At Beacon Payments, we help small business owners take control of their payment processing costs so they can keep more of what they earn. In this post, we’ll break down how processing fees work, how they impact your bottom line, and what you can do to minimize their effect on your profit margins.

What Are Credit Card Processing Fees?

Every time a customer pays with a credit or debit card, your business is charged a small fee. These fees typically range from 1.5% to 3.5% of the transaction amount, depending on the pricing model, card type, and how the payment is accepted.

Common components of processing fees:

• Interchange Fees: Paid to the customer’s card-issuing bank
• Assessment Fees: Paid to card networks like Visa or Mastercard
• Processor Markup: The fee your payment provider adds on top

While each individual fee may seem small, they can add up quickly—especially for businesses with thin margins or high transaction volumes.

Real-World Example

Let’s say you own a small retail store and do $25,000 in card sales per month.

If you're paying an average processing fee of 2.75%, you're losing $687.50 per month—that’s over $8,000 a year in fees.

That’s money that could be reinvested in marketing, hiring, inventory, or simply boosting your profit.

How Fees Affect Profit Margins

Small businesses already face narrow profit margins due to rent, payroll, cost of goods, taxes, and more. When you add high credit card processing fees into the mix, your margins can shrink even further.

For example:

• A 10% profit margin becomes 7.25% after 2.75% in card fees
• A 5% margin drops to 2.25%, which can be the difference between profit and loss

The higher your card-processing costs, the harder it becomes to grow and stay competitive.

Ways to Reduce the Impact of Processing Fees

✅ 1. Choose the Right Pricing Model

• Interchange-Plus Pricing is transparent and often less expensive than flat-rate or tiered pricing.
• Avoid non-qualified rates or mystery-tier pricing whenever possible.

✅ 2. Consider Dual Pricing or Cash Discounting

Encourage customers to pay with cash by offering a discount—or add a small fee for card transactions to offset your costs. Done correctly, this is compliant and can eliminate processing fees entirely.

✅ 3. Use EMV and Contactless Terminals

Swiping cards or manually keying in numbers increases your risk and often leads to higher fees. Use a secure, modern terminal that supports chip and tap payments.

✅ 4. Review Your Monthly Statement

Hidden fees and outdated pricing plans are common. Have your statement reviewed by an expert (we do it for free!) to see where you can cut costs.

How Beacon Payments Can Help

At Beacon Payments, we help small businesses:

• Eliminate junk fees
• Lower their effective rate
• Implement cost-saving programs like cash discounting
• Choose the right POS or mobile payment solution
• Understand exactly what they’re paying and why

Want to see how much credit card fees are costing you?

Send us your most recent statement for a free analysis—we’ll show you how to reduce costs and boost profit margins.