also explore becoming an authorized user on someone else’s credit card account.

Does a student credit card affect credit score?

Yes, a student credit card affects your credit score. A student credit card is a regular credit card that’s just designed with students’ unique needs in mind. Activity is reported to the credit bureaus, so it will affect your credit like any other credit card would.

What is the limit on a student credit card?

Credit limits on student credit cards vary by issuer and card. However, credit limits on student cards are often lower than the average credit card limit due to the fact that students generally have more limited credit histories and lower incomes.

Do you need credit for a secured credit card?

Most secured credit cards have less restrictive requirements for an applicant’s credit. In fact, many secured credit cards consider applicants with very poor or limited credit.

Photo credit: iStock/RgStudio

SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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