Why did my processing fees go up? How to find the line that moved

Processing fees usually go up for one of a few reasons: your customers used more expensive cards, the card networks changed their rates, more sales downgraded to higher interchange, or your processor added or raised a fee. Comparing this month’s statement with the last two or three will usually show which one it was.

If you’re asking why did my processing fees go up, start with the numbers rather than the explanation in a sales call. The statement has the answer.

Step one: confirm it is really an increase

A bigger fee total isn’t always a higher rate. If your sales grew, your fees grew too. Calculate your effective rate (total fees divided by total sales) for this month and the two before it.

An example

Here is a hypothetical example with round numbers, for illustration only. In March a business processes $30,000 and pays $810 in fees, an effective rate of 2.7%. In April it processes $36,000 and pays $970, also about 2.7%. Fees went up, but the rate didn’t. Now say May shows $30,000 in sales and $930 in fees, or 3.1%. That is a real change, and it’s worth tracing.

The seven common causes

Cause	Where it comes from	What you see on the statement
More rewards or business cards	Your customers	Higher interchange categories in the card summary
More keyed-in or online sales	How you take cards	More card-not-present volume
Downgrades	Missing data or late settlement	Higher interchange categories or non-qualified surcharges
Card-network rate updates	Visa, Mastercard, Discover, American Express	Changed interchange or network fee lines
New or higher processor fees	Your processor	A new line item or a notice in statement messages
Lower volume month	Seasonality	Fixed fees spread over fewer sales
Smaller average ticket	Your sales mix	Per-transaction fees take a bigger share

Card mix and how you take cards

The card your customer hands you sets the interchange. A run of premium rewards cards or corporate cards costs more than the same sales on debit. So does keying cards in rather than dipping or tapping them. Our guide on debit vs. credit processing costs explains why card type matters so much.

Downgrades

A downgrade happens when a transaction doesn’t meet the requirements for its best interchange category. Common reasons include settling a batch late, keying a card that could have been dipped, missing address or ZIP data on keyed sales, and missing Level 2 or Level 3 data on business cards. On tiered pricing, downgrades push sales into mid- or non-qualified buckets.

Card-network changes

The card networks update interchange and their own fees on a regular schedule, often a couple of times a year. These changes apply to every processor at once. On Interchange-Plus pricing, you can see the change in the pass-through lines. On bundled pricing, a processor may raise your rate and attribute it to the networks. Without a breakdown, you can’t check how much of the increase was really theirs.

Processor increases

Many agreements let processors change fees with notice, and the notice is often a short message on the statement. Watch for higher percentage markup, a higher per-transaction fee or new monthly lines with names like service, technology or regulatory fee.

Not every processor increase is unreasonable. Costs change, and some fees pay for real services such as a new gateway feature or added security tools. The issue is whether you agreed to it, whether you were told clearly and whether you can see it. A new fee you can explain is a business decision. A new fee you only found by accident is a reason to ask questions, and possibly to compare other options.

Also check whether the fee is labeled as a pass-through when it isn’t. Some processors use names that sound like card-network charges for fees they keep themselves. If a line says network, brand or regulatory, ask whether the full amount goes to the card brands.

How to trace the line that moved

1. Put three months of statements side by side.
2. Compare the card summary: did your mix of debit, credit, rewards and business cards shift?
3. Compare card-present and card-not-present volume.
4. Compare the fee detail line by line. Highlight any new line and any rate that changed.
5. Read the messages section of each statement for notices.
6. If you’re on tiered pricing, check how much volume moved into the higher buckets.
7. Call your processor with the specific line and month, and ask what changed and why.

Write down the answer you get, including the name of the person and the date. If the change was a processor increase, ask whether your agreement allows it and whether it can be reversed.

Preventing the next surprise

You can’t stop the card networks from updating their rates, but you can make sure their changes are the only ones that reach you:

• Choose Interchange-Plus pricing so network costs and markup are on separate lines.
• Get the markup in writing, along with a commitment that it won’t increase.
• Settle batches daily and take cards by chip or tap whenever you can.
• Check your effective rate every month or two.

Our guide on how to lower credit card processing fees goes further on practical steps.

What PayZoom does

PayZoom recommends Interchange-Plus pricing, so card-network changes pass through at cost and you can see them. For Interchange-Plus merchants, our margin above interchange never increases, and that is in writing. We charge no early termination fees and no non-compliance fees. If your fees went up and you can’t tell why, send one statement for a free statement analysis and we’ll find the line that moved. See how we price on our pricing page.