Credit card processing effective rate calculator

Use this tool to calculate your merchant account effective rate. Credit card processing effective rates are critical for peer and industry benchmarking, especially merchants with pass through interchange or interchange plus pricing.

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  • If your business is cyclical, choose a high volume month
  • Subtract any unusual fees. For example, if you have an annual PCI Compliance fee on the statement examined, deduct from fees paid.
  • If American Express revenues are on the merchant statement, but fees are paid separately from your merchant account (common), enter net American Express revenues.
  • If Discover or other card brand fees are on the merchant statement, but fees are paid separately from your merchant account (common), add it to the American Express revenues. (The field name is not important, just that it will be subtracted for analysis.)
net sales submitted

Example step 1, Page 3 of merchant statement with pass through interchange pricing.

pass through interchange pricing

Example Step 2, 2nd to last section of merchant statement with pass through interchange pricing.

Step 3: Resulting effective rate:

effective rate example resultsQ&A:

What is the effective rate for my industry?

Annual revenues impact the effective rate because there’s a baseline profit any acquirer wants to make in order to support your business. My expertise is in omnichannel (mixed card present and card not present) companies with $1M plus annual processing, particularly automotive parts, building materials, and industrial supplies. 100% of them should have less than 3% effective rate. For those with larger retail component, it might be in the range of 1.3-1.5% and for building materials with strong mix of card not present, it’s might be 2.2-2.5%.

Why is my effective rate higher than another similar company, if we both have the same discount rate? Effective rates can be influenced by systems and people. For example, split testing within the same company has shown significant result variances with different payment gateways. Effective rates are a marker of processing efficiency; merchants using automated interchange management systems generally have the lowest effective rates.

Resources: Not sure where to find the numbers to plug in? Watch these videos for First Data, Paymentech and Paypal Pro.

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What’s your effective rate? Industry? (retail, B2B). Is your rate for retail swipe, phone/ecommerce, or both?

Why low cost debit card processing might not matter

The vast majority of businesses are offered a low QUALIFIED RATE, also known as a debit card rate, and then other rates kick in. This rate may be meaningless for your merchant account costs, especially if an ecommerce busines or if you have a high dollar ticket average.

To start your review, you need to know what types of cards are typically received in your operation. I call this credit card processing transparency. If you don’t know where you are, you can’t manage it. If your statement doesn’t break out what interchange categories you’re hitting, you need a new processor immediately.

Looking at your statement, what percent of your transactions hit your price plans lowest QUALIFIED RATE? What percentage of your revenues does that equal? I prefer the number of transactions as a key factor since a few unusually large or small dollar transactions could sku the importance of hitting qualified rates.   In a typical card present RETAIL operation, this number is probably in the 20% to 60% range. In that case, you need to focus on ways to reduce your debit card processing, including least cost routing.

But what if you have very little debit card usage? A lot of people won’t use their check card online. A lot of people like to use rewards cards, frequently 50-60% of transactions,  especially if higher dollar purchases. Businesses rarely use check cards.  Your focus should not be on the qualified rate, but on the overall effective rate. I don’t suggest just focusing on the rewards card rate because there are many of them and the most important aspect in controlling costs is the right pricing for all types of cards received.

Case in point:

An ecommerce apparel store has average ticket of $175.  Generally targeting a wealthier demographic, many of the shoppers are executives and business owners. What’s their percentage of transactions use debit cards? 19%. This merchant is on a wholesale price plan with cost plus, also known as interchange plus pricing. Merchants on a typical pricing plan with low cost qualified rate, frequently pay a .40% to 1.0% surcharge for non-qualified transactions, on top of whatever else may apply for the transaction. Confusing? Let me reverse the language. I could charge you a higher qualified rate and still cut your costs if you have a lot of non-debit cards.


1. Your merchant statement must have complete transparency. If you don’t see REWARDS, COMM CARD, CORP DATA RATE I,  and a bunch of other rate categories, call our hotline right now!

2. What percent of your transactions are debit and non-debit? If more non-debit, do you have a great price for that? If you don’t know, call now.

3. Look at your statements every month. As the economy changes, so does card type usage. What was valid last year  may not be this year.

4. If you have more than $100,000 in debit annually, I recommend you speak to a consultant about technologies that could help you reduce your effective rate.

Low cost debit card processing might not matter. You just need to know what to look for and how it impacts your costs.

Costco, Elavon, Nova and merchant rates

We frequently address questions from merchants currently using the Costco Wholesale Merchant Processing. Costco’s merchant partner is Evalon, formerly Nova Information Systems.

Earlier this year, some Costco member merchant rates were increased, though on the surface it looked like a decrease. It really depends on your business whether you’d be better off or not. In most cases, businesses will pay more.


