How to Save Big on Credit Card Processing Fees for Your Restaurant (Ultimate & Updated Guide)

September 19, 2023
ultimate guide

The average credit card processing fees are a huge burden for restaurant owners in the U.S. These fees, which range from 1.5% to 3.5% per transaction, are the third-highest cost of doing business behind food and labor. And they are only going up. In 2022, credit card companies in the U.S. earned $126.4 billion from these fees. And they plan to raise them more in 2023 and 2024. 

But you can fight back. This guide will reveal how much payment processing should cost for a restaurant. It will also show you how to reduce your credit card processing fees and boost your revenue.

How credit card processing works for your restaurant

How credit card processing works for your restaurant

When a customer pays for their meal with a credit or debit card, you might think that the money goes straight from their account to yours. Indeed, there are many steps and parties involved in making sure that the payment is secure, valid, and fast. This process is called credit card processing, and it can affect your profits and customer experience.

3 key steps of credit card processing

1. Authentication:

This is when the card issuer checks that the customer is the card's rightful owner and that the card is valid. If the card passes this check, the process moves on to authorization.

2. Authorization:

Here, the card issuer checks that the customer has enough funds or credit to pay for the purchase and approves or denies the transaction accordingly.

3. Settlement:

The funds are transferred from the customer’s account to your account, minus any fees paid to the parties involved in the process. Settlement is the last step of this process — after the involved parties each take their cut of each transaction through their respective fees, the merchant bank deposits the remainder received from the issuing bank into the merchant’s bank account.

The transaction steps

1. The customer presents their card to pay for their order through a terminal (a point-of-sale (POS) system, handheld, kiosk, etc.) or enters their card information manually through an online ordering portal or other method.

2. The terminal sends the customer’s information to your payment processing provider, which is the company that handles your credit card transactions.

3. The payment processing provider sends the customer’s information to the card network (aka the company that operates the payment system - for example, Visa, Mastercard, and American Express).

4. The card network requests authorization from the issuing bank, which is the bank that issued the customer’s card.

5. The issuing bank checks if the customer has enough funds or credit and approves or denies the transaction. It sends an authorization message back to the card network.

6. The card network relays the authorization message to your payment processing provider.

7. Your payment processing provider notifies your terminal of the authorization status.

8. Your terminal prints a receipt or confirmation for the customer.

9. At the end of the day, you send all your approved transactions in a batch to your payment processing provider.

10. Your payment processing provider reconciles and formats your batch files and sends them to the card networks.

11. The card networks route your transactions to each issuing bank and request them to transfer funds to your account. This is called settlement.

How paying for credit cards hurts your business

How paying for credit cards hurts your business

We know running a restaurant isn't easy. You have to pay your staff, buy food, and deal with emergencies. After all that, you only keep about 35% of what you make. That’s not much. And on top of that, you have to pay fees every time a diner uses a credit card at your place. But you can’t avoid it, because most people use credit cards when they eat out.

Here are the facts:

  • 92% of restaurants accept credit cards.
  • More than 80% of the money restaurants make comes from debit and credit cards.
  • Over 73% of customers prefer to use debit or credit cards at restaurants.

The fees for using credit cards at your restaurant can be from 1.5% to 3.5% for each payment. Suppose your restaurant makes $30,000 every month. Then you will have $10,500 left after paying your staff. But you will also have to pay $450 to $1,050 for the credit card fees.

The average credit card fee that businesses have to pay

How much do merchants pay for credit card transactions?

The fee amount depends on several factors, such as the card network (e.g., Visa, Mastercard, Discover, or American Express), the type of credit card, and the business category you belong to. When it comes to restaurant payment methods, debit cards tend to have lower fees than credit cards. That’s why some merchants charge an extra fee for credit card payments, but not for debit card payments.

The table below shows the average fees for the four major card networks. These averages are based on the distribution of different types of credit cards. The fees are different for in-person and online or manually keyed transactions.

Card networkIn-personOnline & manually keyedVisa1.79% + $0.082.43% + $0.25Mastercard1.98% + $0.082.51% + $0.25American Express2.68% + $0.083.18% + $0.25Discover2.05% + $0.082.40% + $0.25

Data source: Helcim (2023)

Remember, the fees in the table aren't fixed. They can vary depending on the specific credit card used for the transaction. You may check the table below that shows the range of fees for each card network.

