Network Fees and Assessments
Networks charge fees for using their infrastructure. While interchange gets most of the attention, network fees add 0.15-0.25% to the total cost of card acceptance.
Fee Structure Overview
Card network fees consist of two main categories:
1. ASSESSMENT FEES (percentage-based)
- Charged on transaction volume
- Typically 0.13-0.15% of transaction amount
- Charged to acquirer (passed to merchant)
2. PASSTHROUGH FEES (fixed per-transaction)
- Charged per authorization, clearing, settlement
- Often overlooked but add up quickly
- Range from $0.01 to $0.04 per transaction
Assessment fees are percentage-based (scale with transaction size), while passthrough fees are fixed amounts (same cost for $10 or $1,000 transaction).
Network Assessment Fees
Assessment fees are charged on transaction volume and are non-negotiable.
Current Assessment Rates (2024-2025)
| Network | Assessment Rate | Notes |
|---|---|---|
| Visa | 0.14% | Charged on gross transaction volume |
| Mastercard | 0.1375% | Slightly lower than Visa |
| American Express | Included in merchant discount | No separate assessment for closed-loop |
| Discover | 0.13% | Similar to Visa/Mastercard |
CALCULATION EXAMPLE:
Transaction: $100
Visa Assessment: $100 × 0.14% = $0.14
Mastercard Assessment: $100 × 0.1375% = $0.14
Assessment rates may vary slightly based on:
- Total processing volume
- Card-present vs card-not-present
- Merchant category code (MCC)
- International vs domestic
Passthrough Fees (The Hidden Costs)
Passthrough fees are fixed per-transaction charges that many merchants don't realize they're paying.
Visa Passthrough Fees
ACQUIRER PROCESSING FEE (APF):
- Amount: $0.0195 per transaction
- Applies to: Every Visa authorization
- Non-negotiable
- Who pays: Acquirer → Merchant
FIXED ACQUIRER NETWORK FEE (FANF):
- Amount: Monthly fee based on MCC
- Range: $1-$25 per month depending on merchant category
- Applies to: All Visa merchants
- Varies by: Industry and processing volume
DIGITAL COMMERCE FEE:
- Amount: 0.02% of transaction
- Applies to: E-commerce transactions
- Introduced: April 2024
- Purpose: Fund network infrastructure improvements
AUTHORIZATION FEE:
- Amount: $0.02 per authorization
- Applies to: Each authorization request (even if declined)
- Includes: Both approved and declined transactions
CLEARING FEE:
- Amount: ~$0.01 per cleared transaction
- Applies to: Captured transactions sent for clearing
- Timing: Batch clearing process
SETTLEMENT FEE:
- Amount: ~$0.01 per settlement
- Applies to: Final settlement to merchant
- Frequency: Daily settlement batches
Mastercard Passthrough Fees
NETWORK ACCESS & BRAND USAGE (NABU):
- Amount: $0.0195 per authorization
- Equivalent to: Visa APF
- Applies to: Every Mastercard transaction
- Non-negotiable
DIGITAL ENABLEMENT FEE:
- Amount: $0.01 per transaction
- Applies to: E-commerce and digital wallet transactions
- Purpose: Support digital payment infrastructure
AUTHORIZATION FEE:
- Amount: $0.02-$0.04 per auth
- Applies to: Each authorization request
- Includes: Approved and declined
CLEARING/SETTLEMENT:
- Amount: ~$0.01-$0.02 per transaction
- Applies to: Batch processing
Special Fee Categories
International Transaction Fees
When cards are used outside their country of issuance:
| Fee Type | Rate | Description |
|---|---|---|
| Cross-Border Fee | 0.40% - 1.00% | Card issued in one country, used in another |
| Currency Conversion | 0.20% - 0.30% | Network charges for FX conversion |
| International Service Fee | 0.40% - 0.80% | Additional processing complexity |
TOTAL INTERNATIONAL SURCHARGE: 1.00% - 2.10% on top of domestic fees
EXAMPLE:
US merchant processes €100 from German Visa card:
- Base interchange: 1.80% ($1.80 equivalent)
- Visa assessment: 0.14% ($0.14)
- Cross-border fee: 0.90% ($0.90)
- Currency conversion: 0.30% ($0.30)
─────────────────────────────────────
Total network fees: 3.14% ($3.14) before acquirer markup
Chargeback Fees
Networks charge fees when disputes occur:
| Fee Type | Amount | Who Pays |
|---|---|---|
| Chargeback Processing | $15-$25 | Merchant (via acquirer) |
| Arbitration Filing | $100-$500 | Losing party |
| Excessive Chargeback Program | $5,000-$25,000/month | Merchants in monitoring programs |
Industry-Specific Fees
HIGH-RISK MCC FEES:
- Adult entertainment: +0.10% - 0.25%
- Gambling: +0.15% - 0.30%
- Travel: +0.05% - 0.10%
GOVERNMENT/UTILITIES:
- Reduced rates for certain MCCs
- May have special assessment structures
Complete Fee Breakdown: Real-World Example
Let's break down ALL fees on a typical e-commerce transaction.
