Credit card processing comes down to two real fees. Every time a customer pays with a card, two fees get paid before your business sees a dime — interchange (paid to the customer’s bank) and assessments (paid to Visa or Mastercard themselves). Together, those two fees are the real, fixed “wholesale” cost of accepting a card — the same for every business, no matter who processes their payments. Everything else you see on a statement is markup, added on top by whichever company is reselling that access to you.
That one distinction — wholesale cost versus markup — explains almost everything confusing about credit card processing. Once you understand it, you can explain it to your neighbor in under a minute.
The one thing almost nobody understands about “getting a better rate”
Here’s the misconception that costs businesses real money: a lot of people — including some sales reps who should know better — believe a processor can negotiate a special interchange rate with Visa or Mastercard. They can’t. Interchange rates are published on a public schedule, updated twice a year, and every processor pays the exact same wholesale cost for the exact same transaction. There’s no secret deal, no relationship discount, no volume tier that changes what Visa charges.
The only thing that’s actually negotiable — the only number that’s genuinely different from one processor’s price to another’s — is the markup they add on top. That’s the real conversation worth having when you’re comparing processors. Not “what’s your rate,” but “what’s your markup over the wholesale cost.”
What interchange actually is
Interchange is the fee paid to the bank that issued the customer’s card — it compensates the issuing bank for taking on the credit risk, covering fraud losses, and fronting the money before the cardholder actually pays their bill. It typically runs somewhere around 1–2% of the transaction, though the exact number depends heavily on the card type: a basic debit card carries the lowest rate, while premium rewards cards, business cards, and commercial cards run meaningfully higher. Visa and Mastercard publish updated interchange schedules every April and October — it’s public information, not something any single processor controls.
What assessments actually are
Assessments are a separate fee, paid directly to the card network itself — Visa or Mastercard — rather than to the issuing bank. This is what actually funds the network’s own infrastructure and operations. It’s smaller than interchange, typically working out to somewhere around 0.13–0.15% of volume plus a small fixed amount per transaction, and like interchange, it’s completely non-negotiable and identical for every merchant, everywhere.
What credit card processing actually costs, put together
Interchange plus assessments is the actual, unavoidable cost of accepting a card — fixed by the networks, not by your processor. A company like Paramount, or any other processor, buys access at that same wholesale rate everyone else does. What varies — the only thing that varies — is the markup added on top to create the retail price your business actually pays. That’s the real business model: reselling access to a fixed wholesale cost, with a markup that’s genuinely negotiable, layered on top of a wholesale rate that isn’t.
How that markup usually gets charged
There are two common ways a traditional processor prices that markup, and one of them is a lot easier to actually see:
- Tiered pricing sorts every transaction into a bucket — qualified, mid-qualified, non-qualified — each with its own blended rate. The real cost breakdown (how much is wholesale, how much is markup) isn’t clearly shown, and processors don’t always disclose exactly how a transaction gets classified into one bucket versus another. This is the harder-to-audit version.
- Interchange-plus (cost-plus) pricing shows the real wholesale cost — interchange and assessments — as its own line, with the processor’s markup shown separately, right next to it. Nothing is blended together or hidden in a bucket. This is the transparent version, and it’s usually the cheaper one once a business has real volume.
There’s also flat-rate pricing (the model Square and Stripe-style apps use), which blends everything into one number regardless of actual card mix — covered in more depth on our guide to payment aggregators and merchant accounts, since it comes with its own separate set of trade-offs beyond just pricing.
There’s a third option: not absorbing it at all
Since interchange and assessments are fixed and unavoidable, no processor can actually make that wholesale cost disappear. What dual pricing changes isn’t the cost itself — it’s who pays it. Instead of a business absorbing the wholesale cost plus markup out of its own margin on every card sale, the customer who chooses to pay with a card covers it, through the price difference between the cash price and the card price. It’s a genuinely different way to handle the same underlying cost structure covered on this page — see our full breakdown in Dual Pricing Explained.
Explain it to your neighbor in one paragraph
Every card swipe costs a fixed amount no processor controls — a piece goes to the customer’s bank (interchange), a smaller piece goes to Visa or Mastercard (assessments), and that’s the real, unavoidable cost of accepting a card. Whoever processes your payments buys in at that same fixed cost and adds their own markup on top to make their money — and that markup, not the underlying cost, is the only thing that’s actually different from one processor to the next. A business can either absorb that whole cost itself, or shift it to the customer who chooses to pay by card through dual pricing. That’s really all credit card processing is — a fixed wholesale cost, a markup on top of it, and a choice about who pays it.
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