Merchant guides
How to find your effective processing rate.
Your effective rate is your total processing fees divided by your total card sales for the same month. If you ran $40,000 in card sales and paid $1,240 in fees, your effective rate is $1,240 ÷ $40,000 = 3.1%. That one number tells you what card processing really costs you, whatever your contract says.
Find the two numbers.
Total card sales. Usually called gross sales, total volume, amount processed or total submitted. Use the figure for card sales only, before fees come out.
Total fees. Add up every fee for the month. Some statements show one total (often labeled total fees, fees charged or less discount). Others spread fees across several sections: per-transaction fees, percentage fees, monthly service fees, PCI fees and a statement fee. Add them all.
Then divide fees by sales and multiply by 100. Fees of $1,240 on sales of $40,000: $1,240 ÷ $40,000 = 0.031, which is 3.1%.
Why your contract rate isn’t what you pay.
- Fixed monthly feesStatement fees, PCI fees and monthly minimums are charged no matter how much you sell, so they push your rate up in slow months.
- Per-transaction feesA 30-cent fee is 3% of a $10 sale but 0.3% of a $100 sale. Shops with small average tickets feel this most.
- Card mixRewards, business and foreign cards cost more to accept than basic debit cards. On tiered pricing they often fall into a more expensive bucket.
The three ways processors price.
- Flat rateOne percentage plus a fixed fee on every sale, the way most payment apps charge. Simple to read, but you pay the same on cheap and expensive cards.
- Interchange-plusThe real cost set by the card networks is passed through, plus a fixed markup from the processor. The most transparent model.
- TieredSales are sorted into qualified, mid-qualified and non-qualified buckets at different rates. The hardest to check, because the processor decides which card lands in which bucket.
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FAQ
Common questions
Does the effective rate include monthly fees?
Why does my effective rate change from month to month?
Is a flat-rate processor always cheaper?
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