The formula
For example, if a US business processed $42,000 in card payments and paid $1,260 in processing-related costs in the same billing month, its effective rate would be 3.00%.
What should count as a processing fee?
Include relevant amounts actually charged for accepting those card payments, such as discount fees, interchange or network assessments passed through, transaction charges, and applicable recurring account or service fees. To compare periods or vendors, use a consistent definition of costs.
Common calculation mistakes
- Using gross business revenue instead of card payment volume.
- Comparing fees from one month against sales from another month.
- Excluding monthly charges that are part of the payment acceptance arrangement.
- Assuming the quoted processor markup equals the total cost of taking cards.
What the effective rate cannot tell you
The rate alone cannot establish whether a merchant is overpaying. Card mix, in-person versus keyed or online payments, transaction size, payment risk, terminals and contract terms matter. A like-for-like offer is required to assess potential savings.
How to compare an alternative offer
Ask for all recurring, percentage, per-transaction and equipment fees. Apply those terms to the same expected card volume and transaction mix. Avoid treating a promotional headline percentage as the full effective rate.
Want a second set of eyes on your processing costs?
Our calculator shows the numbers without suggesting guaranteed savings. You can request a free cost review if you'd like a conversation about your own situation.
Email a fee question ↗Related: Compare processing quotes and Understand common pricing models.