Card networkRange of feesVisa1.15% + $0.25 to 3.15% + $0.10Mastercard1.15% + $0.05 to 3.15% + $0.10American Express1.10% + $0.10 to 3.15% + $0.10Discover0.05% + $0.22 to 2.40% + $0.10

Data sources: Mastercard 2022–2023 U.S. Region Interchange Programs and Rates, Visa USA Interchange Reimbursement Fees (2022), Wells Fargo Merchant Services Payment Network Pass-Through Fee Schedule, and Wells Fargo Payment Network Qualification Matrix (2022)

The ranges you looked at above include two types of charges from the card networks: interchange fees and assessment fees. They don't include payment processing fees, which are charged by the company that handles your credit card transactions. Payment processing fees vary a lot depending on the company you choose.

Type of credit card fees for merchants

Interchange and assessment fees are non-negotiable credit card fees that you must pay. They are also known as base costs or the discount rate. The payment network charges these fees for every transaction that uses one of their cards.

1. Interchange fees

The issuing bank of your customer’s card gets the interchange fee when you process their payment. That is, if you accept credit cards Chase, you're paying the fee to Chase whenever your customer uses a Visa card from them.

2. Assessment fees

It goes to the card network that operates the credit card. In the example above, Visa gets the assessment fee when you process a payment from a Chase Visa card.

3. Payment processing fees

It's what you pay to the company that handles your credit card transactions. They send the payment information to the card network and the bank. They may charge you different types of fees, such as:

  • A fee for each transaction.
  • A monthly fee for their service.
  • The cost of the equipment or software you use to process payments.

Credit card interchange fees

Credit Card NetworkAverage Interchange FeeVisa1.15% to 3.15%Mastercard1.15% to 3.15%Discover1.10% to 2.40%American Express1.10% to 3.15%

Data source:  Visa (2023), Mastercard (2023), Helcim (2023)

We hope you know that these aren't the lowest or highest interchange fees that each credit card network charges. We have excluded some of the extreme cases (like Mastercard’s 0.00% + $0.75 for utility bills) to give you a better idea of the typical fee range.

If you're looking for the lowest credit card processing fees, Discover may be a good option, as it has the lowest average interchange fees. But Mastercard and Visa are close, and they have similar fee ranges. For most restaurant owners, it won’t make much difference whether the customer pays with a Visa, Mastercard, or Discover credit card.

American Express has always been the most expensive credit card network.. This is why some restaurants don’t accept it. In 2018, American Express lowered its fees for the first time in 20 years. While that made it more competitive with other credit card networks, it still charges the highest fees on average.

Credit card assessment fees

Credit Card NetworkAverage Assessment FeeVisa0.14%Mastercard0.13% for payments under $1,000; 0.14% for payments over $1,000Discover0.13%American Express0.17%

Data source:  Visa (2023), Mastercard (2023), Helcim (2023)

The credit card company charges the assessment fee for using its network. It tends to be smaller than the interchange fee. 

American Express charges the highest assessment fee among the four credit card networks, but it is only slightly higher than Visa and Mastercard. Mastercard has the lowest assessment fee, especially for payments of $1,000 and more.

That said, the difference in assessment fees between each credit card network is small. It won’t affect your profit much.

Credit card processing fees: How to minimize your restaurant costs

Credit card processing fees: How to minimize your restaurant costs

Interchange and assessment fees are fixed. But payment processors are flexible and you can negotiate the rates with them. Here are some tips to reduce your credit card processing fees.

1. Know which fees you can negotiate with your payment processor

Your payment processor charges you three kinds of fees: flat fees, situational fees, and processing fees. 

Flat fees: The fees that you pay every month or year for things like online reports, network access, payment gateway, statements, etc. Some of these fees are fixed and you can’t negotiate them, but some of them are variable and you can try to lower them.

Situational fees: Ones that you pay only when something happens, like a cancellation, a chargeback, an international card, or a low sales volume. You can also negotiate some of these fees with your payment processor.

Debit and credit card processing fees: The fees that you pay for each credit card transaction. These are the biggest part of your credit card processing costs, and they depend on the type of card and transaction.

Each type of fee has a different level of negotiability. But, if you understand why your payment processor charges these fees, you will have a better chance of getting a lower rate.

