What is the True Cost of Payment Processing?

In life, as well as in business, you most often get what you pay for. For “do it yourself” home improvement projects that are designed to save money, it might make sense to go cheap (especially when the stakes for that rickety spice rack are relatively low). But when it comes to your business, picking the cheapest option can have real consequences, including costing more money in the long run. This is true even for the often-overlooked costs of accepting credit card payments. 

In order to compete in the world of e-commerce and make the online shopping process as convenient as possible for your customers, accepting credit card payments must be an integral part of your site. But as every online merchant knows, that convenience comes with a cost in the form of per-transaction processing fees. What sometimes isn’t clear to merchants, however, is that the true cost to their business goes beyond the simple rate they are charged each time they accept payment. 

What rates and fees are involved?

For each credit card transaction, a merchant can expect to pay a 1.5%-9.95% fee, depending on the card network and a series of other factors. Most of that amount is divvied up by the credit card network and the issuing bank, and there’s really no way a merchant can avoid or negotiate this part. The other part of the fee is assessed by the payment processor, a figure that can vary depending on the processor you select.  

It’s for this reason that the selection of a payment processor is an important decision to consider since it’s one of the few areas of flexibility in terms of cost. But it’s also an area where some scrutiny is warranted because not all processors are the same. As with any service you pay for, the cheapest isn’t necessarily the best. Usually, the lowest rate indicates a processor with a few features and a one-size-fits-all approach to managing payments. 

What is the opportunity cost of choosing a particular payment processor?

The true cost of payment processing can’t just be thought of in terms of rates and fees; you also need to consider the opportunity cost of choosing a cheaper service that subsequently requires more of your time, energy, and focus. You need to ask yourself, what is the value of the time I’ll have to spend managing the payment process and dealing with any related problems? Couldn’t that time be better spent focusing on your business and spurring growth? 

The truth about the cheapest alternatives is that they don’t make an effort to align with your business. What this can mean practically is that they won’t know how to (or care to) tailor their services to your specific business needs, and so they won’t be willing to talk you through any concerns you’re having or provide tools or tactics for how to handle the challenging aspects of running an online business. 

For example, what happens if your chargeback rate exceeds 1% (the typical limit in the payment processing industry) through no fault of your own? The cheapest services may immediately shut down your merchant account, regardless of the circumstances; they won’t investigate the specifics and determine whether a shutdown is really warranted. If you compare a slightly higher per-transaction cost with the cost of lost revenue while finding a new merchant, it’s pretty clear that the lowest price isn’t worth it in the long run.    

Time is money: where are your talents best utilized? 

Beyond the dollar value of the cost of accepting credit card payments, it’s important to look at payment processing in a holistic sense. Ultimately, time is money when running a business, and your time is valuable. So even if you find a processor with ultra-low rates, it may end up being a poor deal if using that processor requires a lot of your time and energy to constantly manage the payment process.  

Similarly, the payment processor you choose should be able to free you up to focus on making your business thrive by relying on their expertise in managing payments. That expertise extends to helping you navigate the ins and outs of payment processing and mitigating the inevitable risks that arise. In the same vein as the chargeback example, the true cost of accepting payments should also take into account the cost that might be incurred if a lesser payment processing service wasn’t able to help you successfully avoid costly risks.  

The value of a great payment processing partner

At the end of the day, the value of a great payment processor is their ability to enhance your business by making accepting online payments easy and low risk so that you can pour all your energy and talents into growing your business. You shouldn’t need to devote resources to staying constantly engaged with the minutiae of the process when you can select a processor whose expertise and features make it almost effortless.  


PayCafe understands that payment processing should be an important but simple part of running your online business. It’s for this reason that they provide customized services that are based on the unique characteristics of your business, even if your business is deemed “high risk” by the payment processing industry. Cheaper “one-size-fits-all” solutions from other processors may be attractive, but they won’t be tailored to your specific needs and they won’t come with a concierge-style customer support system. PayCafe wants to be a partner you can rely on to handle payment processing so your valuable time can be directed towards making your business thrive.