Where Does a $100 Sale Go?
Every card payment passes through 3 parties before you see the money. Here’s exactly who takes what, and which fees you can actually fight.
The Three Parties in Every Card Transaction
When a customer swipes their card, the money doesn’t flow straight to you. It passes through a chain, and three parties take their cut before you see anything.
Most of those cuts are set by Visa and Mastercard. You have zero say in them. But one piece, the processor markup, is entirely negotiable. That’s the number most merchants never question. And it’s often the biggest opportunity.
Breaking Down the ~$2.80 in Fees
Interchange (~$1.80): The Biggest Cut
Interchange is the fee your processor pays to the customer’s bank, and passes directly to you. The rate is set by Visa and Mastercard, not your processor. A rewards card costs more than a debit card. A keyed-in transaction costs more than a tap. None of this is negotiable.
Processor Markup (~$0.50–$1.00): The Only Lever You Have
This is where your processor makes their money. It’s the spread between what they pay in interchange and what they charge you. On flat-rate pricing (Stripe, Square), this is bundled into one number. On interchange-plus pricing, it’s shown as a separate line. When merchants say “my rate is too high,” this is usually why.
Assessment Fees (~$0.14): Tiny and Fixed
Visa, Mastercard, and Discover charge small network fees to maintain their infrastructure. These are flat percentages, typically 0.13–0.15%, and completely fixed. No processor can change them.
What Dual Pricing Changes
Under standard pricing, all three cuts come out of your pocket. Under dual pricing, the customer who chooses to pay by card covers those fees, so your net on a $100 sale becomes $100.00 instead of $97.20. Cash and debit customers pay nothing extra.
It’s not a gimmick. It’s the same economics that gas stations have used for decades. Dozens of states and card networks explicitly permit it.
Why the Processor Markup Is the Only Number You Can Change
Of the roughly $2.80 that leaves a $100 card sale before it reaches your account, only one portion is negotiable.
Interchange — the roughly $1.80 that goes to the customer’s bank — is set by Visa and Mastercard. It is the same for every processor in the country. No one can negotiate it lower.
Assessment fees — the roughly $0.14 that goes to the card network — are also fixed. They’re the same percentage regardless of which processor you use.
The processor markup — the $0.50 to $1.00 your processor adds on top — is entirely up to your contract. This is the only piece of the fee stack that varies by provider and that you can negotiate down.
How Flat Rate Obscures the Markup
When a processor charges you 2.9% flat, you can’t see how much of that is interchange, how much is the network fee, and how much is the processor’s margin.
Everything is bundled into one number. The processor keeps whatever is left after paying interchange and network fees, typically 0.8–1.2% of every transaction — and you have no way of knowing whether that margin is competitive or inflated.
Interchange-plus pricing shows you each component separately. You see exactly what Visa charged, exactly what the network fee was, and exactly what your processor added on top. That transparency is what makes it possible to negotiate.
Dual Pricing: When the Math Changes Completely
Under a dual pricing program, the fee breakdown from a $100 sale looks entirely different.
The card-paying customer pays $102.80 instead of $100.00. The merchant receives $100.00. The $2.80 in interchange, network fees, and processor markup is covered by the customer who chose to pay by card, not absorbed by the merchant.
Cash and debit customers pay $100.00. The merchant still receives $100.00. There is no fee at all on those transactions.
This model doesn’t reduce fees. It shifts who pays them. For merchants processing significant card volume, the financial impact is substantial. A merchant doing $30,000/month in card volume saves roughly $10,000/year under a properly implemented dual pricing program.
What This Means for Your Business
Understanding where your processing fees come from is the foundation of managing them effectively.
Once you know which pieces are fixed (interchange and network fees) and which are negotiable (processor markup), you know exactly where to focus your energy.
PAIR’s free audit breaks down your current fee structure in exactly this way, identifying what you’re paying in each category and benchmarking your processor markup against what merchants at your volume actually pay on well-structured arrangements.
Why Understanding the Fee Stack Matters
Most merchants negotiate with their processor without knowing which fees are actually negotiable.
When you understand that interchange and network fees are fixed — and that only the processor markup varies by contract — you know exactly where to focus your energy. You stop asking about rates in the abstract and start asking about the one specific number that determines whether your processing arrangement is competitive or not.
Knowing the fee stack is the first step. The second is using that knowledge to negotiate the one portion you can actually control, and to decide whether shifting the entire cost off your books through a dual pricing program makes sense for your business.
