Transaction Fee Impact
Understanding fixed & variable rates.
Average Transaction
A primary factor in understanding your processing fees.
Effective Rate
Representing your true, overall cost of processing credit cards.
See Examples
Compare and contrast by viewing examples with identical pricing.
Average Transaction
The average transaction amount is a key factor in determining your effective processing rate. Lower average tickets increase the relative impact of per-transaction fees, resulting in a higher effective rate. As a result, the same pricing structure can yield materially different effective rates based solely on changes in average transaction size.
Effective Rate
The Effective Rate represents the total percentage cost of credit card processing over a given period. It is calculated by dividing total processing fees by total credit card sales. The lower the average ticket the higher the impact of the transaction fee. The same pricing model can produce different effective rates just by changing the average transaction amount. This metric reflects the true overall cost of acceptance — not merely the advertised transaction rate.
See Examples
All three examples below reflect identical pricing — two percent plus twenty cents per transaction. The only difference is the transaction amount. As illustrated, the fixed per-transaction fee has a greater proportional impact on smaller tickets, resulting in a higher effective rate.
- $25 Transaction
- Percentage Fee = 2.00%
- Transaction Fee = $0.20
- Percentage Cost = $0.50
- Transaction Cost = $0.20
- Total Cost = $0.70
- Fixed Weight = 28.57%
- Variable Weight = 71.43%
- $50 Transaction
- Percentage Fee = 2.00%
- Transaction Fee = $0.20
- Percentage Cost = $1.00
- Transaction Cost = $0.20
- Total Cost = $1.20
- Fixed Weight = 16.67%
- Variable Weight = 83.33%
- $100 Transaction
- Percentage Fee = 2.00%
- Transaction Fee = $0.20
- Percentage Cost = $2.00
- Transaction Cost = $0.20
- Total Cost = $2.20
- Fixed Weight = 9.09%
- Variable Weight = 90.91%