How to build payment processing fees into your prices: A small business owner’s guide to payment processing fees

When deciding how much to charge customers for the products and services your business provides, your prices should account for your business expenses. There are many costs associated with running a business: taxes, utilities, advertising expenses, and payroll, to name a few. To determine the right prices for your products or services, you need to understand the total costs of doing business — accounting for all of your business expenses will help you define the right pricing strategy.

Accepting payments from your customers is another expense to consider. Accepting digital payments makes it easier for your customers to pay you, which can help you get your money faster and more conveniently, but it comes with a payment processing fee.

In this guide, we’ll help you understand how payment processing expenses can factor into your overall pricing strategy — so you can get paid digitally without deterring customers.

What are the benefits of getting paid digitally?

With the pandemic as a catalyst accelerating the growth of digital wallets and contactless payments, the shift towards digital options is more than just a trend. 

For small businesses, the benefits of using digital payments are significant: improved cash flow management, enhanced security, and lower handling costs compared to the traditional cash and check payments. Accepting digital payments can not only help retain customers, but also expand your customer base. With faster funding times, business owners can access funds with minimal delay, in contrast to the time needed for checks to clear. Additionally, the ability to track and record transactions digitally simplifies accounting processes, reduces errors, and aids in financial reporting and analytics. 

Embracing digital payments is no longer an option, but strategically important for small businesses looking to thrive in a rapidly evolving commercial landscape where convenience, speed, and security are critical.

Jump ahead: 

• What are payment processing fees and credit card processing fees, and why do you need to pay them?
• What are QuickBooks Payments payment processing fees and rates?
• Can you include credit card processing fees in your pricing?
• How to build payment processing fees into your pricing
• Pros and cons of passing payment processing fees to customers
• Key takeaways

What are payment processing fees and credit card processing fees, and why do you need to pay them?

You need a payment processor to accept any non-cash payments, and there are several fees associated with payment processing. Each party involved in payment processing – from the card issuing bank, to the acquirer, to the card networks – takes a cut.

Some of the fees associated with payment processing include:

• Card network fee: This is also called an assessment fee, and it’s charged by any credit card association your business works with, including Visa, American Express, and MasterCard.
• Card issuing bank fees: The issuer bank is the bank issuing the customer’s cards, and the fees issuing bank charges are also called interchange fees. Interchange fees vary, depending on factors like your industry or the sale amount.
• Processing fees: Processing fees a.k.a. acquiring fees are charged by the merchant’s bank and vary based on your industry and sale amount. If your merchant bank is also your payment processor, you’ll pay them this percentage fee in addition to their authorization fee and any additional fees.

For example, when you use QuickBooks Payments as a payment processor to accept non-cash payments, the issuing bank (your customer’s bank), and the credit card association (Visa, American Express, or MasterCard), both take a cut of every transaction. And your merchant bank or payment processor (Intuit) incurs an interchange fee.

Processing digital payments will always come with fees — and you need a payment processor to accept any non-cash payments — but these vary by payment processing systems. When choosing a payment processor for your business, consider features like payment speed (such as instant deposits) and the payment processor’s fees and rates. 

QuickBooks Payments offers transparent rates and has a variety of payment and invoicing features that can help you get paid faster1 and simplify your bookkeeping.

Payment processing fees, like any other business expense, have an impact on your profitability. It’s important to understand the fees you pay as a merchant, so that you can appropriately build them into your prices. By raising your prices to account for payment processing fees, you can avoid any negative impact on your bottom line from the cost of processing payments.

Can you include credit card processing fees in your pricing?

To offset the cost of payment processing fees, you might consider building the cost of the fees in your final pricing of your products and services. Generally, there are two approaches you can take to offset your business costs of payment processing fees: 

1. Recommended approach: Including your payment processing fees in your overall pricing strategy. You can find instructions on how to do this outlined in this article, here.
2. Charging a ‘Convenience Fee’ to customers who choose to pay online as a means to cover the cost of offering that channel vs mailing a payment.

