Credit card swipe fees are the charges a business pays each time a customer pays with a card, and they typically run between 1.5% and 3.5% of the transaction. Every swipe splits into three pieces: an interchange fee that goes to the bank that issued the customer’s card, an assessment fee that goes to the card network, and a markup that goes to the merchant’s payment processor. Federal law caps only one slice of this, and only for debit cards from large banks. Credit card rates are set by Visa, Mastercard, Discover, and American Express, and merchants cannot negotiate them directly.
The Three Parts of a Swipe Fee
On a processing statement the fee looks like one line. It isn’t. Knowing which piece is which tells you where you have leverage and where you don’t.
The biggest piece is interchange, paid to the bank that issued the customer’s card. It covers the bank’s cost of fronting the money, carrying the fraud risk, and running the cardholder’s account. The networks publish interchange in rate tables with hundreds of tiers. For credit cards, interchange runs roughly 1.15% to 3.15% of the sale depending on the card, the industry, and how the transaction is captured.
The second piece is the assessment fee, paid to the card network itself. Assessments are small, usually a fraction of a percent, and they fund the network’s settlement infrastructure.
The third piece is the processor markup, paid to the company that provides your terminal, gateway, or point-of-sale system. This is the only part you can shop. Some processors pass interchange and assessments through at cost and add a disclosed markup; others quote a single blended rate. If you pay 2.75% blended, you can’t tell how much of that is interchange and how much is the processor’s margin, which makes it hard to judge whether the price is fair.
What Makes One Swipe Cost More Than Another
A $100 sale on a basic credit card might cost you about $1.80 in fees. The same sale on a premium rewards card can cost $2.80 or more. A few factors decide where any given transaction lands.
Card Type and Rewards Tier
Premium cards with travel points, lounge access, or rich cash-back programs carry higher interchange because the issuing bank has to pay for the perks. A no-frills card costs you noticeably less than a high-tier rewards card on the same purchase, and you have no way to steer a customer toward the cheaper one.
How the Card Is Presented
Transactions where the card is dipped into a chip reader or tapped on a contactless terminal qualify for lower interchange. Physical presence makes fraud harder. Online orders, phone orders, and anything else where the card never touches your hardware carry higher rates because fraud risk goes up. That is one reason e-commerce businesses face consistently higher processing costs than storefront merchants.
Merchant Category Codes
Every merchant is tagged with a four-digit Merchant Category Code that tells the networks what kind of business you run. Supermarkets, gas stations, and utilities often get preferential interchange because their transactions are high-volume and low-risk. Industries the networks treat as higher-risk or lower-volume, like jewelry, travel agencies, or direct marketing, pay more. The MCC is one of several inputs that decide which interchange tier a given sale lands in.1Mastercard. Mastercard Interchange Rates and Fees
PIN Debit Versus Signature Debit
A debit transaction can run through a PIN-based network or a signature-based network. PIN debit usually costs less because the cardholder’s identity is verified at the terminal. Signature debit rides the Visa or Mastercard rails like a credit transaction and tends to cost more. On small-ticket sales the math can flip: some PIN networks charge a flat per-transaction fee that overtakes the percentage cost on a low total.
Federal Caps on Debit Interchange
Congress capped debit interchange through the Durbin Amendment, part of the Dodd-Frank Act, codified at 15 U.S.C. § 1693o-2. The statute tells the Federal Reserve to keep debit interchange charged by large banks reasonable and proportional to the bank’s actual processing cost.2Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions
The Current Debit Cap
The Fed implemented the statute through Regulation II, which caps the interchange fee at 21 cents plus 0.05% of the transaction, with an extra 1 cent available to issuers that meet fraud-prevention standards.3Board of Governors of the Federal Reserve System. Regulation II: Debit Card Interchange Fees and Routing On a $50 debit sale, the maximum interchange a covered bank can collect is about 24.5 cents.
The cap only reaches banks and credit unions with more than $10 billion in assets. Smaller institutions are exempt, so a debit card from a community bank or small credit union can carry higher interchange than one from a national bank.4Federal Register. Debit Card Interchange Fees and Routing Credit card interchange is not capped by any federal law.