$100 Visa Card-Not-Present Transaction
| Fee Component | Rate/Amount | Calculation | Fee Amount | Who Receives |
|---|---|---|---|---|
| Interchange | 1.80% + $0.10 | ($100 × 1.80%) + $0.10 | $1.90 | Issuing Bank |
| Assessment | 0.14% | $100 × 0.14% | $0.14 | Visa Network |
| APF | $0.0195 | Fixed | $0.02 | Visa Network |
| Digital Commerce | 0.02% | $100 × 0.02% | $0.02 | Visa Network |
| Authorization | $0.02 | Fixed | $0.02 | Visa Network |
| Clearing | $0.01 | Fixed | $0.01 | Visa Network |
| Acquirer Markup | 0.30% + $0.10 | ($100 × 0.30%) + $0.10 | $0.40 | Acquirer/Processor |
| TOTAL FEES | - | - | $2.51 | - |
MERCHANT RECEIVES: $100 - $2.51 = $97.49
FEE BREAKDOWN BY RECIPIENT:
- Issuing Bank (Interchange): $1.90 (75.7%)
- Visa Network (Assessment + Passthrough): $0.21 (8.4%)
- Acquirer/Processor (Markup): $0.40 (15.9%)
When all passthrough fees are included, effective network fees are typically 0.15% - 0.25% of transaction volume, not just the assessment rate.
How Fees Change by Transaction Type
Card-Present vs Card-Not-Present
$100 CARD-PRESENT (Chip):
Interchange: $1.54 (1.54% + $0.05)
Assessment (Visa): $0.14 (0.14%)
APF: $0.02
Authorization: $0.02
Clearing: $0.01
Acquirer markup: $0.30 (0.30%)
─────────────────────────
TOTAL: $2.03
Merchant receives: $97.97
$100 CARD-NOT-PRESENT (E-commerce):
Interchange: $1.90 (1.80% + $0.10)
Assessment (Visa): $0.14 (0.14%)
APF: $0.02
Digital Commerce: $0.02 (0.02%)
Authorization: $0.02
Clearing: $0.01
Acquirer markup: $0.40 (0.40%)
─────────────────────────
TOTAL: $2.51
Merchant receives: $97.49
DIFFERENCE: CNP costs $0.48 more (23.6% higher) than CP
Debit vs Credit
$100 REGULATED DEBIT (Chase):
Interchange: $0.27 (Durbin cap: 0.05% + $0.22)
Assessment (Visa): $0.14 (0.14%)
APF: $0.02
Authorization: $0.02
Clearing: $0.01
Acquirer markup: $0.30 (0.30%)
─────────────────────────
TOTAL: $0.76
Merchant receives: $99.24
$100 CREDIT (Rewards):
Interchange: $2.40 (2.30% + $0.10)
Assessment (Visa): $0.14 (0.14%)
APF: $0.02
Digital Commerce: $0.02
Authorization: $0.02
Clearing: $0.01
Acquirer markup: $0.40 (0.40%)
─────────────────────────
TOTAL: $3.01
Merchant receives: $96.99
DIFFERENCE: Credit costs $2.25 more than regulated debit (296% higher)
Fee Negotiation: What's Possible
Understanding which fees are negotiable helps merchants and PayFacs negotiate better rates.
