By Louise Peters July 16, 2025
Running a small business in Texas is no small feat. Whether you’re operating a retail store in Austin, a café in Houston, or a boutique service in San Antonio, accepting credit card payments is essential in today’s marketplace. But along with that convenience comes the often confusing world of credit card processing fees.
For many small business owners, these fees can seem unpredictable and difficult to decode. Yet understanding how these charges work is crucial for managing costs, negotiating better terms, and improving profitability. In Texas, where the business landscape is both diverse and competitive, having clarity on this topic can give your company a financial edge.
The Basics of Credit Card Processing
When a customer swipes, taps, or inserts their card to make a payment, the transaction goes through several layers before the money lands in your account. The main players in this process include:
- The merchant (your business)
- The customer
- The acquiring bank (your bank or payment processor)
- The issuing bank (the customer’s bank)
- The card network (such as Visa, MasterCard, American Express, or Discover)
Each entity involved in this process takes a small cut of the transaction in the form of fees. These fees are passed down to you, the merchant, and they are usually bundled into a total percentage that’s deducted from every credit card sale.
Understanding who takes what and why is key to managing your payment processing expenses more effectively.
Common Types of Credit Card Processing Fees
Credit card processing fees are usually made up of three main components: interchange fees, assessment fees, and processor markups. Each plays a different role and is charged by different entities.
Interchange Fees
Interchange fees are set by the card networks (like Visa or MasterCard) and are paid to the card-issuing banks. These fees are typically the largest portion of the total processing cost. They vary based on:
- Type of card used (debit, credit, rewards, corporate)
- Method of transaction (in-person, online, manually entered)
- Type of business accepting the card
For example, an in-store chip transaction may have a lower interchange rate than a manually keyed-in transaction. Interchange fees are non-negotiable, but understanding them helps you evaluate your processor’s pricing model more accurately.
Assessment Fees
Assessment fees are charged by the card networks themselves for using their brand. These are typically flat percentages of the total transaction value and are consistent across all merchants using that network. They are generally small—usually under 0.15 percent—but unavoidable.
Each card network sets its own assessment rates. While they don’t fluctuate wildly, knowing what they are can help you verify whether your payment processor is accurately passing these through without markup.
Processor Markups
This is the portion of your fee that goes to the payment processor or acquiring bank. Unlike interchange and assessment fees, processor markups are negotiable. They may include:
- Monthly service fees
- Per-transaction fees
- Percentage markups
- PCI compliance fees
- Statement fees
- Customer support fees
This is the area where Texas small businesses have the most leverage. By comparing providers and understanding how each one structures their fees, you can often find opportunities to reduce your overall processing costs.
How Fees Are Typically Charged
Processors use different pricing models to bundle these fees. The three most common models are flat-rate pricing, tiered pricing, and interchange-plus pricing.
Flat-Rate Pricing
In flat-rate pricing, the processor charges a fixed percentage and transaction fee for every sale, regardless of card type. This model is easy to understand but may cost more in the long run because the rate includes a cushion for variability.
This model is common with services like Square or Stripe. For example, you may be charged 2.9 percent plus 30 cents per transaction, regardless of whether the card used was a basic debit card or a high-reward credit card.
Tiered Pricing
Tiered pricing groups transactions into categories—typically qualified, mid-qualified, and non-qualified—based on factors like card type or method of entry. Each tier has a different rate, but the criteria for which tier a transaction falls into can be vague and inconsistent.
This pricing structure often lacks transparency and may result in higher fees if the majority of your transactions fall into the non-qualified tier.
Interchange-Plus Pricing
This model separates the processor’s markup from the interchange and assessment fees. You pay the actual interchange and assessment costs, plus a set percentage or per-transaction markup.
While it may look more complex on paper, interchange-plus pricing is generally the most transparent and often the most cost-effective for businesses that process a high volume of credit card sales.
Specific Considerations for Texas Small Businesses
Texas is a large and economically diverse state, which affects how credit card processing plays out for small businesses. Whether you’re in urban hubs like Dallas or rural areas with limited internet connectivity, your transaction methods and customer preferences will influence your fees.
In-Person Versus Online Transactions
Texas businesses operating brick-and-mortar locations may benefit from lower fees due to card-present transactions. However, businesses that rely heavily on e-commerce or mobile services may pay more due to the increased risk associated with card-not-present transactions.
In cities like Austin or Houston, where tech-savvy consumers expect digital options, having a reliable and secure online payment system is essential—even if it costs a bit more per transaction.
Local Taxes and Surcharges
Texas does not regulate credit card surcharges as heavily as some other states, which means you may be able to pass a portion of the processing cost to customers. However, this needs to be done carefully and transparently.
Surcharges must be clearly disclosed before the transaction, and they typically cannot exceed the actual cost of processing the payment. Debit card transactions are not eligible for surcharges under most card network rules.
If you consider using surcharges to offset fees, consult legal counsel or your processor to ensure compliance with Texas laws and card network policies.
