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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.

Processing fees can run over 3% 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 2024

As mentioned above, card processing fees in 2024 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:

In addition, there can typically be a per-use charge (say, 10 to 22 cents) which varies depending on, say, whether the transaction was in-person or online or over the phone.

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% 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.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the typical fee for credit card processing?

The typical fee for credit card processing in 2024 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

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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While you have to be at least 18 years old to get your own credit card, you can become an authorized user on someone else’s credit card as a 16-year-old. This allows you to have a copy of a credit card with your name on it — though the adult will still be the account holder and be responsible for paying the bills.

Keep reading to learn more about how to get a credit card at 16, which will involve becoming an authorized user.

How Old Do You Have to Be to Get a Credit Card?

Generally, you must be 18 years old to get a credit card on your own. Even after turning 18, you usually must prove that you have independent income or get an older cosigner before the age of 21 in order to get a credit card, due to regulations that govern how credit cards work.

While getting a cosigner (usually a parent) can be doable, many teens may struggle to find a credit card issuer that is willing to accept a cosigner. More often than not, if a teen wants to gain access to a credit card, their best path forward is to become an authorized user on someone else’s credit card.

What Is an Authorized User?

An authorized user is someone who is added to a credit card account by the primary account holder. Becoming an authorized user on someone else’s credit card can make it possible for a 16-year old to have a credit card, as virtually all major credit card issuers accept authorized users who are 16.

If an adult — such as a parent — wants to, they can add a teenager as an authorized user to their credit card. The account holder can then request that the authorized user receive a copy of the credit card with their name on it. This credit card will share the same number as the card of the main account holder.

The teen can then make purchases with the credit card anywhere that accepts credit card payments, but they won’t be legally responsible for paying the bills. Because of this, it’s important that everyone works together to communicate and is aware of what’s being spent and who will pay it off. If the parent is going to put a big purchase on their credit card — such as paying taxes with a credit card — an authorized user’s added spending can drive up the credit utilization ratio.

Recommended: When Are Credit Card Payments Due

Becoming an Authorized User

Becoming an authorized user on a credit card can impact a teen’s credit score and build their credit history. That’s because when a teenager becomes an authorized user on a credit card, the credit card issuer will begin to report the account activity to the three major credit bureaus (TransUnion, Equifax, and Experian).

The primary account holder must contact their card issuer to add you. Then, here’s how being an authorized user can benefit you:

•   When the primary account holder makes on time payments and keeps their balance low in comparison to their credit card limit, the teen’s score should benefit. On the other hand, if the account holder is late on their payments, the teen’s credit score could suffer.

•   It’s important for both the account holder and authorized user to know how much they can afford to spend and how much they can manage to pay off each month. Ideally, you’ll be able to pay more than the credit card minimum payment to minimize the interest that accrues.

•   It’s also wise to double-check that the credit card issuer is reporting the behavior of the authorized user to the three main credit bureaus. Some credit card issuers, like Wells Fargo, accept authorized users who are under the age of 18 but don’t report their behavior to the credit bureaus until they come of legal age — which won’t help the teen build their credit history or credit score.

Credit Card Options for 16-Year-Olds

If becoming an authorized user isn’t a good fit, 16-year-olds have other options. Teens may find that a debit card or prepaid card can give them the convenience of using a card without actually having a credit card or borrowing any money.

•   Because debit cards are connected to bank accounts, a teen can use a debit card to make payments without physical cash on hand. However, they can’t spend more than they have in their bank account.

•   They also won’t have to worry about any potential impacts to their credit score when using a debit card.

Another option: prepaid cards, which can be purchased at grocery stores, gas stations, and pharmacies. These can be loaded with a set amount of money. The user can then spend as much as the prepaid card is worth.

Neither a debit card nor a prepaid card will help teens build their credit score, nor do they offer the protections a credit card does, like requesting a credit card chargeback if there’s an incorrect charge. However, these options can get teens used to the concept of not overspending when shopping with a card instead of cash.

Are There Advantages to Getting a Credit Card at 16?

