How to Identify Dubious Credit Card Processing Fees, Part 3

Editor’s Note: This is “Part 3” of a three-part series. “Part 1” and “Part 2” we published previously.

The purpose of this series is to educate merchants on questionable credit card processing fees. There are no enforced standards in the card processing industry regarding rates, fees, and contractual terms. It is possible for two providers to offer seemingly the same rates and fees that result in different processing costs.

PCI Non-compliance or Non-validation Fee

Many providers now charge a $15 to $25 monthly non-compliance or non-validation fee if the merchant is not PCI compliant. This fee may be in addition to a monthly, quarterly, or annual PCI fee. Supposedly, providers charge the non-compliant or non-validation fee as an incentive for merchants to become compliant. Nonetheless, some providers use this fee more for revenue generation, than as an incentive. Some providers do not charge this fee at all.

Merchants should not change providers because of this fee. Instead, the merchants should become PCI compliant to eliminate the fee and reduce the probability of being breached, which could easily result in huge monetary penalties — tens of thousands of dollars. To become compliant, merchants should complete the PCI Self-Assessment Questionnaire and adhere to the PCI requirements, which may require quarterly scans. In short, if a merchant is being charged a non-compliance or non-validation fee, it is as much the merchant’s fault as anyone else.

Visa FANF Fee

In 2012, Visa started charging providers a Fixed Acquirer Network Fee (FANF). The actual fee charged by Visa is dependent on the merchant type. The fee for customer-present retail merchants is based on the number of locations. For example, an average customer-present retail merchant with 1 to 3 locations will cost $2.00 per month per location if all transactions are swiped. The cost for an ecommerce or fast food merchant processing $200,000 to $799,999 of Visa transactions in a given month is $120. Customer-present retail merchants that have non-swiped transactions can also pay an additional customer-not-present FANF fee.

Most aggregators — i.e., merchant account providers that group multiple merchants into a single merchant account, such as Square, PayPal — integrate the FANF cost into their rates and fees versus itemizing them out separately. Most traditional providers properly pass through the actual Visa FANF fee to their merchants. However, there are a few that treat this fee as another hidden revenue stream. I’ve seen providers charge a flat monthly fee (say $6.50) for customer-present merchants and I’ve seen the FANF fee inflated by as much as 50 percent for ecommerce merchants. Keep in mind when reviewing that the fee is generally based on the volume of the prior month. In order words, the fee you see on your statement for April activity is likely based on the March volume, as providers need to know the monthly Visa volume before they can assess the fee.

Unusual Discover Card Fees

For Discover transactions, some providers charge a higher percentage, or higher per-item fee, or monthly access fee. Here again, there is no justification for the higher rates or fees. In fact, these higher rates and fees may be in violation of the providers’ Discover agreements.

Excessive Payment Gateway Fees

A payment gateway routes transactions from the merchant’s website to the provider. In addition, some retail point-of-sales devices require a gateway to route the transactions. Merchants generally pay a per-month and a per-transaction fee for use of the gateway. As a rule, the direct cost to process through the gateway is a few cents per transaction. That’s the direct cost; both the gateway company and the provider have other costs to cover such as customer support and overhead. Merchants should review their gateway fees along with their processing fees when analyzing their overall cost. A provider offering a 5-cent transaction processing fee and a 25-cent transaction gateway fee is not as competitive as one offering a 10-cent transaction processing fee and a 10-cent transaction gateway fee, all else being equal.

Excessive Monthly, Annual, or Quarterly Fees

There are numerous monthly, annual, or quarterly fees merchants may see on their statements each month. Many merchants pay far more than they should for these fees. The fees may have names like “statement fee,” “service fee,” “membership fee,” “regulatory fee,” “PCI fee,” and host of other names. The fair amount each merchant should pay for these fees varies by sales volume and merchant type. Also, the amount a merchant pays for any given fee isn’t as important as the overall processing cost. However, as a rule, retail customer-present merchants should not pay more than $200 per year for all of these fees combined. Ecommerce merchants should not pay more than $300 per year, including any monthly gateway fee. These are general guidelines; some merchants should pay far less. If you are currently paying more, it may be a good time to review your overall processing cost including your pricing plan, rates, and fees.


  • There is a lack of enforced standards and transparency in the credit card processing industry.
  • Providers do not use the same rules when assessing rates and fees.
  • When choosing a provider, merchants should understand the overall processing costs, including the provider’s pricing plan and how they assess their rates and fees.
Phil Hinke
Phil Hinke
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