angle graphic

November 15, 2022

How Much Do Merchant Services Cost?

Merrell Sheehan

Written by:

Merrell Sheehan

How Much Do Merchant Services Cost?

It finally happened—you had a “Eureka!” moment, and your product idea will change the world. But, even if your idea is so genius that the elevator pitch practically writes itself, you have some hurdles to overcome before closing your first sale. 

One major item on your to-do list is finding a merchant services provider—someone who can process credit card payments for you when customers use plastic for a transaction. And if you’re starting your brand on a shoestring budget, you might be wondering, “How much do merchant services cost?”

The answer is different for every brand. But there are a few ways to save money on merchant services. With more than 30 years of experience under our belt, Electronic Merchant Systems is here to help you decipher just how much you should expect to spend on credit card processing.

In this article, we’ll define merchant services, discuss how much they might cost, and break down a few frequently asked questions.

Table of Contents:

What are Merchant Services?

Merchant services, or a merchant account, is—essentially—the bridge between the money a customer uses to pay for a purchase and your business bank account. A merchant services provider processes the transactions your customers make with a credit or debit card by:

  1. Debiting the funds from your customers’ checking accounts or billing their credit card company
  2. Sending you the cash for the purchase

Merchant services providers make money by doing some or all of the following:

  • Charging your business a small fee per transaction processed
  • Administering a membership fee
  • Selling or renting your business point of sale (POS) equipment
  • Providing additional services, like:
    • Small business lending
    • Rewards program design and administration
    • Web design and other eCommerce services

How Much Do Merchant Services Cost?

Depending on your industry, the POS system you use, the additional services you receive, and other factors, your merchant services costs will vary. 

While you might feel some sticker shock upon reading average prices, remember that a high-quality merchant services provider will:

  • Routinely offer you savings opportunities and help you manage your costs
  • Perform rate reviews to help you get the lowest price from credit card companies
  • Offer additional services that increase your value

Before you sign a contract with a provider, make sure they can answer the three questions below.

What Am I Paying for When Using Merchant Services?

When you cut a check to a merchant services provider, you’re usually paying for three general types of fees:

  • Interchange fees – Interchange fees are paid directly to the credit card company for each transaction. These fees vary based on the card the customer used, the transaction amount, and the transaction venue (i.e., in-store or online).
  • Payment processor fees – These fees are paid to the merchant services provider to cover their costs. These fees can include monthly membership fees, statement fees, equipment rental fees, or per-transaction fees (more on this in the next section).
  • Assessment fees – Assessment fees are paid to the credit card network, allowing a business to accept cards in that network. Instead of interchange fees, these costs are generally based on total monthly sales. Merchant services providers usually refer to assessment fees plus interchange fees as “swipe fees.”

How Do Merchant Services Providers Structure Their Fees?

Merchant services fees typically include a combination of all three types of fees above. Let’s break down the second type—payment processor fees—in more detail:

  • Merchant services providers may charge a monthly or annual membership fee—these fees allow your business to use their payment processing services whenever a customer makes a transaction.
  • Statement fees are what your business pays for any statements, reports, tax documents, or other data sheets that the merchant services provider generates for your business. These can be simple credit/debit statements (essentially, a list of transactions) or complex, coded, and categorized reports. 
  • If you rent or purchase POS equipment from your merchant services provider, you should expect to pay for them—the ideal POS system allows your customers to make transactions and your merchant services to track those transactions all on the same platform. 
  • Per-transaction fees are like interchange fees, except they go to your merchant services provider instead of the credit card company. 

Simply put, monthly or annual membership fees, statement fees, and per-transaction fees pay for the merchant services provider to do their primary task—move money between your customers’ bank/credit accounts and your business’s bank account and give you the transaction data you need for bookkeeping purposes. Equipment fees cover the cost of the equipment that both of your businesses use to complete that task. 

How Can I Save Money on Merchant Services and Payment Processing?

With all this talk of fees, the whole concept of merchant services is starting to sound expensive. But it doesn’t have to be. 

In fact, a merchant services provider can actually help you save money on credit/debit card processing by:

  • Negotiating with credit card companies on your behalf for the lowest possible interchange fees
  • Creating pricing models with merchant services fees built-in to customer price tags
  • Building a cash discount program for in-person clients to eliminate costs entirely and cover the cost of the sale with customers that use credit cards
  • Implementing security measures to prevent costly fraud risks—this is especially crucial for eCommerce brands and companies that do a majority of their business online

Frequently-Asked Questions About Merchant Services

Don’t scrap your potential million-dollar idea if your head is still spinning. Let’s break down a few merchant services FAQs to help you wrap your head around credit/debit card processing for your business. 

Do I Have to Pay Credit Card Processing Fees?

If you want to accept forms of payment besides cash, then yes—you do have to pay credit card processing fees. 

Luckily, merchant services aren’t a monopoly. You have a slate of providers to choose from, and you should pick the brand that gives you the best bang for your buck, helps you build an airtight transaction processing system, and has expertise in your industry. 

How Much Can I Charge for Credit Card Processing?

We briefly mentioned baking the cost of merchant services into your product prices—that’s perfectly legal (and, for many businesses, encouraged). 

However, there are limitations:

  • The current average interchange fee ranges from 1.15% (of the purchase price) + $0.05 to $3.15% + $0.10, plus an additional 0.14% to 0.17% in assessment fees.
  • Legally, merchants are currently only allowed to charge a maximum of 4% of the purchase price to customers. 
  • This limit prevents brands from overcharging customers or potentially profiting off of the merchant services process. 

Can I Just Switch to 100% Cash Transactions?

Theoretically, yes—you can structure your business around 100% cash transactions. And this might work in some industries (like food and beverages).

But the world is generally moving away from cash. Five years ago, in 2017, about 28% of people who participated in a Gallup poll used cash for most purchases. That figure has more than halved—only 13% of people do so now, and 64% of people say that they think a cashless society is likely to develop in their lifetime.

If you opt for a cash-only business, you stand to lose a lot of customers. 

Finding the Best—and Most Affordable—Merchant Services

In today’s economy, merchant services are part and parcel of running a successful brand—especially considering the growing presence of eCommerce. 

Prices vary from business to business, but the cost of merchant services depends on factors like the cards your customers use, the average amount of their transactions, and the additional services you request from your service provider. 

If you’re on the hunt for merchant services that are as innovative and cost-effective as your business, you’ve come to the right place. Electronic Merchant Systems has over 30 years of experience in payment processing, and we’re a true partner in your brand’s success—after all, we only make money if your business makes money. 

We offer expert guidance, lower rates and fees (and free rate reviews), and 24/7/365 customer support. Electronic Merchant Services is your number one source for turnkey, top-to-bottom merchant services solutions.

New call-to-action

angle graphic