There are some unique advantages that come with getting a credit card at the age of 16 by becoming an authorized user. In addition to the teen gaining a firm grasp on what a credit card is, these are the main benefits worth keeping in mind.

Building Credit Score

As we briefly mentioned earlier, using a credit card responsibly can help teens build their credit history and credit score. Building credit when you’re young can make it easier to qualify for better credit products as well as rates and terms down the road.

Learning Good Financial Habits Early

Another headstart that teens can get by using a credit card at age 16 is learning good financial habits. Using a credit card can help teenagers learn how to budget, pay bills on time, and spend less than they earn. They can also begin to learn about annual percentage rate, or APR, and understand why it’s so important to find a good APR for a credit card.

Access to Emergency Funds

As teenagers gain more and more independence, their parents won’t always be with them when they’re out and about. If an emergency were to arise, like running out of gas, a credit card can give a teen the ability to spend more than just the cash they have on hand.

Rewards for Card Holders

The fun part about credit cards is that it’s possible to earn rewards when you use them. Because the teen will be an authorized user on a credit card, the account holder will be the one to redeem any credit card rewards. Still, this serves as a good opportunity to teach a teenager the benefits of using credit responsibly when it comes time for them to apply for a credit card of their own.

If they want, the primary account holder can even share some of their cash back or other perks with the authorized user.

Convenience for Both Parents and Children

Parents may find that their teen having a credit card saves them a lot of fuss. Do they need money for a yearbook or to buy prom tickets? No worries, they can use their credit card as long as they have permission or know their spending limits. With their own credit card (and the help of a responsible adult when it comes time to pay the bill), teens can use a credit card to manage their college applications, pay for SAT prep classes, or pick up school supplies.

Recommended: Does Applying For a Credit Card Hurt Your Credit Score

Common Pitfalls for 16-Year-Olds With a Credit Card

Of course, credit cards aren’t all fun and games. Here are some pitfalls that 16-year-olds should look out for when using a credit card.

Overspending

The biggest mistake any of us can make when it comes to credit cards is overspending and not being able to afford our bill. It’s important that parents or legal guardians have serious conversations with their teens about how credit works and what the consequences of overspending can be. This can include credit card interest, fees, and a bruised credit score.

Possibility of Credit Card Fraud

Credit cards come with fraud risks that teens who are used to paying in cash may not know what to look out for, such as credit card skimmers. While credit cards can be more secure than debit cards, it’s important to teach teens about how to use credit cards safely so their card isn’t lost or stolen and they don’t fall prey to identity theft.

The Takeaway

It is possible to get a credit card at 16 by becoming an authorized user on an adult’s credit card account. To get your own credit card, you’ll need to wait until you’re at least 18, and even then, you’ll need to prove you have independent income or get a cosigner. When it is time to get a credit card of your own, you’ll want to make sure you’re ready to manage it responsibly and that you take the time to select a credit card that fits your needs.

Whether you're looking to build credit, apply for a new credit card, or save money with the cards you have, it's important to understand the options that are best for you. Learn more about credit cards by exploring this credit card guide.

FAQ

What is the minimum age to get a credit card?

You must be 18 years old to get your own credit card. Even then, you must prove that you have a steady source of income or else you’ll need to get a cosigner who is over the age of 21.

Can a 16 year old get a credit card with a cosigner?

No, you must be at least 18 years old to get a credit card — even if you have a cosigner. Those under the age of 18 can become an authorized user on an adult’s credit card account, but they can’t get a credit card of their own.

Can you use a credit card to build a good credit score?

When used responsibly, a credit card can help build a credit score. If a teen becomes an authorized user on a parent’s credit card, for instance, and that parent makes on-time payments and keeps their credit utilization low, they can build their credit score as well as the teen’s.

What payment card can you get at 16?

Before the age of 18, teens can get a debit card or a prepaid card on their own. Neither type of payment card will help build their credit score, but they are easier to obtain than a credit card. A teen can also become an authorized user and get a credit card of their own if approved by the main account holder, though this will not be their own credit card account.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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.

Photo credit: iStock/cyano66
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