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How Much Are Credit Card Issuers Charging Merchants?

Contributed by mm | February 4, 2009 5:31 AM PST

creditcardlogo.jpgDo you know why some small businesses refuse to take credit cards, and do you know why credit card companies can afford giving away 1% cash-back or even more when you swipe your card? Yes, your card issuers will charge any business you pay by credit card. But by how much?

The short answer: it varies. According to

- A standard card from Visa or Mastercard with no reward feature charges about 2.3-2.4% for big ticket purchases like airfare and electronics, and 1.5-1.6% for groceries.

- Visa and Mastercard rewards cards usually mean 0.3% higher charge for the merchants.

- Business cards with Visa or Mastercard logo usually cost businesses 0.7% more than a plain-vanilla card.

- Discover card charge can vary but is about 2.0%. Discover negotiates rates on a business-by-business basis.

- American Express is the most expensive for businesses. Amex typically charges 0.77% more than Visa or Mastercard, so the banker's haircut is be about 3.5%. Amex also negotiates rates on a business-by-business basis.

- Also, different types of merchants pay dramatically different rate. And quite typically, businesses are charged by a percentage plus a per-item fee. So if you only buy a pack of gum at a convenience store, the store owner might have to fork over 25% of the price of the gum to the credit card company.

Find more at (Story via Freakonomics.)

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This Post Has Received 23 Comments. Share Your Opinions Too.

Hank Commented on February 4, 2009

American Express' high merchant fee is one reason that a lot of businesses still refuse to accept AmEx as a form of payment.

Econ4u Commented on February 6, 2009

Interesting post.

The fees the credit card's are charging the customer might be the real racket though!

Wide Moat Commented on February 8, 2009

Businesses should be able to pass through at least part of the 3% charge in mark-ups; consider it the cost of timely payment.

The biggest issue is the base transaction fee, which, as you noted, hammers those (like restaurants) who sell low ticket items. Small businesses who sell such items should try to negotiate that away, but of course, it is tough to negotiate against the big boys.

GloombergNews Commented on February 9, 2009 - Home of "The Gloomberg Report"

Personal Debt Coach Commented on February 11, 2009

This is a HUGE deal to small businesses. I work with business owners everyday, and the fees on MCS is a big reason why many of them do not have them. This is not to mention the initial setup fees and the terminal fees...very expensive!

Кирилл Commented on February 11, 2009

Nice post! But in present they shoud reevaluate their fees.

keith Commented on February 14, 2009

You're not feeling the blog anymore. Hang it up.

americans united Commented on February 16, 2009


A Modern day “Boston Tea Party”, Americans all over America are mad as hell and are not going to take our government’s bad policies and back room decision making anymore. Here is the American publics’ response to government bailouts; stimulus packages and the putting us back to work to spend.

We, the People ask that you act swiftly and without haste, prosecute, all who aided, abetted and prospered in our current economic collapse; to restore the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and re-establish the rules of our Constitution for the United States of America. We, the people are formally requesting such actions.” Otherwise, Democracy is government by the lowest common denominator.

The wizards of Government and Wall Street, through their greed and corrupt practices, have given us the people very few options: risk destitution, foreclosure and bankruptcy or save. We've chosen to save. To save, save, save ourselves. This is what the internet is all about! Put fifty million, pissed off people with computers to work, and stand back! Our public policies are influenced and our constitution useless… American people our insurance of prosperity is-- $13 a week as help during a banking manufactured depression. We all need a reality check and to treat other American's as if they are us.

