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How Much Do You Really Know About the Hidden Costs of Credit Card Acquiring?
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Written by
Lin · Founder
Publication Date
December 10,2025
3 Min Read
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Nearly 90% of merchants ask the same first question when speaking with any payment provider: “What is your rate?” For merchants who are just starting to accept credit cards or local payment methods, a pricing model like “% + xx USD” is easy to understand—even without prior experience. However, the real costs you don’t see are often hidden beneath the surface.
Table of Contents
- 01: Pricing Models
- 02: Visible Fees
- 03: Hidden Fees
- 04: Comprehensive Costs
01 Overview of Pricing Models
Currently, there are two mainstream pricing models for card payments:
- IC++ (Interchange Plus Plus)
- Flat Rate Pricing
Below is a brief introduction to both models, followed by a comparison to help you determine which pricing structure is more suitable for your business.
01.1 What Is an Interchange Fee?
The interchange fee is a fee paid by the merchant’s bank (the acquiring bank) to the cardholder’s bank (the issuing bank) when a card-based transaction is processed.
It represents a portion of the total transaction amount and is intended to cover costs related to card issuance, transaction processing, and risk management incurred by the issuing bank. Interchange fees are set by the card networks (Visa, Mastercard, etc.) and vary depending on: Card type, Transaction method (card-present vs. card-not-present), Country, MCC, Merchant industry.
Official Website：Mastercard Interchange fee
https://www.mastercard.us/content/dam/public/mastercardcom/na/us/en/documents/merchant-rates-2023-2024.pdf
https://www.mastercard.us/content/dam/public/mastercardcom/na/us/en/documents/merchant-rates-2023-2024.pdf
Official Website：Visa Intercharge fee
https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf
https://usa.visa.com/content/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees.pdf
01.2 IC++ Pricing
Under the IC++ model, costs consist of two parts:
- Interchange Fee: Charged by the issuing bank for each transaction. The rate varies based on card type, transaction amount, merchant category, and other factors.
- Markup (Processor Margin): The payment processor charges an additional markup, usually a small percentage plus a fixed fee per transaction. This is how the payment provider earns revenue.
01.3 Flat Rate
Flat rate pricing simplifies all transactions to a single fixed rate, regardless of the card type used or how the transaction is processed. For example, a payment processor might charge a fixed rate of 2.75% per transaction. Commonly known as a package price.
The advantage of flat rate pricing is its simplicity. The disadvantage is that payment providers usually set a fee to cover the highest interchange fee they might encounter. Also, because it's a package price, merchants cannot see the individual interchange fees or the provider's profit per transaction.
If your business handles a high monthly transaction volume or large transaction amounts (generally over $1 million USD per month) and values transparency or potential cost optimization, then the IC++ model is more suitable for you.
This model offers high transparency, and the variability of Interchange fees means businesses can leverage lower fees for certain types of card types or transactions to optimize costs. However, the IC++ model can be relatively complex to understand, and its pricing is not entirely stable, as card networks generally update their fees twice a year.
If you are a startup or small business that places greater importance on cost simplicity and predictability, then Flat Rate pricing is more suitable during the early stages when focusing on rapid business growth and streamlining operations.
02. Overview Visible Costs
1. One-time Access Fees, Annual fees, Monthly Fees
These fees are not mandatory in card acquiring, but many domestic acquiring companies charge: One-time setup fees, Annual fees. These fees are often applied to small merchants and function more like service fees, as early-stage merchants usually require more support and faster response times. If you have high expectations for service and responsiveness, starting with a domestic acquiring company may be a better option. Overseas payment providers usually do not charge setup or annual fees, but may charge monthly minimum fees to ensure baseline revenue from low-volume merchants. While they often have local account managers, core technical teams are usually overseas, so issue resolution may be slower.
2. Processing Fees, Chargeback Fees, Refund Fees, Risk Management Fees, Rolling Reserve
Processing Fees: This is relatively simple. Credit cards usually have a "% + fixed amount", while local payment methods might only have a "%", which is suitable for low average order value products.
Chargeback Fees: Typically $10–$15 USD for acquirers, and $15–$25 USD for third-party payment providers.
Refund Fees: This also depends on the payment method. Generally, the processing fee is not refunded, but there's no extra refund handling fee. However, some payment methods may still impose an additional refund fee.
Risk Management Fee: Some third-party payment providers charge risk services as an additional cost.
Rolling Reserve: 5%~10% 180 Rolling Reserve. This is not exactly a fee but affects your cash flow, as having funds held by another party limits flexibility. Card networks do not mandate security deposits. Third-party payment providers, to control their own financial risk, will assess based on the merchant's historical transaction data, chargeback rate, and business model. Their risk department evaluates whether an RR is required. If your chargeback rate is low and your business model is low-risk, you can definitely try to negotiate not to require a RR.