How to Read and Understand Your Merchant Statement
One of the best ways to take control of your credit card processing fees is to regularly review your merchant statement. This monthly report outlines all the fees and charges associated with your card transactions.
Look for the following key details:
- Total sales volume
- Average ticket size
- Interchange fees by category
- Processor markups and monthly fees
- Chargebacks or adjustments
Understanding this data helps you identify high-cost transactions, compare month-to-month performance, and spot hidden charges. If something looks unclear, ask your processor for clarification.
You can also request a fee audit from a third-party consultant or service that specializes in evaluating merchant statements. These professionals can help you spot inflated charges and negotiate better terms.
Reducing Processing Costs Without Compromising Service
Lowering your credit card processing fees doesn’t always mean switching providers. Sometimes, small changes to how you process transactions can lead to significant savings.
Encourage Card-Present Transactions
Whenever possible, process transactions in person using EMV-compliant terminals. These transactions carry lower risk and therefore lower interchange rates. Avoid manually entering card information unless absolutely necessary.
Set Minimum Purchase Requirements
If your business frequently processes small-ticket items, fees can eat into your profits. Setting a reasonable minimum purchase amount for credit card use can help cover your costs.
Under federal law, you can set a minimum of up to ten dollars for credit card transactions, but not for debit cards.
Consider Dual Pricing
Dual pricing is a system where customers are shown two prices—one for cash and one for credit card. This method complies with network rules and allows you to recover processing fees while still offering client choice.
It’s important to work with a provider that supports dual pricing correctly and ensures compliance with all relevant regulations.
Evaluate Alternative Processors
Don’t be afraid to shop around. Different processors may offer better rates based on your business size, industry type, or transaction volume. Local credit unions or Texas-based merchant service providers may also offer more competitive pricing and personalized support compared to national brands.
When evaluating options, ask for a side-by-side comparison of total monthly costs, not just the advertised rates. Some providers may advertise low transaction fees but charge high monthly service fees or penalties.
PCI Compliance and Its Role in Fees
Payment Card Industry Data Security Standards (PCI DSS) are a set of security standards designed to protect cardholder information. As a merchant, you’re required to comply with these rules to avoid additional fees and reduce the risk of data breaches.
Processors often charge a monthly PCI compliance fee, and if you fail to complete the required self-assessment or validation, you may be charged a non-compliance penalty.
Maintaining compliance not only helps avoid unnecessary charges but also protects your business and customers. Use the tools provided by your processor, complete your annual questionnaire, and make sure your systems are updated regularly.
Understanding Chargebacks and Their Costs
A chargeback occurs when a customer disputes a transaction and the funds are withdrawn from your account pending investigation. Each chargeback can result in a fee—often ranging from fifteen to fifty dollars—on top of the lost revenue.
Too many chargebacks can lead to higher processing rates or even account termination. Preventing chargebacks involves:
- Providing clear receipts and billing descriptions
- Offering good customer service and refund policies
- Collecting signatures or documentation for disputed services
- Using recognizable business names on card statements
By managing chargebacks proactively, you reduce additional costs and maintain a positive relationship with your processor.
Tools and Services That Can Help
Several tools can simplify how you manage and understand your credit card processing fees.
Analytics Dashboards
Many modern processors offer real-time dashboards that display transaction volumes, average ticket sizes, and fee breakdowns. These insights can help you make informed decisions about pricing, promotions, and business hours.
Fee Auditing Services
Some independent consultants specialize in auditing merchant processing fees. They can help identify areas for savings, interpret complex statements, and negotiate better deals on your behalf.
POS Systems with Integrated Payments
Choosing a point-of-sale system that integrates payments and reporting helps reduce manual entry errors, simplifies accounting, and often comes with lower bundled rates.
Final Thoughts
Credit card processing fees are a necessary part of doing business in today’s economy, but they don’t have to be a mystery. By understanding how these fees are structured and what affects them, Texas small business owners can take greater control of their costs.
Transparent communication with your processor, regular review of your statements, and a willingness to explore competitive options are the keys to managing this expense effectively. With the right knowledge and tools, you can reduce costs without compromising the quality or convenience your customers expect.
In a competitive business environment like Texas, every percentage point matters. Understanding your credit card processing fees isn’t just good financial hygiene—it’s a smart business strategy.
FAQs
Are credit card processing fees negotiable for small businesses?
Yes. While interchange and assessment fees are fixed by the card networks, processor markups and service fees are negotiable. Always compare offers and ask for customized rates.
What’s the best pricing model for Texas small businesses?
Interchange-plus pricing is usually the most transparent and cost-effective, especially for businesses with higher transaction volumes. Flat-rate pricing may work better for low-volume businesses.
Can I charge my customers extra for using a credit card?
In Texas, surcharging is allowed under certain conditions. However, you must follow specific rules from card networks and disclose the surcharge clearly at the point of sale.
Do I need to worry about PCI compliance as a small business?
Yes. PCI compliance is mandatory for any business accepting credit cards. Staying compliant helps protect customer data and prevents costly non-compliance fees.