1. The Stimulus is all about you spending your money to support the system, not about helping ordinary Americans get through the depression.
2. The movement of funds in America is generated from Wall Street—stocks, banking--insurance interests-- to politicians, and then through public policy. Chains you can believe in.
3. Bank Behavior + Economic Crisis = TREASON (1. the offense of acting to overthrow one's government or to harm or kill its sovereign. 2. a violation of allegiance to one's sovereign or to one's state. 3. the betrayal of a trust or confidence; breach of faith; treachery). And, banks are still engaging in treasonous behavior by raising interest rates on credit cards, mortgages, cars, etc. during economic crisis they created. Stop giving them power by spending money.
4. The US government and the banks have been in bed together all along. They are interdependent. It's a symbiotic relationship. When the banks fail, the government fails. If you are a politician, you don't want the big banks to fail because this debt ridden country will fail. It’s the house of cards we all support through consumerism. Stop buying for you are sealing your own financial coffin and giving them license to abuse us.
5. This is going to be a slow brutal recovery that has more ugliness to come.
6. Is this a surprise to anyone? Our private banking cartel isn't finished bankrupting the middle class and system yet. And, the poor--just keep pushing them down to they become homeless and die on our streets. We only need two classes in America anyway as far as the American politicians are concerned…they are a drain on our system unless they are foreign born poor—then, they are entitled to a good life, liberty and the pursuit of happiness, at American taxpayers’ expense.
7. Notice how there was no problem AND government intervention until the rich started to be threatened. Once that happened we started seeing phrases like "TOO BIG TO FAIL".
8. The biggest losers are the American people, democracy and the American way of life. We were promised 95% tax relief and got $13 a week as help during a depression and your president wants you to spend that $13 on junk to help the economy. All awhile your bills are mounting up. Obama is not change, just more of the same and let’s make him a one term president.
9. It took Obama and the rest of his crew, just three weeks to screw average American citizens. Recognize him for what he is…a smooth talking liar.
10. He can fix the economy however he does not want to piss off the lobbyist and power brokers. So he is all campaign talk and no action.
11. Current Available Economic Fixes: No. 1: Increase the capital gains and dividends taxes for higher-income taxpayers, No. 2: Eliminate all oil and gas tax loopholes, No. 3: Eliminate capital gains taxes for small businesses and start-ups, 4: Expand the earned income tax credit, No. 5: Require publicly traded financial partnerships to pay corporate income tax, No. 6: Close loopholes in the corporate tax deductibility of CEO pay, No. 7: Create a retirement savings tax credit for low incomes, No. 8: End income tax for seniors making less than $50,000. No. 9: Repeal the Bush tax cuts for higher incomes. No. 10: Phase out exemptions and deductions for higher earners. No. 11: Make the top players complicit in the economic demise of America, liquidate, their assets as repayment to bring down the deficit. These would have made more sense to be economic stimulus and to help bring down national debt.
12. We were promised transparency but both houses of congress were asked to vote on the largest economic bill in history, without, us, the people, having a chance to read or respond to what’s in the final version. The reason there was nothing in it for us. We would have been outraged if we had seen it before signed. The bait and switch. Promises of relief, but reality it is about keeping the system that is abusing ordinary Americans alive.
13. Recent data showing just how sharply growth in the U.S. and elsewhere has declined in the final months of 2008 have cast a deepening shadow over 2009.
14. Shelters are reporting slightly higher numbers of two-parent families than in previous years. "One of the parents loses a job, the family can't afford the rent or mortgage, they don't have family they can rely on and they are evicted."
15. Similar increases in shelters are being reported across the country. Homelessness: Is now the Family Portrait.
16. JOBS: Unless you are to work for the government, construction and teacher's union, you are on your own. We were promised 4 million new jobs but now that might be all in "saved" jobs.
18. It is simple. Government produces no wealth. Nada. They can redistribute the wealth that the private sector creates. By redistribution, they give the masses the impression that new wealth is being created. It's not. Only the private sector can create profit and in turn, wealth.
20. Remember to vote all incumbents out EVERY election cycle—to reshuffle the deck, whoever, they are, and, whatever party. Don't let this go unchecked. Our government (system) is the problem. We must crash the system for our own country’s future survival and for benefit of the taxpaying people.
21. Look for massive unemployment and runaway inflation in the coming years. There is something disturbing about media suggestion of unquestioned allegiance to consumerism, its cult like.
22. The housing market will have to wait for another day for its government help except if you bought more house than you could afford. Home builders and Realtors pushed for a $35 billion tax credit to support home sales. The $15,000 tax credit to buy a new home, included in the Senate bill was eliminated from the stimulus in the House-Senate compromise. Instead, an existing $7,500 tax credit for first-time homebuyers was expanded to $8,000 and extended to the end of 2009. American taxpayers will see no immediate change and no checks in the mail.
23. So we the citizens have started a FINANCIAL REVOLUTION, and decided to stop patronizing corporations and save our money, to collapse the system of the elite! More power to us! Keep on fighting people, for it is working.