2. Understand how your payment processor calculates your processing fees

Your payment processor can use one of four methods to charge you for each credit card transaction:

Cost-Plus: You pay the interchange fee plus a percentage of the transaction amount plus a card brand fee plus a flat fee per transaction.

Fixed or Flat fee: Your restaurant pays a fixed percentage of the transaction amount plus a dollar amount per transaction.

Interchange differential: You pay the difference between the interchange fee and another fee based on the type of card plus the card brand fee plus the interchange fee.

Tiered Fee: Your company pays different processing fees depending on which tier the transaction belongs to. The tiers are based on your business type, your card type, and your transaction type. For example, a big and popular restaurant will have more transactions than a small and local one. A card with rewards and benefits will cost more than a card with low limits and no perks. A transaction in person will cost less than a transaction online, over the phone, or through an app.

3. Check how much you're paying for credit card processing every month

A simple way to see how much credit card processing costs you is to look at your monthly statement. Divide the total fees by the total transactions and multiply by 100. This will give you the percentage of fees that you are paying for each transaction.

Example: ($1,775.25 / $41,550.75) x 100 = 4.27% in credit card fees this month.

Have you noticed that this percentage is going up or changing a lot from month to month? Then, you should talk to your payment processor and ask for an explanation or a better deal.

4. See what types of cards your customers prefer to pay with

Some cards cost you more per transaction than others. For instance, rewards cards that give cash back or miles to the customers are more expensive than debit cards or basic credit cards with no perks.

Moreover, some methods of payment are more secure and cheaper than others. For example, chip and PIN transactions are safe and affordable because they have less chance of fraud. Payment processors may also charge you extra for international cards that need to be converted to a different currency.

You should check what kinds of cards and methods your customers use most often, and see if the pricing model that you have is the best fit for your restaurant. Flat-fee pricing charges the same rate for all types of cards, but it may be higher to cover the risk. Cost-plus pricing charges different fees for different types of cards; it may be better for a large restaurant that serves high-end customers who use rewards cards a lot.

5. Look for hidden fees and ask your payment processor to explain them

Some payment processors may not tell you all the fees that they charge you. They're likely to charge you a flat fee for services that you don’t need, add high fees in hidden surcharges, or charge you fees if you don’t meet a minimum sales amount each month.

You should read your contract carefully and see if there are any fees that you don’t understand. If there are, ask your payment processor to explain them and see if you can negotiate them down or eliminate them.

Again, restaurant credit card processing fees aren't fixed and final. You can negotiate and reduce them by finding a payment processor that suits your restaurant’s needs and offers you a fair deal. Look for a payment processor that offers:

  • Competitive and transparent pricing
  • Fast, reliable, and secure payment deposits
  • Same-day or next-day deposits
  • Easy integration with your current systems
  • Solutions to reduce risk factors or fraud
  • Updated POS systems including mobile and wireless options
  • Quality service and live support

Remember, asking about your restaurant’s credit card processing fees is part of your job. Luckily, with a trustworthy payment processor, having that conversation and understanding your contract will be easy.

How to save money on credit card processing by changing your operations

How to save money on credit card processing by changing your operations

1. Use integrated payments

Make sure that your credit card processor works well with your point-of-sale system. This way, you can send the payment information from your POS to your payment terminal without typing it in manually.

Integrated payments make checkout faster and easier, and they prevent mistakes. While this doesn’t directly lower your payment processing fees, it saves you time and money in the long run.

To use integrated payments, talk to your POS provider. For example, at One2, we offer unified payments so you can accept credit card payments without leaving your POS. You also get clear and flat-rate pricing, and you only have to deal with one vendor for all your POS and payment needs. This makes your operations more efficient and simple.

2. Settle transactions as soon as you can

One of the ways to reduce credit card processing fees for small business is to batch your transactions daily. But sometimes, after a busy shift, you might forget or delay this task.

However, you can usually get the best interchange rate if you settle charges within 24 hours. This is especially important if you use an interchange plus processor, which charges you based on the interchange rate plus a markup.

How One2 can cut your payment processing costs by using Stripe

How One2 can cut your payment processing costs by using Stripe

You'll get everything out of the box. No gated features

One2 is an online ordering and menu management system that lets you pay less for credit card processing by using Stripe as your payment processor. A popular online payment platform, Stripe offers low rates and fast payouts for businesses of all sizes.

