Payment processing costs depend on the method, the merchant, and who handles the transaction
There is no single cost for processing a payment. A wire transfer costs differently than a credit card swipe, which costs differently than an ACH transfer or a peer-to-peer app. The person or business receiving the money usually pays the fee, though sometimes it comes out of what you send. The amount ranges from nothing to several dollars per transaction, plus sometimes a percentage of the total.
The cost also depends on who is doing the processing. A bank charges one rate. A payment processor like Square or Stripe charges another. A peer-to-peer app like Venmo or PayPal has its own structure. A merchant account set up for a small business works differently than a one-time payment through a website.
Understanding what you are paying for—and why—matters when you are choosing how to send money or when you are setting up a business to receive it.
Key Takeaways
- Credit card processing typically costs the merchant 1.5% to 3.5% of the transaction plus a per-transaction fee of 20 to 30 cents, though rates vary by card type and processor.
- ACH transfers through a bank usually cost nothing for the person sending money and $0.25 to $1.50 for the business receiving it, depending on the bank.
- Wire transfers cost $15 to $50 per transaction at most banks, and the sender usually pays the fee.
- Peer-to-peer payment apps charge nothing for transfers between personal accounts but may charge 1% to 3% if you use a credit card to fund the transfer.
- Merchants can sometimes pass fees to customers, but rules vary by card type, state, and the merchant's agreement with their processor.
Credit card processing: the largest cost for most merchants
When a customer pays with a credit card, the merchant pays a combination of three things: an interchange fee (set by the card network), an assessment fee (also set by the card network), and a processor markup (set by the payment processor or the merchant's bank).
The interchange fee is the biggest piece. Visa, Mastercard, American Express, and Discover each set their own rates, and those rates change several times per year. A standard Visa or Mastercard transaction typically costs the merchant 1.51% to 2.22% of the sale plus 5 cents. An American Express transaction often costs 2.5% to 3.5% plus 10 cents. Debit cards usually cost less—around 0.3% to 0.5% plus 5 cents. Business cards and rewards cards cost more.
On top of that, the payment processor adds its own markup. Square charges 2.6% plus 10 cents for in-person card swipes and 2.9% plus 30 cents for online transactions. Stripe charges 2.9% plus 30 cents for online payments. A traditional merchant account through a bank might charge 1.5% to 3% plus 20 to 30 cents, depending on your sales volume and the bank.
A $100 credit card sale might cost a small merchant $3 to $4 in processing fees. A $1,000 sale might cost $30 to $40.
ACH transfers: low cost for businesses, free for individuals
ACH (Automated Clearing House) is the system banks use to move money between accounts. When you pay a bill online or set up direct deposit, you are using ACH.
If you are sending money as an individual through your bank's bill pay or a peer-to-peer app, there is usually no fee. If a business is receiving money via ACH, the bank typically charges $0.25 to $1.50 per transaction. Some banks charge a flat monthly fee instead—$10 to $25—if you receive a certain number of ACH transfers per month.
ACH is slower than credit cards or wire transfers. A transfer usually takes one to three business days to clear. That matters if you need the money immediately.
Wire transfers: expensive but fast
A wire transfer moves money directly from one bank account to another, usually within hours. The cost is high because the bank has to verify the account details and process the transaction manually.
Most banks charge $15 to $50 per wire transfer. Some charge different rates for domestic wires (within the US) and international wires. International wires often cost $35 to $75 or more. The sender usually pays the fee, though occasionally the receiving bank charges a small fee as well.
Wire transfers are irreversible once sent. If you send money to the wrong account, you cannot get it back through the bank. That is why they cost more—the bank is not protecting you from your own mistake.
Peer-to-peer apps: free between people, costly if you use a card
Apps like Venmo, PayPal, Square Cash, and Zelle let you send money to another person with just their phone number or email. If both people have bank accounts linked to the app, the transfer is free and usually arrives within one to three business days.
If you use a credit or debit card to fund the transfer instead of a bank account, the app charges a fee—typically 1% to 3% of the amount. PayPal charges 2.2% plus 30 cents for credit card transfers. Venmo charges 3% for credit card transfers. Zelle does not accept credit cards at all.
These apps are designed for small, personal transfers. They are not meant for business payments or large amounts. Most have daily or monthly limits on how much you can send.
Invoicing and payment links: variable fees for online businesses
If you send a customer an invoice with a payment link, the cost depends on the platform. Square Invoices charges 2.9% plus 30 cents if the customer pays with a card. PayPal Invoicing charges 2.2% plus 30 cents. Some invoicing platforms like Wave charge nothing if the customer pays by ACH but charge the standard card processing rate if they use a card.
These platforms are useful because they keep a record of what was sent and when it was paid. They also send reminders automatically. The trade-off is that you pay a processing fee for the convenience.
Can merchants pass the cost to customers?
Some merchants add a "convenience fee" or "processing fee" to the customer's bill. Whether this is allowed depends on the card network, your state, and your agreement with your payment processor.
Visa and Mastercard allow merchants to pass fees to customers, but only if the fee is clearly disclosed before the customer completes the purchase. American Express historically did not allow this, though their rules have loosened in recent years. Discover allows it in most cases.
Some states have laws that limit or prohibit surcharges. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas have restrictions. Even in states without specific laws, your payment processor's contract may prohibit it.
If you are a merchant considering this, check your processor's terms and your state's laws first. The fee must be clearly labeled and cannot exceed the actual cost you are paying.
Frequently Asked Questions
Why do credit cards cost so much more than ACH?
Credit card networks charge high interchange fees because they assume the risk if the cardholder disputes the charge or the card is fraudulent. ACH is slower and less reversible, so the risk is lower and the cost is lower. You pay for the speed and buyer protection that credit cards offer.
Do I pay a fee if someone sends me money through Venmo or PayPal?
No. The person sending the money pays any fee, not the person receiving it. If they use a bank account, there is no fee. If they use a credit card, they pay 1% to 3% depending on the app.
What is the cheapest way to accept payments as a small business?
ACH transfers are cheapest if your customers can wait one to three days. You pay $0.25 to $1.50 per transaction. Credit cards cost more (2.5% to 3.5% plus fees) but arrive faster and customers expect them. Many small businesses use both.
Can I negotiate my credit card processing rates?
Yes, if you have high sales volume or a long history with a processor. Interchange rates are set by the card networks and do not change, but the processor's markup can be negotiated. Larger merchants often get better rates than small ones.
What happens if I wire money to the wrong account?
The bank cannot reverse it. You would have to contact the receiving bank and ask them to return the funds, which they may or may not do. This is why wire transfers are irreversible—the cost reflects that risk.