If you choose to apply a convenience fee to only your customers who pay online, you are legally required to disclose that fee as a separate line item on your invoice and receipts. This can be off-putting to some customers and may encourage those customers to pay with other payment methods instead, such as paper checks or cash — taking longer to hit your bank account. 

Make sure you stay in compliance

Additionally, there may be state laws and card brand rules that prohibit or restrict merchants from charging additional fees based on payment type or channel. It is recommended that you seek legal counsel to check the laws in your state and locality, and any states and localities where you will be selling, before charging separate payment processing fees to your customers to ensure that you are properly complying with any applicable laws.

By accounting for your payment processing fees in your overall prices, you can avoid charging separate fees. You’ll also avoid cutting into your bottom line and still maintain your desired profit margins. This approach can also encourage your customers to use digital payment methods, which help you avoid the wait and inconvenience of getting paid with slower payment methods like cash or paper checks – which have costs for your business as well, in the form of the time it takes to track, receive, and manage these payments.

How to build payment processing fees into your pricing

In this example, we’ll walk through 4 steps to apply your payment processing fees to your product and service prices. This method will help you find the average payment processing fee you pay for transactions, which you then can apply to your prices to build payment processing expenses into your overall pricing strategy.

1. Review your merchant payment processing fees.

The first step to building payment processing fees into your overall pricing is to review the fees charged by your payment processing provider. In this example, we’ll use QuickBooks Payments’ introductory payments processing fees:

2. Find the percentage of payments your customers make through digital methods, and determine which payment methods they use most.

Next, you’ll want to review your customer transactions to determine two things:

What percentage of your customers pay through digital payment methods that require you to pay fees to process? 

To get a good understanding of this, you’ll want to use a time period that’s representative of trends in your customer’s transactions. For example, if your business has been open for 3 years but you only began taking digital payments 2 years ago, exclude the first year of your business from your calculation. The right time period to look at for your business will depend on factors such as any seasonal trends your business experiences, how many transactions your business processes, and if you anticipate any changes to your operations that could impact how your customers pay you going forward. Overall, you’ll want to look at a period of time that you feel is representative of your business.

Looking at your customers who pay through digital methods, which methods do those customers use? 

Do your customers primarily pay you online through card payments, or ACH transfers? Or do you take many payments with a card reader in person? Since these different types of transactions have different associated fees, you’ll want to take this into consideration to help you find your average payment processing expense.

If you use QuickBooks, you can find this information by reviewing past receipts from your customers.

3. Calculate the average expense of your payment processing fees.

Taking into account the factors in steps 1 and 2, let’s walk through how to calculate your business’s average payment processing expense using the following example:

Let’s say you are the owner of a construction company, and all of your customers pay you through pay-enabled invoices. These invoices give your customers the option to make payments with cards and digital wallets, or with ACH payments.

You decide that looking at customer transactions over the last year will give you a good representation of what methods your customers generally use to pay you. Reviewing those transactions, you find that 75% of your customers pay their invoices through card payments, and the remaining 25% pay through ACH payments.

You know that for each card payment processed, you are charged 2.99% of the total transaction fee. For each ACH payment, you are charged 1% of the total transaction fee.

To find the percentage you’d increase your overall prices, you can find the weighted average between these two rates, based on how often customers pay you with each payment method – here is a breakdown of that formula:

((The percentage of customers who pay you with card payments × the 2.99% rate you are charged for processing card payments) 

+ 

(The percentage of customers who pay you with ACH payments × The 1% rate you are charged for processing ACH payments)) 

÷  100 

= The average payment processing fee you pay per transaction as a merchant

With the numbers from our example, this looks like:

((75 × 2.99) + (25 × 1)) ÷ 100 = 2.49

4. Apply your new prices to your products and services.

Now that you know the average fee you are paying for payment processing per transaction, you can apply that to your overall pricing to build your payment processing fees into your overall pricing strategy. To do so, you’ll raise your prices for all products and services you sell to your customers by that amount. In our example above, you’d raise your overall prices by 2.49 percent.

