Stop Overpaying for Payment Processing – Cut Costs by 20% or More

You’re probably paying too much. If you’re like most merchants, you’re paying 20-40% more than you should—and it’s eating into your profitability every single day. According to the Nilson Report, US merchants paid a record $187.20 billion in processing fees  (the highest in the world) in 2024. 

What this means for your business: In 2024, many small businesses were paying $1.57 per $100 or $15.70 per $1,000 for accepting card payments. With rising costs for everything and fee increases projected for 2025, now is the time for businesses to protect their bottom line and review their processing costs.

Specific Cost Examples

For a small business processing $40,000 monthly in credit card sales:

• At 2024’s average rate of 2.4%: $12,000 annually (processing fees)

• At 2025’s projected rate of 2.5-2.6%: $12,480-$12,800 annually ($1,006 monthly)

• Annual increase: $480-$800 or 4-6.7%

The Bottom Line: That’s more than the average U.S. car payment ($745 for new cars, $521 for used cars), coming directly out of your profits. Now, more merchants are saving thousands by switching from flat-rate processors to transparent interchange-plus pricing models. But you need to know what to look for before making the switch from one processor to another.

The $12,000+ Problem Most Merchants Face

Here’s what’s really happening: Small businesses are getting crushed by rising processing costs. US merchants paid a record $1.57 for every $100 in card payments processed. These are among the highest payment processing fees in the world.

But it’s getting worse. Processing fees jumped 4-6.7% in 2025, pushing many merchants from manageable rates into profit-crushing territory. In 2025, you will be paying $480-$800 more than you did in 2024, assuming your volume didn’t grow, which it did. How much more can your bottom line take?

Real Savings Breakdown:

Many small businesses use a payment facilitator (PayFac), such as Square or PayPal, which charges a flat rate for every transaction, whether it is a credit or debit. These PayFacs make it easy for new businesses that don’t process high credit card volumes, micro-merchants with unpredictable sales patterns, or seasonal or pop-up shops to get set up quickly and efficiently. For new businesses, ease of setup matters more than getting the best cost.

So, when you are processing more than $5,000 a month, you are spending way more than you should. Compare flat-rate pricing to interchange-plus pricing at various monthly volumes in the chart below.

With 2025’s fee increases, these savings become even more critical for protecting your margins.

Why Your Payment Processor Is Probably Ripping You Off

The Flat-Rate Trap

Most “simple” flat-rate processors are banking on your confusion. They advertise 2.9% rates but don’t mention that rate only applies to basic transactions. Premium cards, rewards cards, and business cards? You’re paying much more—sometimes 3.5% or higher—while they pocket the difference. Many flat-rate processors, such as Square and PayPal, are also payment facilitators (PayFacs).

The Hidden Truth: Flat rate payment processors bake the fluctuations of interchange rates into their fees, so you’re generally paying more. Smart merchants save around 25% on fees compared to flat rate pricing when they switch to interchange-plus models. Yet most business owners never make the switch because processors deliberately keep their fee structures confusing.

Hidden Fees That Are Killing Your Margins

Common Monthly Fee Breakdown:

These “small” fees add $540-1,620 annually to your costs—on top of processing rates.

The Markup Game: What Processors Don’t Want You to Know

Here’s the dirty secret of payment processing: a payment processor’s markup can range from 0.15% to 1.5% on top of interchange fees—and most merchants have no idea which end of that spectrum they’re on.

The Real Numbers Behind Processor Profits:

Your processing costs aren’t just a single fee—they’re made up of different charges, and the processor’s markup is often the part that’s hardest to spot. That extra percentage, typically hidden in the fine print, is another unexpected cost beyond the advertised rate.

Processing Cost Breakdown:

• Interchange fees (what Visa/Mastercard charge): 1.4% to 2.1% depending on card type
• Assessment fees (card network fees): 0.13% to 0.15%
• Your processor’s markup: 0.15% to 1.5% (this is where they make their profit)
• Other fees: statement, gateway, batch, account, PCI compliance, and others.
• Total cost:  3.2-4.0% or more

Why This Matters: Two merchants processing identical $50,000 monthly can pay wildly different amounts:

• Low-markup merchant: $840/month total fees
• High-markup merchant: $1,875/month total fees
• Difference: $1,035/month or $12,420 annually

The Volume Discount Myth

Most processors advertise “volume discounts,” but here’s what they don’t tell you: volume discounts typically don’t apply to interchange fees—only to their markup. Since interchange represents 80-85% of your total costs, most merchants see only minor savings, sometimes just a few dollars per $10,000 processed.

Volume Discount Reality Check:

The Truth: Even “enterprise” volume discounts save most businesses little, while switching to a different pricing model can save $ 8,000 or more on the same volume.

Other Fee & Charges Processors May Not Disclose

Your payment processor makes money from your account in ways they’ll never put in their marketing materials:

Float Income

• Average settlement time: 24-48 hours
• Processors earn overnight interest on all transactions before paying you
• Industry-wide, this generates $2.1 billion annually in “float” revenue

Chargeback Penalties

Fees can vary from as low as $15 to as high as $50 or more, especially for merchants with a high-risk profile or a high chargeback ratio.

• Industry standard: $15-25 per chargeback, $50+ for high risk
• Processor cost to handle: $9-10 per chargeback
• Pure profit margin: 50 to 150% on chargeback fees

The “Free Terminal” Trap

What’s advertised: “Free credit card terminal with account signup!”