Stripe charges a flat rate of 2.9% + $0.30 for each successful card charge, which is cheaper than many other payment processors that charge extra fees or higher percentages. Also, it accepts different payment methods, including credit and debit cards, digital wallets, bank transfers, and electronic checks. This can make it easier and more convenient for your customers to pay.

Furthermore, One2 helps you save on delivery costs by working with the best delivery companies in the U.S. like DoorDash. We offer flat-rate delivery fees that depend on your city and state. That is, you don’t have to pay a percentage of your sales to the delivery company, which can reduce your profits. Instead, you'll be able to offer your customers a faster and more affordable delivery service that increases your online orders and revenue.

By using One2, you should enjoy a simple and effective online ordering system that connects with your website and menu management. You won't have any difficulty offering loyalty and rewards programs to your customers to keep them coming back and spending more. 

some best features

We're committed to being the best platform for growing first-party online orders for your restaurants, ghost kitchens, and virtual brands. Just get started for free the same day without a credit card or hardware required.

What makes us different and better:

  • Free tier plan that includes all features
  • Uncomplicated pricing structure
  • Not require hardware and software installation
  • Not require customers to download any app to access the digital menu
  • Give you freedom and control over your digital menu design and layout
  • Scale your business, handling more orders and customers without compromising performance or quality
  • Integrate with Mailchimp, Google My Business, Google Maps, etc., to boost your online presence and reach more customers
What our clients are saying

What our clients are saying

Related questions

1. How do customers feel about restaurants charging credit card service fees?

If you own a restaurant in the US, you know how hard it is to make a profit these days. Food and labor costs are rising, and customers are more demanding than ever. You may be tempted to cut corners by accepting only certain credit cards or charging extra fees for using them. But this could be a big mistake.

- Some customers like to pay with credit cards. And among them, a few favor American Express and Discover over other brands, because they offer rewards and benefits. If you don’t accept these cards, you may lose potential customers who will go to your competitors instead. You may also annoy your existing customers who don’t like to carry cash or use other payment methods.

- Charging extra fees for credit cards is not only bad for customer satisfaction but also risky for your business. Depending on your state laws and your merchant agreement with Visa and Mastercard, you may be breaking the rules or violating the contract by doing so. You could face fines, lawsuits, or even termination of your account if you get caught.

- Raising your menu prices to cover the costs of credit card processing is a better option than charging extra fees. Most customers understand that prices go up over time due to inflation and other factors. They're more likely to accept a small increase in the price of their meal than a separate fee that seems unfair and arbitrary.

For example, five years ago, the average restaurant made 30% of the total bill as profit, but now they are lucky to make 20%. That means if the bill is $200, the restaurant is only making $40. If you charge a 3% fee for credit cards, you're adding $6 to the bill, which may not seem like much, but it could make a big difference in how the customer feels about your service.

On the other hand, if you raise your prices by 5%, you're adding $10 to the bill, which is more than the fee, but it is spread across all items and customers. This way, you aren't discriminating against anyone or making it hard for them to pay you. You're also increasing your profit margin by $4.

Another suggestion is that you may offer free shipping and increase all your prices by more than the shipping cost. This strategy can boost your sales by 35%.

As a business owner, you need to think about cash flow and customer loyalty. We learned early on that we should make it easy for clients to pay us. You offer high-value services and you take credit cards without adding a fee. Just know that sometimes clients have cash flow problems, but they still pay you (and not some of the other vendors).

2. Why is Stripe a good option for restaurant credit card processing?

If you run a restaurant that offers online ordering and delivery, you might want to consider Stripe as your credit card processor. Stripe lets you accept credit cards online and various other payment methods from your customers, including debit cards, digital wallets, bank transfers, and electronic checks.

Also, you can use Stripe’s API to customize your online ordering platform and connect it with different POS systems and delivery apps. Stripe payment processing fees are straightforward. You only pay a fixed percentage and a small amount for each successful transaction. And there are no monthly fees or minimums.

3. What determines my interchange fees?

Your business type:

Each business has a code that shows what kind of business it is. This code is called a merchant category code (MCC). Payment networks charge different fees for different codes. For example, a restaurant pays different fees than a supermarket.

