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cost of online payments

Why is the Cost of Accepting Payments Online So High: Part 1

Part 1

A question we often receive from merchants is why the cost of accepting payments online is higher than at the point-of-sale. Before we explore the factors that can drive up the cost of accepting payments in a card-not-present environment, let’s explore the three major categories of payments acceptance fees: interchange, dues/assessments, and processing fees.


Interchange, which comprises the largest proportion of fees, is set by the card brands and paid to the issuing banks. For most merchants, it represents approximately 95% of total processing fees. It’s important to remember that interchange is not one rate but many rates and can fluctuate depending on a variety of factors (credit vs. debit, card type, location of the issuer and the acquirer, etc.).


The second biggest bucket of fees is dues and assessments, which are also set by the card brands. Historically, dues and assessments were charged as a flat rate but now the card brands can charge for a variety of reasons including wrong types of authorizations, not matching deposit amounts to clearing amounts, and cross-border fees on foreign transactions.

Processing Fees

The last category is processing fees. For most merchants this includes such items as authorization requests, number of times they do a deposit (sale or credit), and how many chargebacks they encounter. Processing fees are the only ones discussed here that can be negotiated with the processor.

That last point is an important one to remember: the majority of a merchant’s fees does not stay with the processor and are not negotiable. Of the three major fee categories, the one that has the biggest impact on a merchant’s bottom line is interchange. In Part 2, we’ll talk more about managing interchange and some key factors to consider when accepting both card-present and card-not-present transactions.

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