Why Have a Processing Fee: The 8 Keys To Making Sense of Our Fees

January 3, 2022

Processing fees are a standard business practice, but it can be challenging to understand their reasoning. Some people believe processing fees are too high and should be eliminated. Others feel that they're necessary for the bank to cover their costs. Have you ever wondered why credit card companies charge a processing fee? It seems like an extra cost that doesn't benefit the cardholder. But, like most things in life, there is a method to the madness. Here are the eight keys to making sense of our fees. 

What Is a Credit Card Processing Fee 

A credit card processing fee is a charge added to each transaction processed through your merchant account. If you have a business that sells goods or services, this might sound familiar. In the case of online transactions, it's automatically included in the total price if you don't opt-out. It covers things like equipment and software for accepting payments from customers, third-party fees associated with the payment process, and why it exists in the first place. 

What Do You Mean By Transaction? 

A transaction is anything that involves you receiving money for something. This could be a sale of goods or services at your storefront location, online sales through an eCommerce website like Amazon or eBay, phone transactions, or even checks. There are many different ways to process payments. Each has its associated fees because credit card companies have to pay their employees to handle these individual tasks. 

The 8 Secrets to Understanding Credit Card Fees 

It's essential to understand why you're paying a fee in the first place, so here are the top ten secrets to understanding credit card fees. 

  1. The fee helps the bank maintain PCI-compliance standards: PCI refers to the Payment Card Industry. Banks are required by law every quarter to test their systems for security vulnerabilities. The processing fee pays third parties who perform this service to protect customers from identity theft or credit card fraud. 
  1. It helps cover costs associated with providing customer service: Even if you never use your credit card, purchasing involves risks like identity theft or fraud. That's why banks offer 24/hour customer support as a way to help customers should an issue arise when processing any payment. 
  1. The fee also helps cover costs associated with cardholder benefits: Rewards programs, travel insurance, and fraud protection are just a few of the benefits of using a credit card. But these services cost money to provide, so the processing fee goes toward funding them. 
  1. It helps the bank cover costs by providing a card: Even when you don't use your credit card, it has monthly fees for paying things like 24/hour customer service and fraud protection. Banks also have minimum spending requirements to waive annual fees during the first year of usage. 
  1. It pays for merchant account equipment and software: A merchant account must process payments from customers. This comes with equipment used for accepting credit card transactions. A processing fee covers the cost of these items and the software needed to run them. 
  1. The fee helps the bank offset risks associated with lending: The goal of any business is to make money. Those that provide credit cards are no exception, even though the fees associated with them are often hidden from customers for this exact reason. When you pay an annual fee or interest on your balance, it's used as a way to cover losses incurred by lending money out to others who don't always pay it back. 
  1. The fee allows the credit card company to profit: This is probably the most obvious reason. Credit card companies are businesses, and like any other business, they need to turn a profit to stay in operation. The processing fee helps them do just that. 
  1. The fee helps cover costs associated with chargebacks: A chargeback is when a customer disputes a purchase they made and requests their money back. It can happen for many reasons, such as if they never received the product or defective. The processing fee goes toward paying for employees to handle chargebacks and why they happen in the first place. 

There you have it. Eight reasons why the processing fee is necessary for credit card companies (and banks) to cover the costs associated with providing this service. Keep in mind that not all fees are bad, and in some cases, they're worth it. Just be sure to read the fine print before signing up for a new credit card. 

FAQs About Credit Card Processing Fees 

Here are some of the most frequently asked questions about credit card processing fees: 

Is there a processing fee for debit cards? 

Typically, no. Since merchants and banks don't need to cover the costs associated with lending money out for credit card transactions, debit card fees are typically much lower than their counterparts. 

What about using a credit card abroad? 

In most cases, you can expect to pay anything from an additional three percent to five percent on top of whatever transaction amount is being charged by the overseas bank or retailer for processing foreign currency payments. But why does it cost so much? This is because most credit cards are issued in the United States. That means that they have to pay a conversion fee for every foreign transaction before charging your card. 

Is there an extra charge when I purchase something online? 

Not always. In some cases, you can expect your bank or retailer to add their processing fees on top of whatever amount is being charged by the credit card company. However, this isn't always the case. Many companies have now eliminated these fees to remain competitive and attract more customers. 

Is there a limit to how much I can spend? 

Yes. Most banks will waive their annual processing fee if you meet a specific spending requirement within a given year. But if you don't meet this threshold, they'll usually charge anywhere to continue using their service. 

How can I avoid paying a processing fee? 

There is no definitive answer to this question. However, you can avoid paying a processing fee by using your debit card instead of your credit card, shopping at retailers that don't charge an extra fee for card payments or looking into a credit card that doesn't have an annual fee. 


The most apparent reason why credit card companies charge fees is that they need to turn a profit and the processing fee helps them do just that. Other causes include helping cover costs associated with chargebacks or providing this service in general. 

Each of these keys provides a different perspective on the fees we charge and why they are essential. The most crucial key is to understand how credit card processing works so that you can decide if our rates make sense for your business. 

We hope this blog post has given you a better understanding of our credit card processing fees and how we work to make sense of them. If you have any questions about the charges imposed by BNG Payments, please don't hesitate to reach out. We are happy to help. 

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