# Per-Transaction Fees: Definition, Components, Typical Cost

## What Are Per-Transaction Fees?

A per-transaction fee is an expense a business must pay each time it processes an electronic payment for a customer transaction. Per-transaction fees vary across service providers, typically costing merchants from 0.5% to 5% of the transaction amount plus certain fixed fees.

### Key Takeaways

*   A per-transaction fee is an expense that businesses pay a service provider each time a customer payment is processed electronically.
*   The per-transaction fee can vary depending on the service provider but usually ranges between 0.5% and 5% plus certain fixed fees.
*   Merchants partner with merchant acquiring banks to set up the electronic payment process and the deposit account for the funds.
*   A per-transaction fee usually consists of an acquirer fee and a processor fee.

## How Per-Transaction Fees Work

Per-transaction fees are required of the merchant from a few different entities in a transaction. Merchants partner with merchant [acquiring](https://www.investopedia.com/terms/a/acquirer.asp) banks to facilitate all of the communications in an electronic payment transaction.

Merchants also set up a [merchant account](https://www.investopedia.com/terms/m/merchant-account.asp) with the acquirer, which serves as the merchant’s primary deposit account for funds from each transaction. A merchant who receives a lot of electronic payments will rely heavily on the merchant acquiring bank, making the terms of the merchant account agreement an important factor for a merchant.

## Components of Per-Transaction Fees

Merchants [pay a variety of fees](https://www.investopedia.com/terms/m/merchant-discount-rate.asp) related to the acceptance of electronic payments. Some fees will vary while others are fixed. Merchants have a wide range of acquiring banks they can partner with for electronic payment services. Each acquirer has different fee structures and service capabilities allowing merchants to choose the acquirer that is best for them.

> **Fast Fact**
>
> Acquirers will typically charge per-transaction fees as well as a monthly fee for the management of a merchant account.

The second component of a per-transaction fee is the fee paid to the network processing company. Merchants establish the types of branded cards they can accept at their store based on the processing network of their merchant acquiring bank.

Payment card companies such as MasterCard, Visa, Discover, or American Express each have their per-transaction fees that will be charged to the merchant in a transaction. Payment card company fees, also called wholesale fees, are usually a fixed fee per transaction. Some acquirers may be able to negotiate lower wholesale fees through network relationships with processors.

Acquirer and processor fees are the main components of a comprehensive per-transaction fee. In some cases, other [fees](https://www.investopedia.com/terms/f/fee.asp) for a merchant may also apply. One added cost merchants might encounter is a terminal fee which is a per-transaction fee charged to a terminal provider such as Square for the use of a terminal in an electronic payment card transaction.

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](https://www.investopedia.com/terms/d/debitcard.asp). For example, merchants may set a $5 or $10 minimum for [credit card](https://www.investopedia.com/terms/c/creditcard.asp) and debit card transactions. Smaller merchants who are less able to absorb excess card fees are more likely to impose these minimums.

> **Fast Fact**
>
> American Express, Visa, MasterCard, and Discover all charge approximately the same fees, with slight variations that amount to cents in some of the components. Generally, Visa charges the lowest total amount. This depends on the cards used as well, as cards with rewards often have higher fees.

## Merchant Account Statements

Acquirers will detail a merchant’s total monthly costs and transaction activities in a monthly statement. Generally, service provider transaction fees will be delineated in one of three categories: interchange, tiered, or subscription.

The [interchange](https://www.investopedia.com/terms/i/interchange-rate.asp) section lists the payment card company fees and service provider fees separately on the merchant’s monthly statement. The tiered section assesses different fees based on the transaction type, such as in-person versus online. Subscription fees are also assessed on a monthly or annual basis.

## How Can I Avoid Transaction Fees?

You can avoid transaction fees by paying for a purchase with cash. However, if you are using a credit card, there will be a per-transaction fee charged to the merchant. If the merchant does not want to pay the fee, they may raise their prices so customers would effectively be subsidizing the fee.

## Who Pays Credit Card Transaction Fees?

A credit card transaction fee is charged to the merchant or vendor, not the cardholder. Businesses pay the card transaction fees to the credit card issuer or payment processor company.

## Can Businesses Charge a Credit Card Surcharge?

A merchant is responsible for paying a credit card transaction fee, and some merchants charge a credit card surcharge to recoup this expense. However, in some states it is illegal for merchants to charge a credit card surcharge.

## The Bottom Line

Per-transaction fees are charged to merchants, not consumers, but you may be affected by these fees if the merchant adjusts prices to recoup their expenses. Merchants, especially smaller businesses, may also set minimum purchase amounts if you are using a credit card so that they do not lose money on a transaction.

> **Article Sources**
>
> 1.  FDIC. "[Merchant Processing](https://www.fdic.gov/regulations/examinations/credit_card/pdf_version/ch19.pdf)." Page 8.
>     
> 2.  Square. "[Fees and Payments](https://squareup.com/help/us/en/article/6109-fees-and-payments-faqs)."
>     
> 3.  VISA. "[Minimum Transaction Amount on a Visa Credit Card](https://usa.visa.com/dam/VCOM/download/merchants/minimum-transactions-credit-card.pdf)."