Visa/MasterCard Qualified (Traditional Credit & Signature Debit) 1.48% plus $0.20 (reduced)
Visa/MasterCard Qualified Rewards 2.20% plus $0.20 (increased)
Visa/MasterCard Partially Qualified 2.96% plus $0.33
Commercial Non-Qualified 2.96% plus $0.33
MasterCard Non-Qualified 3.80% plus $0.33
Pin-Debit Transaction Fee $0.12

Previous blog readers know these numbers above are pretty meaningless for comparing merchant rates. What really matters is your effective rate. You get the qualified rate when the customer uses their check card and signs for it instead of entering the pin number. Debit card usage is definitely on the rise so the lower rate is a good thing. But how many of your transactions will qualify for the qualified rate vs the other rates? Reference this article for a more important number to use when comparing rate plans.
how to calculate credit card processing effective rate
In addition to the above fees, processors are passing along .30% or .40% international fees launched in 2009 by Visa and MasterCard, also called cross border service fees. These are fees for foreign issued cards. There’s no way out of this one. Everyone pays it. Since no one knows how many foreign cards you’ll be presented with, it’s usually an extra line item on your merchant statement. I’d be vary wary of any deal that did not separate out these fees.

Based on the April rate changes, I’m staying neutral on processing up to $100,000 annually via the Costco membership plan. Anything over that, I’d look at other options.

how to calculate credit card processing effective rate

Quoted rate or qualified rates are not the same as the effective rate. Video example for a retail store with swipe transactions. By calculating your effective rate you have a basis for conversation with a credit card processing consultant. An experienced consultant will know roughly what range your effective rate should be with certain information about your business. This helps open or close the door on whether it’s worth exploring changing your credit card processor.

Don’t be fooled by quotes for low qualified rates appearing to be the cheapest credit card processing. Managing your payment processing costs means managing all rates, not just the qualified rate.

paypal payments pro vs Paymentech for ecommerce

Recently I switched a Volusion hosted ecommerce store from credit card processing with Paypal Payments Pro to the Paymentech platform via my ISO. (3D Merchant is not an ISO, but your blog author is an agent with multiple payment processing solutions to choose from, including Paymentech.)

I chose Paypal years ago when the store first started. It was just a ‘buy now’ button. Then it became a full fledged store, and I upgraded from regular paypal to Paypal Payments Pro. With Volusion, I bought the Volusion branded security certificate and used in the integrated Paypal checkout. This means customers would pay with a credit card just like on any other web site. Shoppers normally never know who a company’s processor is. They just get a receipt from the business they bought from. I also kept the Paypal option. This means a customer could also check out with Paypal or with any credit card.

Paypal Summary:
Paypal regular- customers checkout on the paypal web site.
Paypal Payments Pro- checkout just like any other store with your credit card, all on one page.
In either case, merchant fees are deducted from every transaction. Additionally, you have to login to Paypal, then request to transfer deposits from transactions to your bank. The transfer time to my bank account was about 2-3 business days, sometimes longer.
My typical transaction cost was 2.95% (excludes factoring in the monthly fee). This is not the same as effective rate covered below.

Processing via my ISO/paymentech
Credit cards- customers use a one page checkout. I’m using as a gateway. I can login to or Paymentech to view transaction information. The transfer time to my bank account with Paymentech is 2 days FIRM, add 1 day if Sunday is in the 2. Merchant fees are deducted once per month, which makes it much easier for reconcilation.
I’m paying pass through interchange now instead of being lumped into one big rate. For example, I hit the CPS Rewards rate of 1.9% most frequently. My worst interchange rate is 2.3%.

Customers who use this same scenario also need to add the merchant discount, per transaction fee, dues and assessments, and monthly statement fee. Paypal checkout is still offered; customer checkout is on the paypal web site. Customers rarely use it.

The old Paypal effective rate was 3.75% when I ran it just before switching and the new effective rate for my B2B stores which usually hit higher interchange rates because of corporate cards is probably going to be about 2.2%. The effective rate includes all fees- monthly statement, percent of transaction, per transaction fee and everything else.

The old way (Paypal Pro) was cost efficient when the store first opened, but later became costly and I didn’t like that customers would see ‘paypal’ on their credit card statements when they paid via normal checkout. It was also a manual process when I wanted to partially refund a customer.
The new way (regular merchant account) , which includes, has reduced bookkeeping and customer care time because of the superior transaction flexibility. In reality, those costs are probably much higher than what I am saving on the processing, but the hard cash savings is great too!

Old effective rate 3.75% vs new effective rate 2.2%. Your ecommerce effective rate will vary since the merchant discount, a fee over and above interchange, is usually tied to volume. Additionally the type of buyer correlates to the type of credit card used.

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