24. We have reduced our spending (to only what we NEED, not what we want) because we NEED our own money more than traitorous US corporations WANT it. We have no loyalty to corporate America because they have no loyalty to us or our fellow citizens. Guess what ...
25. Consumers have cut back sharply on food spending, shunning restaurants, opting for generic products over brand names, trading in lattes for home-brewed coffee and shopping for bargains. "Congress has done a great job of killing the resort hotel business”.
26. Economists React In Our Favor: Retail Sales Don’t Mark Start of Recovery. The results were totally inconsistent with company reports and we strongly suspect that seasonal distortions were responsible for much — if not all.
27. U.S. household wealth appeared to have plummeted in 2008 in the face of falling values for stocks and homes.
28. The government is responsible for the root cause of this mess. It drove up consumerism and promoted the financial industry—and distorted mortgage risk on a national scale. Private corporations simply DO NOT work for public good. They look for maximum profits at any costs. These same government-corporate partnerships subverted our republic and brought us TARP the biggest give-the-rich a party legislation in history. It was Wall Street companies who conceived an economy built on debt, along, with public policy and enlisted an army of felons, tax evaders, liars, cheaters, imposters, extortionist, and smooth talkers. With the economy slaughtered they lobbied government into cooperation, to act as mortgage brokers making them complicit in using our money and passing the bad debt onto taxpayers.
29. What doesn't work capitalism? It promotes radical inequality, worship of greed and money, preying on the ignorant masses that just buy into the agenda of the wealthy elite, and encourages monopolies that pose as competitive enterprises.
30. The average guy has woken to the fact that the last round of raises, the ruling elite gave itself – it did so, on the average guy’s back. Outsourcing jobs to foreign workers—encouraging the jobs being offered to foreign workers as being low paying jobs. Sure tech support and customer service jobs are low paying to the elite. Have you called your bank for customer service or for tech support for a consumer product lately to reach India whose middle class has grown as a result of these low paying jobs? Your president is a liar.
31. Reducing our medical benefits, freezing and curtailing pension plans. Obstructing unemployment benefits. Massive layoffs and stealth wage reductions through the increased use of part-timing. And, lending for everything: payday, credit cards, medical and dental care, cars, houses – and college education - at usurious rates. The average guy is not outraged because Tom Daschle made five million dollars. He’s outraged because the money came by the increasing of his co-payments, reducing his flexibility in selecting doctors, raising his credit card interest rates, denying his legitimate medical claims, fazing out his job or outsourcing to cheaper labor, and of inflating his home value and charging him three times what it worth as a loan with interest; over taxing then giving tax credits, cuts and rebates as false pacification.
32. Changing presidents or congressional members doesn’t change the lives of average Americans. True change can only come from the American people through what we choose to support or not support. Three quarters of the American GDP is based on consumerism. American people buying things. Stop buying and you will see the change we are seeking. The banks got billions and the American people got $13.
33. Americans, we are nowhere near angry enough, time to up the ante. We have to continue organizing protests. Get together our masses--of the newly unemployed, students, and concerned who may have never been given a chance as productive citizens; get together to protest on Wall Street, in front of the White House, and on the National Mall. On Capital Hill, at our Congress member’s district offices, and in front of all the corporations that received taxpayer money. Only, when we take our emotion, energy, and organization to the streets, in a non-violent manner will our politicians get the message. They won’t be able to get to work because they will have to get through us first, therefore, we cannot be ignored. They will see the same people on the way in, as they will see on the way out.
34. Remember during the protest period, to continue to save your money. Do not spend it! If you must spend it; spend it very wisely.
35. Many Americans are angry about how cavalier those in Washington appear to be about their own sense of entitlement and their total obliviousness to the plight of many of us who you used to feel secure about calling ourselves middle class and American citizens.
36. Americans, we cannot simply under react.
37. The Great American Con-Job is government and corporate businesses. Citizens we are being rolled by our own government.
38. Whoever is in office be it Democrat or Republican makes no different. American government is about keeping the system going. The system is for the elite; corporate America, our elected officials and keeping capitalism alive. The masses of people are inconsequential and expendable at every level, until now.
39. DIG IN DEEPER PEOPLE its working…ignore media and government’s cries—of, we will create jobs and put you all back to work to spend. Make them feel your pain each time they have to struggle to make the national budget work they will KNOW how you feel EACH MONTH trying to make your money work in tough economic times. And, the money is there, with all the tax breaks the wealthy and corporations get, they could close those and bring down the national debt. Translation: They want to continue riding our backs to feed the system. You know how it goes…they need us to help, the rich get richer.
40. AGAIN, Americans, we are nowhere near angry enough, time to up the ante.

