How Much Are Debit Card Processing Fees

a person holding a debit card next to a calculator


      Understanding debit card processing fees is important for any business that takes card payments. These fees can add up, so knowing how much you’re being charged and how to reduce these costs can help you save money.

      What Are Debit Card Processing Fees?

      Debit card processing fees are charges that businesses must pay every time they accept a debit card payment. These fees cover the costs of processing the transaction, ensuring the payment goes from the customer’s bank to the business’s bank account securely and efficiently. Unlike credit card processing fees, which can be higher due to the risk of credit, debit card fees are generally lower because the funds are directly debited from the customer’s bank account, reducing the risk of non-payment.

      When a customer uses their debit card, several parties are involved in processing the transaction: the bank that issued the debit card (issuing bank), the bank that provides the business with card processing services (acquiring bank), and the payment processor. Each of these parties takes a small portion of the fee. Understanding these fees and their components can help businesses manage their expenses better and choose the right payment processor.

      Some businesses might find it beneficial to only accept debit cards for payments. This means they would only allow customers to pay with their debit cards, While this approach isn’t right for every business, it can be especially useful for those that can’t handle credit card transactions, operate in industries where customers often dispute charges, or want to lower their processing fees. 

      If you want to learn more about debit card processing fees, explore the Payment Savvy page dedicated to Debit Card Only Payment Processing Solutions!

      Different Types of Debit Card Transactions

      There are two main types of debit card transactions: signature debit and PIN debit.

      Signature debit transactions occur when a customer signs to authorize the payment. They are processed through credit card networks, even though they involve a debit card, and usually incur higher fees due to the additional security and processing steps involved.

      Signature debit transactions are commonly used by ecommerce businesses. Even though the transaction goes through a credit network, the funds are instantly taken out of the cardholder’s account. As the merchant, the fees you pay come from the network.

      On the other hand, PIN debit transactions require the customer to enter their personal identification number (PIN) to authorize the payment. This type of transaction is common at grocery stores, gas stations, and any other business that uses a physical terminal.

      Since PIN debit transactions are processed directly through debit networks (Interlink or Maestro, for example), they generally incur lower fees compared to signature debit transactions.

      Feature Signature Debit Transactions PIN Debit Transactions
      Authorization Method Customer signs to authorize payment Customer enters a PIN to authorize payment
      Processing Network Credit card networks Debit networks (e.g., Interlink, Maestro)
      Common Usage Ecommerce businesses Stores with a physical terminal
      Fee Levels Usually higher fees due to additional security and processing steps Generally lower fees
      Timing of Fund Deduction Funds are instantly deducted from the cardholder’s account Funds are instantly deducted from the cardholder’s account
      Fee Source Credit card network Debit network

      Factors That Influence Debit Card Processing Fees

      Several factors influence debit card processing fees, which can vary widely depending on the specifics of the transaction and the merchant’s circumstances. Let’s take a look at them below:

      • Type of Transaction: In-person transactions where the card is swiped or inserted typically have lower fees compared to online or manually entered transactions due to the reduced risk of fraud.
      • Merchant Category and Risk Level: Businesses in higher-risk categories, such as those with a higher likelihood of chargebacks, often face higher processing fees.
      • Payment Processor and Service Provider: Different payment processors have varying fee structures and markups. Choosing the right provider can significantly impact the overall cost.
      • Transaction Volume: Higher transaction volumes can sometimes qualify businesses for lower fees, as some processors offer volume-based discounts.
      • Average Transaction Amount: The size of the average transaction can also affect fees, with some processors charging lower rates for higher average ticket sizes.

      Who’s Charging Debit Card Processing Fees?

      All right, you know that there’s a debit card processing fee – but who’s charging it? Debit card processing fees are typically charged by several entities involved in the payment processing chain:

      • The bank: This refers to the bank that issued the debit card to the cardholder. Banks may charge interchange fees, which are set by the card networks like Visa or Mastercard and are a portion of the transaction amount plus a flat fee.
      • The credit card company: In this context, credit card companies also refer to the card networks like Visa, Mastercard, or Discover. These companies set interchange fees and assessment fees, which are charges for using their payment network.
      • The debit card processor or payment processor: These are entities that provide the technology and infrastructure to process debit card transactions on behalf of merchants. They charge processor markups, which are fees added on top of interchange and assessment fees for their services.

      These three entities collectively determine the total debit card processing fees that businesses must pay for accepting debit card payments. More on that below!

      a person paying with a debit card

      How Much Are Debit Card Processing Fees? 

