Getting a merchant account for your business shouldn’t feel like solving a complicated puzzle. Other processors will often try to hide fees, add confusing terms, and mislead their merchants on pricing models. It’s no wonder business owners get frustrated. At AllayPay, we’re here to cut through the confusion. The guide below will walk you through the essentials of credit card processing, explain the costs, and help you find the best solution for your business.
What to Expect
After reading this guide, you’ll have the tools and knowledge to have a productive conversation and confidently negotiate your credit card processing agreement. We removed the typical sales pitches and minimized the industry jargon by laying out the definitions and tips that help you keep your costs down.
Understanding the Credit Card Processing Ecosystem
Credit card processing might seem complex, but it all comes down to four key players:
- Issuing Banks: These banks provide credit cards to consumers, like Chase, Bank of America, or smaller Credit Unions.
- Acquiring Banks: These banks approve and maintain merchant accounts for businesses, enabling them to accept credit card payments.
- Card Networks: Brands like Visa, Mastercard, American Express, and Discover Card connect issuing and acquiring banks through their processing systems.
- Payment Processors: These companies handle the technical work of routing transactions, managing payments between parties, and checking whether the card is good or the customer is over their limit, for example.
There are three additional parties often discussed that are worth mentioning:
- Independent Sales Organizations (ISOs): ISOs partner with acquiring banks and processors to resell payment services to merchants. They also provide customer support and additional tools, such as chargeback monitoring.
- Agents: Agents work under ISOs or directly with processors to resell merchant services. They earn commissions or residuals from the merchants they sign and retain while assisting with onboarding, underwriting, and ongoing support.
- Referral Partners: Referral partners also work with ISOs or processors but focus solely on referring potential merchants. Unlike agents, they provide leads (“drop a name”) without handling underwriting, merchant applications, or ongoing support responsibilities.
Where Does Your Money Go?
Every time a customer uses their card, your business incurs fees paid to three entities:
- Interchange Fees (Non-Negotiable): Paid to the issuing bank.
- Assessment Fees (Non-Negotiable): Paid to card networks.
- Processor Markup (Negotiable): Paid to the payment processor.
The first two fees are fixed costs, but the processor’s markup is where you can negotiate to save money.
While interchange and assessment fees remain consistent across processors, the markup is where you have the power to negotiate and save money.
Most Common Visa Interchange and MasterCard Interchange Rates 2025
Here’s an example of how interchange fees can break down for a $100 transaction:
| Card Type | Current Interchange Rate |
|---|---|
| Visa Debit CPS Regulated | 0.05% + $0.22 |
| MasterCard Debit Regulated | 0.05% + $0.22 |
| Visa Debit CPS | 0.80% + $0.15 |
| MasterCard Debit | 1.05% + $0.22 |
| Visa Credit CPS Retail | 1.51% + $0.10 |
| MasterCard Credit Consumer (Merit III Core) | 1.65% + $0.10 |
By understanding the different interchange fees, you will better know where your money is going and identify opportunities to save.
Pricing Models: What You Need to Know
Not all pricing structures are created equal. Here’s a quick breakdown:
Pass-Through Pricing
With this model, processors pass on interchange and assessment fees at cost, adding a transparent markup. It offers clarity and is typically the most cost-effective.
Bundled Pricing or Tiered Pricing
Bundled pricing or Tiered Pricing hides interchange and assessment fees within ambiguous “qualified,” “mid-qualified,” and “non-qualified” rates. This pricing model is not suggested for low-risk merchant accounts, as it lacks transparency and often leads to higher costs.
Surcharging
Surcharging allows merchants to pass the cost of credit card processing fees onto customers who choose to pay with credit cards. This model helps merchants offset processing costs while complying with legal and card network rules. Surcharging on debit card transactions is prohibited, and the surcharge rate must be disclosed to customers at the point of sale. The typical rate charged on credit is 3%. Surcharging is a cost-effective program for merchants to save 60-75% of their processing fees.
Cash Discount
Cash Discount is a pricing model that incentivizes customers to pay with cash by offering a reduced price compared to card payments. Unlike surcharging, which adds a fee to credit card transactions, a cash discount program applies a discount at the point of sale for those who choose to pay with cash. This method helps merchants offset processing fees while rewarding customers who opt for lower-cost payment methods. When implemented correctly, cash discounting remains compliant with card network regulations and provides a straightforward way for businesses to manage expenses while maintaining transparency.
Convenience Fee
A convenience fee is an additional charge added to a transaction when a customer uses an alternative payment method that isn’t typically accepted by the business for a particular type of transaction. This fee covers the cost of processing a payment method that comes with additional costs, usually credit or debit cards.
Dual Pricing
Dual pricing presents two different prices to customers: a lower price for cash payments and a slightly higher price for credit card payments. Unlike surcharging, this model incentivizes cash payments while remaining compliant with card network regulations. It’s a transparent and effective way for merchants to manage processing costs without directly charging extra fees. See Convenience Fee vs. Dual Pricing blog for more information.
Flat-Rate Pricing
Flat-rate pricing simplifies fees by charging a single percentage rate for all transactions, regardless of the card type or interchange category. While easy to understand, this model can be more expensive for merchants with high sales volumes or low-risk profiles. This is the reason why Stripe, Square, and PayPal often default to this model.
How to Pick the Right Processor
Finding the right processor can seem overwhelming, but focusing on these steps can simplify the process:
- Request a detailed proposal: AllayPay will provide a detailed side-by-side proposal for free so you can make the best decision.
- Demand Best Pricing Plan: Work with your dedicated agent to ensure you save the most amount of money possible.
- Review All Fees: Consider monthly, annual, and transaction fees—not just the percentage rate.
- Request Full Disclosure: Ask for a detailed breakdown of all costs in writing.
At AllayPay, we prioritize transparency, providing precise, straightforward quotes tailored to your business needs.
Innovative Strategies to Minimize Costs
Keep an Eye on Processor Fees:
Processors sometimes raise rates quietly over time. Check your monthly statements to catch any changes early.
Optimize Interchange Rates:
Interchange fees depend on details like card type and transaction method. Adjusting your processes or upgrading equipment can help you qualify for lower rates.
Reduce Level 2 and Level 3 Fees with Our Auto-Populating Gateways
Take advantage of our auto-populating gateways to streamline data entry and ensure all required fields for Level 2 and Level 3 processing are completed. Using these gateways can help lower interchange fees by up to 1.00% while improving compliance and efficiency for your business.
AllayPay: A Partner You Can Trust
At AllayPay, we’re committed to simplifying credit card processing for businesses for small and medium-sized businesses. Here’s what sets us apart:
- Transparent Pricing: No hidden fees, no confusing terms—just straightforward, honest quotes.
- Competitive Rates: We help you get as close as possible to the actual cost of processing.
- Ongoing Support: From setup to optimization, our team is here to help every step of the way.
Why Choose Us?
Transparency and simplicity are at the heart of everything we do. With AllayPay, you’re not just getting a service; you’re gaining a partner invested in your success.
Sign up today and see how much you can save!
Get Started Today
Ready to take control of your credit card processing? Contact AllayPay for a free consultation and discover how much you could save. With our expert guidance and commitment to transparency, you’ll gain confidence in every transaction.
Visit AllayPay.com to learn more or Apply Now!
Helpful Resources
Want to dive deeper? Check out these links to learn more about interchange fees:
