How Payment Processing Fees Actually Work

The three layers inside 2.9% + $0.30

When Stripe, Square or PayPal quotes you 2.9% + $0.30, that single number bundles three separate charges. Interchange — the largest share, roughly 1.5–2% — goes to the bank that issued the customer's card. Assessment — around 0.15% — goes to the card network (Visa, Mastercard). Markup — the remainder, typically 0.7–1% plus the $0.30 — is what your processor actually keeps.

Flat-rate pricing exists precisely so you never have to think about this. The processor pools every card type, pays whatever interchange each one really costs, and pockets the difference.

Why some cards cost the processor more than others

Interchange isn't one rate — it's a matrix. A plain debit card tapped in person can cost under 1%; a premium rewards credit card keyed in online can exceed 2.5%. The cardholder's 'free' airline miles are funded by your interchange. That's why processors quote blended rates — and why interchange-plus pricing exists for larger merchants.

With interchange-plus, you see the real interchange on every transaction plus a fixed processor markup. It's cheaper at scale (usually past ~$10–25k/month) but the monthly statement becomes a spreadsheet. Under that volume, flat-rate simplicity usually wins on total cost.

The fixed fee is why small tickets hurt

The '$0.30' matters more than the '2.9%' on small transactions. A $5 charge costs $0.45 — an effective 9% fee. A $100 charge costs $3.20 — 3.2%. This is why micropayment rates exist (smaller percentage, smaller fixed fee) and why minimum-purchase signs exist in coffee shops.

What you can actually negotiate

Interchange and assessment are set by the card networks — no processor can change them. The negotiable part is the markup, and processors will shave it once your volume justifies it (typically $80k+/month for Stripe's volume discounts). Below that, your real levers are choosing the right fee model, avoiding international and currency-conversion surcharges where possible, and pricing products so the fixed fee doesn't eat small-ticket margins.