How Do Credit and Debit Card Swipe Fees Work?

When we talk about credit cards online, we primarily encounter two schools of thought. 

  • Credit cards are the worst. You should never get one unless you need it.
  • Credit cards are the absolute best. They offer so many benefits.

Which school of thought you resonate with more, depends on your financial habits. Individuals that have good financial habits and know how to use their credit cards correctly can potentially save thousands of dollars in fees and rewards every year. On the other hand, people who often overextend themselves and have poor saving habits end up penalized with massive credit card debt. 

In this blog, we discuss the use of credit and debit cards from a merchant’s point of view. We briefly touch upon the following: 

  • Different Types of Credit Card Fees
  • Different Types of Debit Card Fees
  • What are Credit and Debit Card Swipe Fees?
  • 6 Things Merchants Should Know About Swipe Fees
  • How to Start Accepting Credit and Debit Cards?


Different Types of Credit Card Fees

In our previous blog on 24 FAQs on Credit Card Processing Fees, we covered the different types of fees associated with credit cards on both consumer and merchant fronts. To give you a quick recap, here are the most common types of credit card fees:

  • On the consumer front:
    • Processing fee
    • Interchange fee (aka swipe fee)
    • Annual fee
    • Late-payment fee
    • Interest charges
    • Balance transfer fee
    • Foreign transaction fee
    • Over-the-limit fee
    • Cash advance fee
    • Returned payment fee
    • Assessment fee
    • Swipe fee
  • On the merchant front:
    • Markup fee
    • Discount rate fee
    • Scheduled account merchant fee
    • Chargeback fee

24 FAQs on Credit Card Processing Fees

Different Types of Debit Card Fees

Debit card fees are mostly similar to credit card fees. They fall into one of the following three categories on the merchant front:

  • Interchange fee
  • Assessment fee
  • Processor’s markup fee


What are Credit and Debit Card Swipe Fees?

Swipe fees are essentially fees that are charged every time a card is used to carry out a transaction. Most individuals and retailers do not know about these fees, hence they are popularly classified as “hidden fees”

Credit card and debit card swipe fees are usually different.

Credit Card Swipe Fee

Banks and credit card companies secretly pull out a small percentage of the overall transaction cost as swipe fees on every credit card transaction. Most consumers and merchants do not understand these fees correctly. They also do not assess their impact since they form a small percentage of each transaction but can rake up to thousands of dollars over the long term

Credit card swipe fee varies depending on:

  • Merchant category - Type of business where the card is used. A same-sized transaction at different businesses may attract different fees.
  • Type of credit card network used - American Express, Visa, Mastercard, etc.
  • The processing method used - Online or in-person

Organizations like the National Retail Federation are currently fighting for a fair swipe fee reform policy to help small businesses accept credit cards at a transparent fee model.

The credit card swipe fees usually consist of the following components:

  • Authorization fees: The credit card issuer charges the ISO, and in turn the merchant, this fee for every swipe. The merchant ends up paying this authorization fee even if the customer's card is declined due to NSF, incorrect transaction details, or fraudulent behavior.
  • Transaction fees: The ISO charges the merchant a transaction fee for every successful transaction. The ISO and merchant set this fee in the contract.  
  • Card Detail Modification Fees: The card issuers charge the merchants $0.25 if their customer need to change credit card numbers, expiration dates, or any other payment-related information. Merchants should pass this charge to their customers. Customers can prevent this additional fee by getting a new card when it is damaged or expired. 

A few tech-savvy payment processors offer Authorization Optimization services that help the merchant automatically reprocess a failed credit card transaction on a set schedule. This service helps them charge the customers' credit card again:

  • 3 days later
  • On Fridays
  • Daily once (but not more to prevent the card from getting blocked for fraudulent use) 

Debit Card Swipe Fee

Debit card swipe fees are more regulated than credit card swipe fees. The Durbin Amendment, passed in 2010, was brought in by the legislators to limit the processing fees charged to merchants for debit card processing. However, this amendment was met with mixed reviews by the merchant community. The Credit Union National Association termed it the ‘purest example’ of failed government policy


6 Things Merchants Should Know About Swipe Fees

Fees as Percentage

Typically the credit card swipe fee averages about 2 - 2.5% of the total transaction amount. This amount is directly paid by the merchant to the card network. Businesses further recover the cost of these interchange fees by adding it to the total billed amount for the consumer. Therefore, the end consumer ends up paying more for their purchase. However, the merchant may choose to offer a cash discount, when a consumer pays through cash, check, or ACH. In a well-implemented and compliant cash discount program, the merchant passes the benefit of not paying additional swipe fees back to the consumer in form of an additional discount on the final bill.

Here are some resources that will help you understand the cash discount program in depth.

Swipe Fee Statistics

Although the swipe fee seems like a small percentage, it can quickly rack up to larger amounts. The Nilson Report statistics show that the U.S. merchants that accepted credit and debit card payments ended up paying $137.83 billion in processing fees in 2021 alone

Card-Not-Present Fees

If the consumer does not have their card physically present with them during a sale, they might have to pay the fee for a card-not-present (CNP) transaction. This fee is typically as high as 2.5% of the total transaction cost but can go higher or lower depending on the type of card and card issuer.

Online Card Usage Fees

The swipe fees for using a credit card in-person and online are different. Physical card transactions (in-person) attract a 1.95% to 2% swipe fee. On the other hand, online credit card transactions usually attract higher 2.3% to 2.5% swipe fees. 

Saving Card Processing Fees

Merchants can save on hefty card processing and swipe fees by offering alternative modes of payment. ACH is one of the most popular methods of collecting payments at low processing costs. Complemented by SMS payments, Email invoicing, and IVR technology, it is versatile and customer-friendly enough to help merchants streamline payments frictionlessly.  It is beneficial for both consumers and merchants. Learn more about the credit card alternatives to collect payments. These payment methods are especially helpful for business owners to accept payments during credit card outages

Tips on Saving Uncommon Swipe Fees

While we cannot eradicate swipe fees entirely, we can put measures in place to ensure that we do not pay more than the bare minimum necessary amount. By limiting the number of swipes, merchants save on the extra unnecessary swipe fees. For every failed swipe transaction, the merchant still attracts the authorization component of the swipe fee. So, the consumers that try swiping their cards multiple times before switching to a different card incur swipe fee losses to the merchant. 

Merchants that accept cards online can limit the number of virtual swipes for a consumer and offer them an alternative mode of payment after a set number of failed attempts. This small change in process can help them save hundreds, if not thousands, of dollars in processing fees every month. 


How to Start Accepting Credit and Debit Cards?

Merchants can use a PCI-compliant hosted payment portal to collect payments safely online via credit cards and ACH. The best payment processors have technologies to collect consumers’ credit card information like PIN and card numbers safely to reduce PCI scope for the merchant. They also support the collection of additional personal information with customizable forms to reduce chargebacks. Here’s a small 5-step guide on accepting credit and debit cards for your business:

Moreover, merchants should not hesitate in contacting their banks if they detect any suspicious consumer activity. They should report offenses and fraud immediately.


Most consumers prefer online or card payments to pay for their purchases. They hardly carry paper checks or cash. Merchants that accept these card payments online and offline can attract a larger consumer base easily. If you are a partner looking to help your merchants accept online card payments, reach out to us today. Become a partner to help your merchants discover next-gen innovative payment technologies!

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