You may also want to consider that by raising your overall prices by that percentage, you’ll also increase your payment processing fees by a small amount as well. 

Let’s walk through how to do so, using the same example. In the example we’ve outlined in this guide, your payment processing fees are 2.49%. If one of your products or services was originally priced at $1,000, after factoring in 2.49% of $1,000, you would add $24.90 to your original $1,000 price: 

$1,000 + $24.90 = $1,024.90

Your new price with payment processing fees added would be $1,024.90. You would then find 2.49% of the added payment processing fee: 

24.90 x 0.0249 = 0.62001

You would then add that to the amount you plan to increase your prices to account for payment processing fees:

$24.90 + $0.62 = $25.52

In this example, to fully build your payment processing fees into your original $1,000 price, your new price would be $1,025.52.

With your payment processing fees built into your pricing, you may also want to consider factors like psychological pricing strategies to help you maintain attractive prices for your customers and clients. For example, customers may find that a product or service priced at $1,025.99 appears more attractive than one priced $1,025.52. With your base pricing strategy determined, you can then apply psychological pricing strategies to ensure your prices are appealing to your customers.

Pros and cons of passing payment processing fees to customers

When you include your payment processing costs in your pricing, your pricing better reflects your business expenses. Here are a few pros and cons you can weigh when determining how to pass those fees to your customers.

QuickBooks Payments processing fees and rates

QuickBooks Payments offers competitive payment processing rates, plus a variety of features that can help speed up your payments and keep cash flowing into your business. You can compare how our rates stack up against other providers below:

Rates are accurate as of 07/24/2024. All listed rates are per transaction. Not all payment plans shown; only most comparable plan by feature are highlighted.

*Stripe may charge an additional 0.4%/0.5% fee per paid invoice based on plan.

QuickBooks Payments offers competitive payment rates and fast deposit speeds with no setup costs or hidden fees — just pay as you go. Learn more about our rates and fees and calculate how much you might save by using QuickBooks Payments here.

And when you use QuickBooks Online and QuickBooks Payments, we automatically match your payments in your books.** You’ll have confidence your bottom line is accurate and avoid spending extra time on manual reconciliations.

Key takeaways

You should be pricing your products and services to accommodate your business expenses while still making a profit — that’s how you generate revenue. Payment processing fees are just another business expense to include when building your pricing strategy. To offset payment processing fees, you might consider folding them into your existing prices — this helps you avoid any legal issues that come with charging separate surcharges and deterring customers with an added line item.

QuickBooks Payments offers competitive processing fees and rates — additional features, like instantly payable invoices, real-time payment tracking, and a card reader for in-person payments, make it easy for you to get paid quickly and conveniently. Click here to find out how much you could save when you switch QuickBooks Payments.

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Money movement services are provided by Intuit Payments Inc., licensed as a Money Transmitter by the New York State Department of Financial Services. For more information about Intuit Payments' money transmission licenses, please visit https://www.intuit.com/legal/licenses/payment-licenses/.

This content is for information purposes only and the information provided should not be considered legal, accounting, or tax advice or a substitute for obtaining such advice specific to your business. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable for dealing with a customer’s particular situation. Intuit Inc. does it have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. Intuit Inc. cannot warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers should verify statements before relying on them.

QuickBooks Payments: QuickBooks Payments account subject to eligibility criteria, credit, and application approval. Subscription to QuickBooks Online required. Not available in U.S. territories or outside the U.S.

** Features

Automatic Matching: QuickBooks [Online/Money] will only match bank deposits with transactions processed through QuickBooks Payments. Not all transactions are eligible.

# Claims

“Get paid faster”: 'Four times faster’ is an average based on time to receive payment from the date invoice was sent, for U.S. customers using QuickBooks Online invoice tracking and payment features, compared to customers not using these features, from Aug 2022 to Jul 2023