What they don’t tell you:

• Terminal actually costs $150-300
• You’re paying for it through higher processing rates (typically 0.10-0.15% markup increase)
• Over 3 years, that “free” $200 terminal costs you $1,800-$2,700 extra in processing fees

Better Option: Buy your own terminal for $200-400 and negotiate rates that don’t include equipment subsidies.

Terminal Leasing

What’s advertised: “Leasing or renting a credit card terminal requires little money down, regular upgrades, and often promises easy replacement if the device breaks.”

What they don’t tell you:  Over the lifetime of your lease, you’re paying three to ten times more than the terminal’s actual value, never own the equipment, and breaking the contract early can mean more fees. For example, a terminal that would cost $300 to buy today could end up costing you $2,000–$5,000 (or even more) in total lease payments—and you would still need to return the terminal or start a new lease.

Better Option:  Buy your terminal up front and own it outright, freeing your business from ongoing rental bills and restrictive contracts

The Contract Length Game

Processors love long contracts because customer acquisition costs them $400-600 per merchant. They need 18-24 months just to break even on signing you up.

Why This Matters for Your Rates:

• Month-to-month contracts: Processors quote higher rates to cover acquisition risk
• 3-year contracts: Lower rates, but you’re trapped if fees increase or service degrades
• Sweet spot: 12-month contracts often get you 90% of long-term rates with flexibility

Geographic Rate Discrimination

What processors don’t publish: Where your business operates can affect the rates offered by payment processors, because factors like regional competition, local economic conditions, and the number of available processors can influence pricing.

Examples of rate variation:

• In large cities with many competitors and sophisticated merchants, rates may be closer to interchange plus 0.45–0.75%.

• Suburban businesses might see interchange plus 0.35–0.55%.

• Rural or low-competition areas may face higher rates, like interchange plus 0.65–0.95%, as choices and market awareness are more limited.

Reality: While rates are determined by a combination of regional factors—including market competition, industry, and business sophistication—they can lead to noticeable differences in the processing rates offered to similar businesses in different locations. It’s crucial to remember that this geographic variation is not in the interchange fees (which are set by Visa/Mastercard and are the same regardless of location), but in the processor’s markup.

The Assessment Fee Shuffle

Card networks (Visa, Mastercard) update assessment fees twice yearly, but here’s what most merchants don’t know: processors often increase their markup alongside assessment increases, hoping you won’t notice the difference.

Example: Visa increases assessment fees by 0.02%. Your processor raises your rate by 0.05% and claims it’s “due to card network increases.” You’re paying 150% more than the actual increase, and the processor pockets the difference.

Industry Switching Costs: The Real Numbers

Processors bank on “switching inertia”—the idea that changing providers is too much hassle. But here’s the actual cost breakdown:

Real Cost to Switch Processors:

• Time investment: 8-12 hours total over 2-3 weeks
• Setup fees with new processor: $0-200 (often waived)
• Training/integration: 2-4 hours
• Total switching cost: $500-800 in time and fees

Average Annual Savings: $3,000-8,000

ROI on switching: 400-1,600% in first year alone.

Red Flags: Run From These Processors Immediately

Processor Comparison: What to Avoid vs. What to Seek

Frequently Asked Questions

“My processor says they offer the ‘lowest rates’—how do I know?”

Ask for your “effective rate”—total fees divided by total volume. Most US merchants discover their “low” rate only applies to basic transactions. Remember, North American payment processing fees are among the highest in the world due to high interchange rates and the dominance of major card networks, such as Visa and Mastercard, which control over 80% of the market. Interchange-plus pricing typically saves 20-25% compared to flat rates when you calculate the real numbers.

“Will switching disrupt my business?”

Not if you do it right. Run both systems in parallel for 48 hours, train staff in advance, and have your new processor’s support team on speed dial for the first week.

“How do I avoid getting scammed again?”

Demand transparent pricing that clearly separates interchange costs from processor markup. Avoid any processor who won’t clearly explain their fee structure or uses high-pressure sales tactics.

“My volume is low—do these savings still apply?”

For most US businesses, yes. The only times flat-rate pricing is generally cheaper is if your average transaction size is less than $5 or you’re processing less than $5,000 per month. Above that threshold, you’re likely overpaying in America’s high-fee environment. With US merchants paying $1.57 for every $100 processed, even small savings add up quickly.

Take Action Now: Your Money Is Walking Out the Door

Every day you delay switching costs you money. If you’re processing $25,000 monthly and overpaying by just 0.5%, that’s $1,500 annually—enough to hire part-time help or invest in business growth.

Your Next Steps:

1. Calculate your real costs using last month’s statement
2. Document your pain points (failed transactions, hidden fees, poor support)
3. Get quotes from 3 processors using the questions in this guide
4. Make the switch within 30 days to start saving immediately

Don’t let another month of overpaying slip by. The processors banking on your inaction are the same ones charging you hidden fees and locking you into bad contracts.

About IntelliPay

We help merchants optimize their payment processing through transparent interchange-plus pricing, no hidden fees, expert guidance, and reliable technology solutions. Our team combines deep industry knowledge with personalized service to ensure every client gets the best possible payment processing solution for their business.

The information provided on this page is for educational and informational purposes only. We make no representations or warranties regarding the completeness, accuracy, or security of this content, and all advice is provided “as is.” The content does not constitute legal, financial, or professional advice, and readers act on it at their own risk