Business News Daily receives compensation from some of the companies listed on this page. Advertising Disclosure

To sustain a healthy cash flow, most merchants need to allow customers to use credit cards. While it may be a no-brainer to accept credit cards as a form of payment, selecting a payment processing service can be overwhelming. 

It is essential to choose a processing services provider that can take multiple forms of payment (Visa, Mastercard, Discover, American Express, PayPal, etc.) and keep your customers' information secure.

Editor's note: Looking for the right credit card processor for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Fees can also depend on several factors, including required and negotiable costs through the payment processor, card network, and card issuer. You will need to monitor the monthly fees to determine which payment forms are sustainable for your business to accept.

But how much money will you have to account for in fees? And how do the different fees measure up? We'll walk you through the basic fees for credit cards and offer some tips along the way.

Fees for accepting credit cards can differ from business to business based on industry, location, type of card and number of transactions.

When accepting credit cards, you should be aware of fees from your payment processor (payment processing fees), card network (assessment fees) and card issuer (interchange fees). Other mandatory fees include the Acquirer Processing Fee, Fixed Acquirer Network Fee, Kilobyte Access Fee, and Network Access and Brand Usage Fee.

For small businesses with $10,000 to $250,000 in annual credit card transactions, the average cost of processing these payments is currently 2.87% to 4.35%. However, additional fees (whether required or added by your payment processing provider) could make your rates higher than average.

When working with credit card payments, you are charged by three primary services: the payments processor, card network and card issuer.  

The payments processor is a financial institution, like Chase, that completes the credit card transaction. Most merchants work with a third-party company that facilitates this process for a financial institution, like Leaders Merchant Services. 

Tip: To learn about some specific examples of payment processors, read our review of Merchant One or our Square review.

The best credit card processing providers can also offer you equipment for brick-and-mortar and online transactions. This equipment includes point-of-sale (POS) systems and credit card terminals. In addition, you can also access payment software systems such as virtual terminals, contactless payments through RFID (Apple Pay, Google Pay), mobile payments, e-commerce shopping carts and payment gateways.

Payment processors charge a percentage of each credit card or debit card transaction plus a flat fee.

Card networks include American Express, Discover, Mastercard and Visa. They facilitate credit and debit transactions between the card issuer and the merchant. In addition, card networks partner with card issuers for credit cards and debit cards.

These are the average transaction costs from the top four credit card networks:

Card networks also determine where credit and debit cards are accepted. While credit cards used to have a variable acceptance rate, major credit card networks now have relatively similar rates, with all four major credit card networks accepted at over 10 million U.S. locations.

Card networks are also responsible for any credit card or debit card perks or rewards. 

The card issuer makes money by charging the business owner a percentage of each transaction plus a flat fee (similar to payment processing providers). In addition, card issuers have the final say on whether a card transaction is approved or denied.

The average credit card processing fee per transaction is 1.3% to 3.5%. The fees a company charges will depend on which payment company you choose (American Express, Discover, Mastercard, or Visa), the merchant category code (MCC) and the type of credit card.

Did you know? Debit card transactions usually cost a business less than credit card transactions. Debit cards typically have their own pricing structure and may be listed separately from credit card fees.

The table below shows interchange and assessment fees, but not processing fees, as they vary widely by credit card provider, card type, and MCC.

There are three main types of credit card processing fees: payment processing fees, assessment fees and interchange fees.

There are many payment processors that you can use to accept credit card payments. Generally, you will have payment processor equipment to take physical cards and an online payment gateway to accept credit cards through a virtual shopping cart.

The payment processing company determines your payment processing fees. It may choose to charge you in the following ways:

Did you know? American Express and Discover operate their own payment networks. By doing so, they can collect both the assessment and interchange fees. Therefore, American Express and Discover make more per transaction than Visa and Mastercard do.

Major credit card providers receive assessment fees. For example, if you have a Capital One Visa credit card, Visa receives the assessment fee on every transaction. The major networks' average credit card assessment fees fall at or around 0.14%, broken down in this table:

The bank that issues your credit card receives an interchange fee on every transaction. In the case of the Capital One Visa credit card, Capital One would receive the interchange fee.

Interchange fees are set by each network and change every year in April and October. The average credit card interchange fee is 1.5% to 3.3%, as you can see in the table below.

The interchange fee helps cover the risk for the card issuer in the case of fraud and handling costs. The following risks will influence your interchange rates.

Credit cards have a higher risk than debit cards with a security PIN, so you will pay higher interchange rates for credit card transactions. However, debit cards that require a signature are processed like credit cards, and credit cards that double as reward cards (travel, cash back, etc.) can also have a higher interchange rate.

POS transactions may have lower interchange rates than card-not-present (CNP) transactions. CNP transactions include online, phone, direct invoicing and mail orders.

If your business has a large number of transactions of small dollar amounts, you can negotiate lower interchange rates to increase your profit.

When your business accepts credit cards, you are issued a four-digit number as an MCC. Your MCC helps with IRS reporting. It also categorizes your industry so that financial institutions can assign you a risk factor when determining interchange fees. For example, companies with a higher risk factor, like travel and gambling, are often subject to higher interchange fees.

If you accept credit cards, you will also be subject to the following fees. These costs do not vary between processing companies and are required by every payment processor.

Some fees are not required for your business to process credit cards. Choosing a merchant services provider that is transparent about all of its costs is in your best interest. Negotiate the following fees with your payment processor to see if they can be waived. 

Tip: Avoid leasing your credit card terminals. A credit card machine should cost you only a few hundred dollars to purchase outright, while leasing the same terminal could cost you nearly $5,000.

Small businesses can cut down their credit card processing costs by implementing a few transaction rules.

Credit card processing costs can add up if you sell many inexpensive items, especially for sales under $10. The Dodd-Frank Act of 2010 combats this cost by allowing businesses to set a credit card minimum up to $10 per transaction. 

However, check with your state before getting creative with credit card policies. Most states require you to use the same minimum policy for every payment company you offer (Visa, Mastercard, etc.).

If your business has a high rate of chargebacks, financial institutions automatically consider you high risk and can spike processing fees.

To lower your risk of chargebacks, use a credit card authorization form. Once a customer signs this form, you can charge the card on an ongoing basis. Having this document in hand when a chargeback case is raised can give you the upper hand.

With online transactions on the rise, there will also be an increase in fraud. Accepting payments in person can reduce this risk and lower your overall processing fees.