The card used by the customer:

Some cards offer more benefits to the customers, like travel rewards or purchase protections. These cards usually have higher fees for you. For instance, a World Elite Mastercard costs more than an Elite Mastercard, and a Visa Signature Preferred Card costs more than a Visa Signature Card.

How you process the card:

The fees can change based on how you accept the card. You can swipe or insert the card (or use a contactless card), key in the card number, or take the payment online or over the phone. The fees are different because some ways are riskier than others.

For example, card-not-present (CNP) transactions have more chances of fraud or chargebacks, so they have higher fees. American Express also looks at how much the customer spends to decide the fees. The more the customer spends, the less you pay in fees.

4. When do payment networks change their interchange fees?

They usually change these fees once a year. This doesn’t mean they always make them higher. Visa and Mastercard didn’t change their fees in 2020 and 2021 because of the COVID-19 pandemic, but they did in 2022. These changes are hard to understand.

The fees depend on what kind of business you are, what kind of card the customer uses, and how you take the payment. There are many different types of businesses, cards, and ways to pay. Some fees go up and some go down. It can be tough to figure out how these changes affect you.

One estimate said that the 2022 fee changes from Mastercard and Visa will make merchants pay $475 million more, even though some fees went down. Credit card fees went up in 2022, and some people want them to go down. They say the fees are too high and unfair. But the credit card companies don’t agree.

You might think that the card networks make the most money by raising fees, but it’s the banks. The fees go to the bank that gives the credit card to the customer. The banks that work with Visa and Mastercard to offer their cards are the ones that get those extra fees.

5. Is restaurant payment processing secure?

Yes. A restaurant payment app uses a lot of security measures. The app works with credit card processors that follow the PCI standards and use special codes to protect the transactions.

6. What are the most common hidden fees my restaurant should watch out for?

There are many fees that payment processors can charge you, and some of them may not be obvious or transparent. 

Monthly or Annual fee: The fee you pay every month or year for using the payment processor’s service. It can range from $0 to $100 per month or $0 to $300 per year.

Terminal/Equipment fee: The fee paid for renting or buying the hardware that you use to swipe or insert the cards. It may range from $5 to $60 per month.

PCI non-compliance fee: A fee that you pay if you fail to meet the security standards set by the PCI for protecting your customers’ card data. It can range from $20 to $120 per year.

Chargeback fee: The fee that you pay when a customer disputes a charge on their card and requests a refund. It can be from $10 to $30 per occurrence.

Monthly minimum fee: A fee that you pay if your total transaction volume falls below a certain threshold set by the payment processor. It may be from $0 to $25 per month.

Cancelation or Early termination fee (ETF): This is a fee that you pay if you want to switch to another payment processor before your contract expires. It can range from $300 to $1000 per occurrence.

Address verification system (AVS) fee: The fee that you pay for verifying the billing address of your customers when they use their cards online or over the phone. It can vary from $0.05 to $0.25 per occurrence.

Batch fee: This is a fee paid for sending a batch of transactions to the payment processor for processing at the end of each day. It can be from $0.05 to $0.30 per occurrence.

Application/Setup fee: A one-time fee that you pay for applying and setting up your account with the payment processor. It may vary from $50 to $100 per occurrence.

PIN debit transaction fee: This is a fee that you pay for accepting debit cards that require customers to enter their PINs. It can be from $50 to $60 per year.

Payment gateway fee: The fee paid for using an online platform that connects your website or app with the payment processor. It can range from $5 to $25 per month.

Online reporting fee: The fee that you pay for accessing online reports and analytics about your transactions and sales. It can be from $0 to $10 per month.

Account closure fee: A fee that you pay for closing your account with the payment processor. It tends to be from $20 to $75 per occurrence.

Merchant location fee: This is a fee paid for registering your business location with the payment processor. It can range from $5 to $15 per year.

IRS reporting fee: A fee that you pay for complying with the IRS requirements for reporting your income and taxes. It is 25$ per year.

Statement fee: This is a fee that you pay for receiving paper or electronic statements of your transactions and fees. It can range from $5 to $10 per month.

Voice authorization fee (VAF): The fee that you pay for obtaining authorization for a transaction over the phone when the card is not present or readable. It can range from $0.25 to $4 per occurrence.

Non-sufficient funds fee (NSF): This is a fee paid when your bank account doesn't have enough funds to cover the transactions or fees that you owe to the payment processor. It can range from $20 to $25 per occurrence.

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