Non-Negotiable Fees (75-80% of total)
INTERCHANGE:
- Set by card networks
- Published in official rate schedules
- Updated April and October
- Same for all acquirers
- NEGOTIABLE: ❌ NO
NETWORK ASSESSMENTS:
- Set by Visa/Mastercard
- Applied uniformly to all transactions
- Published rates
- NEGOTIABLE: ❌ NO
PASSTHROUGH FEES (APF, NABU, etc.):
- Fixed by networks
- Same for all acquirers
- Cannot be waived
- NEGOTIABLE: ❌ NO
Negotiable Fees (20-25% of total)
ACQUIRER/PROCESSOR MARKUP:
- This is the ONLY negotiable component
- Typically 0.10% - 1.50%
- Based on volume, risk, industry
- NEGOTIABLE: ✅ YES
WHAT TO NEGOTIATE:
| Merchant Profile | Typical Markup | Best-Case Markup |
|---|---|---|
| High-volume, low-risk | 0.30% - 0.50% | 0.10% - 0.25% |
| Medium-volume | 0.40% - 0.70% | 0.30% - 0.50% |
| Low-volume | 0.70% - 1.50% | 0.50% - 1.00% |
| High-risk | 1.00% - 2.50% | 0.75% - 1.50% |
NEGOTIATION LEVERAGE:
- Volume: $10M+/year = strong leverage
- Low chargebacks: < 0.5% = better rates
- Card-present: Lower risk = lower markup
- Industry: Low-risk verticals get better rates
- Competition: Multiple quotes create leverage
Hidden Fees to Watch For
Beyond network fees, processors may add additional charges:
Common Hidden Fees
STATEMENT FEES:
- Monthly fee: $10-$25
- Often waived for high-volume merchants
PCI NON-COMPLIANCE FEES:
- Monthly charge: $20-$100
- Until annual PCI SAQ completed
BATCH FEES:
- Per-batch charge: $0.10-$0.25
- If batching multiple times per day
MONTHLY MINIMUM FEES:
- Charge if processing below threshold: $25-$50
- Common for low-volume merchants
EARLY TERMINATION FEES:
- Cancellation penalty: $250-$500
- Often in 3-year contracts
AVS/CVV FEES:
- Per-transaction: $0.005-$0.01
- For address/CVV verification
GATEWAY FEES:
- Monthly: $10-$25
- Per-transaction: $0.05-$0.10
- "Bundled" or "flat-rate" pricing that hides interchange
- "Qualified/Mid-Qualified/Non-Qualified" tiering (usually inflates costs)
- Automatic rate increases without notice
- Fees not disclosed upfront
PayFac Pricing Considerations
PayFacs must understand network fees to price sub-merchants profitably.
PayFac Cost Structure
COSTS INCURRED:
- Interchange (passed through)
- Network assessments (passed through)
- Passthrough fees (passed through)
- Sponsor bank fees (markup)
- Platform costs (overhead)
TYPICAL PAYFAC PRICING:
Sub-merchant charges: 2.9% + $0.30 per transaction
$100 transaction breakdown:
- Interchange: $1.90
- Assessment/Network: $0.21
- Sponsor bank markup: $0.15
- PayFac margin: $0.64 (0.64%)
─────────────────────────────
Total charged: $2.90
PAYFAC MARGIN: 0.30% - 0.70% (on the markup portion)
Blended vs Interchange-Plus
BLENDED PRICING (Common for PayFacs):
- Single rate: 2.9% + $0.30
- Simple for sub-merchants
- PayFac absorbs interchange variance
- Risk: Premium cards eat margin
INTERCHANGE-PLUS (Transparent):
- Interchange + X% markup
- Sub-merchant pays actual cost
- PayFac has predictable margin
- More complex to explain
Key Takeaways
-
Network fees are 15-25% of total cost - Beyond interchange, networks charge assessments and passthrough fees
-
Most fees are non-negotiable - Only the acquirer markup (20-25% of fees) can be negotiated
-
Passthrough fees add up - $0.02-$0.04 per transaction seems small but adds significant cost at scale
-
CNP costs more than CP - E-commerce has additional digital commerce fees beyond higher interchange
-
International is expensive - Cross-border fees add 1-2% on top of domestic fees
Related Topics
Card Network Fundamentals:
- Card Network Role Overview - What card networks do
- Network Rules - Compliance and governance
Fee Analysis:
- Fee Breakdown - Complete fee structure including interchange
- Interchange Optimization - Reducing total processing costs
Pricing Models:
- PayFac Economics - How PayFacs price and profit
References
Official Network Fee Schedules
- Visa USA Interchange Reimbursement Fees - Includes assessment fee updates
- Mastercard Interchange Rates - Assessment fees listed separately
Industry Analysis
- The Nilson Report - Payment industry statistics and trends
- PaymentsSource - News on network fee changes
Processor Transparency
- Stripe Pricing - Example of transparent interchange-plus pricing
- Square Pricing - Example of blended pricing model
Continue learning: Card-Present vs Card-Not-Present