      Unfortunately, there’s no simple answer to this question because the cost of debit card processing fees can vary significantly. However, we will do our best to provide a detailed answer.

      The average fee per debit card transaction is approximately $0.44, according to the Federal Reserve. However, the specific fees you’ll incur depend on factors such as your chosen payment service provider, their offered rates, the volume of transactions your business processes, and other variables.

      Keep in mind that rates can differ widely based on individual circumstances. While someone else may be paying a certain rate, your own agreement could result in better terms or potentially higher costs. It all depends on your specific business needs and negotiations with the provider.

      Types of Debit Card Processing Fees

      When it comes to debit card processing, you can expect to encounter a number of different types of fees. These include:

      Interchange Fees

      Interchange fees are set by the card networks (e.g., Visa, Mastercard) and represent a percentage of the transaction amount plus a flat fee. These fees are non-negotiable and vary depending on factors such as the type of card used (debit, rewards, corporate), the merchant’s industry, and the transaction method (swiped, keyed-in, online).

      Assessment Fees

      Assessment fees are charges imposed by the card networks for using their payment infrastructure. These fees are also non-negotiable and typically charged as a small percentage of the transaction volume. Assessment fees are also known as brand usage fees.

      Processor Markups

      Processor markups are fees added by the payment processor or merchant service provider for their services. These markups can vary significantly between providers and are often negotiable based on factors such as transaction volume, average ticket size, and the merchant’s creditworthiness.

      Other Fees

      In addition to the main types mentioned above, businesses may encounter other fees such as monthly service fees, PCI compliance fees (for maintaining data security standards), chargeback fees (for disputed transactions), and terminal rental fees (if applicable).

      Fee Type Description Examples
      Interchange Fees Fees set by card networks (e.g., Visa, Mastercard) based on transaction amount plus a flat fee. Non-negotiable and vary by card type, merchant industry, and transaction method. Varies for debit, rewards, or corporate cards; higher for online transactions compared to in-person transactions.
      Assessment Fees Charges by card networks for using their payment infrastructure. Typically a small percentage of transaction volume. Also known as brand usage fees. Applied by Visa, Mastercard, etc., based on the total transaction volume processed through their networks.
      Processor Markups Fees added by payment processors or merchant service providers for their services. Can vary widely and often negotiable based on transaction volume and merchant’s creditworthiness. Vary between providers; negotiable based on factors like transaction volume and merchant’s credit rating.
      Other Additional fees businesses may encounter. Monthly service fees for account maintenance; PCI compliance fees for data security; chargeback fees for disputed transactions; terminal rental fees if hardware is leased.

      How Can I Lower My Debit Card Processing Fees? 

      You probably want to know what can you do to ensure your debit card processing fees are as low as possible. Here are some strategies to consider:

      • Allow PIN Debit Transactions: Encourage your customers to use PIN debit transactions instead of signature debit can reduce your processing costs. PIN debit transactions typically incur lower fees because they involve fewer risks for fraud. Try it if you have a brick-and-mortar store.
      • Avoid Tiered-Pricing Models: Tiered-pricing models can result in higher fees, as transactions are categorized into different tiers with varying rates. Opt for interchange-plus pricing models instead, which offer more transparency and can potentially lower overall costs.
      • Charge Your Customers a Small Fee for Using a Debit Card: Consider passing on some or all of the processing fees to customers by implementing a small surcharge for debit card transactions. Ensure compliance with card network rules and regulations when implementing this strategy.
      • Look Out for Better Deals: Regularly review and compare offers from different payment processors. Negotiate with your current provider or consider switching to a new one that offers more competitive rates and better terms.

      By implementing these strategies, businesses can effectively manage and potentially reduce their debit card processing fees. This, in turn, can improve their profitability and financial sustainability.

      Final Thoughts

      As a business owner who wants to effectively manage their finances, you must understand debit card processing fees. Knowing the factors that influence these fees and implementing strategies to reduce them can significantly enhance your profitability.

      Additionally, staying informed about industry trends and regulations empowers you to make informed decisions about your payment strategies. By implementing these strategies effectively, you not only save money but also improve customer satisfaction and streamline operations. 

      Taking a proactive approach to debit card processing fees ensures that you remain competitive and resilient in today’s ever-changing business landscape. Check out our Debit Card Processing Service Page to learn more about debit card processing and discover how it can positively impact your business.

      Chad Deatherage

      Chad Deatherage

      Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.