3. Taxes
There are essentially four types of tax rates: VAT, GST, WHT, and IOF (Brazil).
VAT/GST: Different names in different countries, but both are consumption taxes. It is a tax borne directly by the consumer at the time of purchase.
Withholding Tax (WHT): Basically, when the profit you make in a certain country goes out of the country, you gotta pay a % income tax. Usually, this should be covered by the merchant.
IOF (Brazil): Primarily a financial transaction tax in Brazil. Its main purpose is to regulate the economy and increase fiscal revenue by taxing financial operations such as credit, foreign exchange, insurance, and securities transactions. It can be categorized as an income tax.
03. Hidden Costs
FX Markup
Exchange rates are indeed easily overlooked by merchants. Normally, any currency switch will inevitably result in some degree of exchange loss. However, even in the case of inherent exchange losses, third-party payment providers often apply an additional markup. This way can make additional revenue to them and could prevent the upstream providers from giving them bad exchange rates and causing them to lose profits.
Not all payment providers have this FX markup.
1. Pricing Currency: What currency is your product priced in? USD or local currency?
2. Transaction Currency: Does your payment providers support the local currency as the transaction currency? If not, should a default currency (e.g., USD, EUR, GBP) be used, this can result in exchange losses. (Note: If the providers doesn't support the pricing currency as the transaction, the consumer's card issuer will charge a currency conversion fee, resulting in a poor consumer experience.)
3. Settlement Currency: What currency (e.g., USD, EUR) was agreed upon between you and the payment provider for settlement?
If Pricing Currency = Transaction Currency = Settlement Currency. 
In this scenario, your exchange rate loss can be minimal. This is often possible with international credit cards. But you need to ensure your settlement account supports multi-currency and that like-to-like settlement is enable.
RDR/Ethoca
First, a brief explanation: These are products offered by Visa and Mastercard to help reduce chargebacks. Basically, before a consumer's dispute with their issuing bank escalates into a formal chargeback, RDR/Ethoca communicates with the issuer or acquirer, automatically deducting the amount from the merchant's account and issuing a refund. This prevents the dispute from becoming a chargeback, thereby reducing the chargeback rate.
- RDR: A Visa product, costing approximately $4-5 USD per transaction.
- Ethoca: A Mastercard product, costing approximately $18-19 USD per transaction.
For merchants with high chargeback rates, some payment companies may require them to use RDR and Ethoca at their own expense to reduce chargebacks before setting up integrations with third parties. So, this cost also needs to be considered.
04. Comprehensive Costs
Let's look at the issue of cost from a broader perspective. When a transaction fails, is it just the loss of the product's price? Let's walk through the complete customer journey from acquisition to successful payment.
1. $2,000 in advertising was spent to acquire 100 paying customers who reached the payment page. CAC (customer acquisition cost) = $20 per customer.
2. At the checkout page, nearly 30 transactions are lost due to reasons like: 'Website lacks security logo', 'High product price without installment options', 'the redirect after selecting a payment method causes churn', 'Slow page loading', 'Forgot card number and card not readily available', etc.
3. After the transaction enters risk control, it will be reviewed by the payment provider's risk control system, resulting in 2 more transactions lost.
4. The payment provider will then request the approved transaction to the card group, which will then request the issuing bank to perform 3DS authentication (Note:3DS is not mandatory in all countries). 3DS is mandatory in some countries, such as the EU, but not in the US. 3DS authentication aims to ensure the card is pay by consumers themselves. If verification is successful, there is no way to file a chargeback. If 3DS fails, another ~4 transactions are lost here.
5. The issuing bank must approve the transaction. For domestic payments, their risk checks are usually lower, so the approval rate is high. But for cross-border payments, the approval rate tends to drop by about 10–20%. he issuing bank might decline authorization due to perceived transaction risk/fraud, or simply because the consumer's card has insufficient funds/credit limit. Assuming a 90% authorization rate, another ~6 transactions are lost here.
6. There's also a real-time risk control rule that uses the user's perspective to determine whether to ship. This could lose another ~2 transactions. so,in the end,only 56 customers successfully complete their paymengt, generating $2,800 in revenue for a $2,000 investment, not even accounting for the cost of the goods.
7. Please note that there are still some chargebacks after the transaction, which will incur a chargeback fee of $15-25 plus the loss of the goods' value.
To summarize, key factors affecting your costs are:
Processing Fees
Checkout Page Conversion Rate
Transaction Authorization Rate
Balancing Risk Control Rules with Success Rates
3DS Dynamic Strategy
Chargeback Rate
Chargeback Dispute Win Rate
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