Payment fees explained
A plain-English breakdown of every type of payment processing fee — transaction fees, interchange, chargebacks, and more — so you know what you are paying and why.
Payment processing fees can seem like a jumble of percentages, flat charges, and mysterious line items. This guide explains each type so you understand exactly where your money is going.
Quick summary
Most businesses pay a per-transaction fee (a percentage plus a flat amount) on each successful sale. With all-in-one processors like Stripe and PayPal, this single fee covers everything. You may also encounter fees for chargebacks, currency conversion, refunds, and instant payouts. No monthly fees apply with standard Stripe or PayPal accounts.
The main fee types
Transaction fees
This is the fee you pay on each successful payment. It is typically made up of two components:
- A percentage of the sale amount (e.g. 2.9%)
- A flat amount per transaction (e.g. $0.30)
So on a $50 sale at 2.9% + $0.30, the fee is $1.75, and you net $48.25.
Transaction fees are deducted automatically from your payout — you never see a separate invoice.
Interchange fees
Interchange is the fee that goes to the bank that issued your customer's card (their bank). It is built in to the transaction fee that your processor charges you. With an all-in-one processor, you never see interchange separately — it is already included in the percentage.
At very high transaction volumes, some businesses switch to "interchange-plus" pricing, where interchange is passed through at cost and the processor charges a separate, lower markup. This is generally only worthwhile at significant monthly volumes.
Monthly fees
Many processors — especially traditional ones — charge a monthly account fee or gateway fee. Stripe and PayPal standard accounts do not charge a monthly fee. You only pay when you earn.
Some premium features (Stripe Radar for advanced fraud rules, Stripe Sigma for custom reports, etc.) are available as optional paid add-ons.
Chargeback fees
When a customer disputes a charge and initiates a chargeback through their bank, your processor charges a dispute fee. This fee applies regardless of whether you win or lose the dispute.
See Chargebacks & disputes explained for details on the dispute process.
International and currency conversion fees
If your customer's card was issued in another country, most processors add a small surcharge (typically around 1.5% on top of the standard rate). If currency conversion is required, a conversion fee (around 1%) also applies.
Instant payout fees
If you need funds transferred to your bank faster than the standard schedule, processors like Stripe offer instant payouts for an additional fee — typically around 1% of the payout amount.
Refund fees
Issuing a refund returns the customer's money. However, the original transaction fee is generally not returned to you. Some processors keep the full fee; others return a portion. Check your processor's refund policy for specifics.
Fee comparison at a glance
| Fee type | Stripe (typical US) | PayPal (typical US) | Notes |
|---|---|---|---|
| Standard transaction | 2.9% + $0.30 | Similar — check current rates | Per successful charge |
| International card | +1.5% | Varies | On top of standard rate |
| Currency conversion | +1% | Varies | When converting currencies |
| Instant payout | 1% (min $0.50) | Varies | Optional fast transfer |
| Chargeback / dispute | Fee per dispute | Fee per dispute | Regardless of outcome |
| Monthly account | None (standard) | None (standard) | Some add-on features cost extra |
| Refund processing | Original fee kept | Check current policy | Customer refunded in full |
Rates change — always verify
Fee structures are updated periodically. The rates above are general guides. Always check your processor's current pricing page or your account's fee schedule for the exact rates that apply to you.
How fees affect pricing
It is worth building processing fees into your pricing. If you charge $100 for a service and pay $3.20 in fees, your net is $96.80. Many businesses round prices up slightly to absorb fees without thinking about them on every transaction.
For high-volume businesses, even small differences in fee rates add up significantly. A 0.2% difference on $500,000 in annual sales is $1,000.
Common questions
Related guides
- Stripe payouts & fees explained
- PayPal basics for business owners
- Chargebacks & disputes explained
- Refunds: best practices
- Payouts & bank transfers
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