Your Right to Route Debit Transactions
The Durbin Amendment also bars networks from locking merchants into one routing option. Every debit card has to be enabled on at least two unaffiliated networks, and you can pick which network carries a given transaction. If a competing PIN network offers lower interchange than the Visa or Mastercard rail printed on the card, you can route the sale there. Networks and issuers cannot penalize you for the choice or steer transactions away from a competitor.4Federal Register. Debit Card Interchange Fees and Routing
Regulation II Is in Flux
In August 2025, a federal district court in North Dakota vacated Regulation II in full, finding that the Federal Reserve went beyond its statutory authority in deciding which costs could be built into the cap. The court stayed its own order while the case is on appeal, so the 21-cent cap still applies for now. Separately, the Fed has proposed cutting the cap to 14.4 cents using updated cost data from large issuers, but that proposal has not been finalized. Expect continued uncertainty around debit interchange pricing until these matters settle.
Passing the Cost to Customers
Merchants have three main ways to offset processing costs at the register: a surcharge on card payments, a discount for cash, or a minimum purchase amount for cards. Each one carries its own rules, and getting the details wrong can draw network fines or run into state law.
Credit Card Surcharges
A surcharge is an extra fee added when a customer pays with a credit card. Visa caps the surcharge at the lesser of your actual processing cost or 3%.5Visa. U.S. Merchant Surcharge Q and A Mastercard caps it at the lesser of your cost or 4%.6Mastercard. Mastercard Credit Card Surcharge Rules and Fees for Merchants If you accept both, the Visa 3% ceiling is the one that binds.
Before you start surcharging, you have to notify both the card network and your processor at least 30 days ahead.6Mastercard. Mastercard Credit Card Surcharge Rules and Fees for Merchants You also have to post clear signage at the store entrance and at the point of sale disclosing the surcharge before the customer commits. These are network rules, not federal statutes. Surcharging a debit transaction is prohibited whether the customer uses a PIN or signs.
Roughly a dozen states restrict or prohibit credit card surcharges. Some of these statutes have been challenged on First Amendment grounds and the picture varies by state, so check your state’s rules before you notify the networks.
Cash Discounts
A cash discount runs in the other direction: instead of adding a fee for card use, you offer a lower price for paying with cash or check. Federal law protects this approach directly. Under 15 U.S.C. § 1666f, a card issuer cannot bar a merchant from offering a cash discount, and the discount isn’t treated as a hidden finance charge as long as it’s available to every buyer and clearly disclosed.7Office of the Law Revision Counsel. 15 USC 1666f – Inducements to Cardholders by Sellers of Cash Discounts To a customer the difference between a cash discount and a credit surcharge can feel like semantics, but the legal treatment is not the same. A cash discount sets the higher price as the regular price and rewards cash; a surcharge starts at a base price and penalizes card use.
Minimum Purchase Amounts
The Dodd-Frank Act lets a merchant set a minimum dollar amount on credit card purchases, as long as the minimum is $10 or less and applies evenly across every credit card network.8Federal Trade Commission. New Rules on Electronic Payments Lower Costs for Retailers A coffee shop can require $5 on credit, but not $15. The right covers credit cards only. Minimums on debit transactions are not allowed under federal law, though government entities and higher education institutions have some additional flexibility under separate provisions.
How Swipe Fees Affect Your Taxes
Processing fees are ordinary business expenses and reduce your taxable income. Sole proprietors deduct them on Schedule C; other businesses deduct them on their entity return. No special form.
One trap catches many business owners. Payment processors report the gross amount of your card sales on IRS Form 1099-K, not the amount after fees. If you run $200,000 in card sales and pay $5,000 in processing fees, the 1099-K shows $200,000.9Internal Revenue Service. Form 1099-K FAQs: Common Situations You need to deduct the $5,000 separately on your return. Skip that step and it can look like you underreported expenses or overreported income, which invites IRS attention.
For 2026 transactions, processors must issue a 1099-K to any merchant whose card volume tops $20,000 and 200 transactions in the calendar year. There is no minimum threshold specific to payment card transactions when they settle through a payment card network rather than a third-party settlement organization.10Internal Revenue Service. Treasury, IRS Issue Proposed Regulations Reflecting Changes From the One, Big, Beautiful Bill to the Threshold for Backup Withholding on Certain Payments Made Through Third Parties