American people while the old way of “storming the fort” was applicable in that day and age to signal revolt, this is modern America’s way, by us staging a “financial revolution”. Not buying into the consumerism that keeps the cycle of abuse going.

We have seen our annuities shrink by tens of thousands of dollars, and likewise, the value of our homes. Of course we are not spending. We may never spend. One reason is that we are so ANGRY at the corporations. We are tired of being subjected to social engineering every time we enter a store, tired of cheap junk merchandise from China, tired of our government being bought instead of representing us, tired of the government being taken over by armband religion, tired of our healthcare, tired of lousy schools that are unaffordable, tired of bailouts which is really nothing but more robbery of the people, specifically, the middle class.

We have no representation, no free press, and no recourse of any kind, except, not spending. So, by golly, we are not spending. It's practice for when we won't be able to spend anyway, because the government will end up with every last cent that we ever earn anyway and they just give it away freely to Wall Street as bailouts while they make us beg for help like the lady in Florida.

Note: All taxpayer help is back ended…we will do something for you after you do something for the system. Whereas banks are cash infusions and front end.

Congress, American government, consider yourself notified. Americans are no longer “buying” the swampland, of buy, buy, buy, or, consume, consume, consume. It is now save, save, save ourselves. Unless you start infusing capital directly to the American people to help bail us out, to get us through this depression, expect it to go on for as long as it takes, to bring down the system of the elite. You left us no other recourse. We are no longer going along with the program (stimulus, relief, bailout, TARP or whatever you decide to call the next “chump change” pacification); you heard it, first, from us…

junior will Commented on February 25, 2009

your article tells it all The fees the credit card's are charging the customer are just wild

Bill McCollam Commented on March 14, 2009

This is classic game theory. If you're not using a credit card and getting points or cashback... then you're paying for someone else that does get the benefit.

Folliculitis Commented on March 16, 2009

Its very interesting to see how much the credit card issuers are making on both sides of the transaction. So many people do not know how to use credit it is amazing.

Арина Commented on March 16, 2009

"americans united" thank you for you big comment. Very educational.

I Was Broke. Now I'm Not. Commented on March 18, 2009

I've noticed some smart small business such as the nearest coffee shop charging $.50 more on credit/debit transactions under $5 to offset their cost of processing the transaction. They even have a note on the register to let you know they're doing it. I haven't seen anyone not buy their latte because of the up-charge. In fact it works as an up-sell usually because the customer will add a danish or something to their order to get it over $5. There's a smart idea if you're a small business owner.

Apex Commented on March 18, 2009

You know, you do yourself no good by failing to post anything here for months but still moderating comments and stripping out those comments that say anything critical or challenge a concept in your post (and if you let this one go through that one prove anything either). A little decent is healthy. Enjoy your uniformity of opinions sounding board.

high interest checking Commented on March 19, 2009

How credit card debt councilors work with banks when people owe a lot of money on their credit cards. They say they can not only reduce the amount owed but also get your monthly payments down to where they are manageable. How do they do this, are there any consequences such as a reduction of credit score, and is it effective (do they really do this or is it a scam)? Also, how much do they charge? Thanks.

The Almost Millionaire Commented on March 21, 2009

As a small business owner, it is of HUGE concern to me what the credit card company charges for their services. Especially now that things are really tight in Michigan, more and more customers are turning to their cards becuase they don't have the cash. CC Fees become a bigger part of my business expenses every month.

frontierblog Commented on March 23, 2009

I cannot agree more, actually I wrote a similar post weeks ago


Frontier Blog - No one ahead, no one behind

FX Commented on March 28, 2009

As a business owner you are caught in a catch 22 situation. If you don't take credit cards then you will lose sales. If you do take them, then your expenses increase and your margins decrease.

There really is no easy answer or solution to this question. If there were somebody would of thought of it already and instituted it.

Dog Chic Commented on April 5, 2009

I agree, the fees these banks charge for tranascations is amazing. And we are bailing them out??? Come on now!

frontierblog Commented on April 7, 2009

I cannot agree more, actually I wrote a similar post weeks ago


Frontier Blog - No one ahead, no one behind

Horlic Commented on April 11, 2009

The small company not only refuses to take credit cards; they are charging the cost to consumer. Some of them set a minimum purchase. Yes, I agree with kupunn they should reevaluate their fees.

York Commented on April 12, 2009

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My Amazing Weight Loss Story Commented on May 28, 2009

Thanks for posting, I really enjoyed your latest post. I think you should post more often, you obviously have talent for blogging!

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