Effective rate calculator

Effective rate equals (total fees divided by total card volume) multiplied by 100. Total fees means everything the processor took that month: the discount rate, per-item fees, the statement fee, the gateway fee, PCI charges, the monthly minimum, and anything else on the bill.

Effective markup equals (total fees minus interchange minus card brand assessments) divided by total card volume. This is the number to take into a negotiation, and it is usually quoted in basis points, where one basis point is one hundredth of a percentage point.

The distinction is not academic. Interchange goes to the bank that issued your customer's card and card brand assessments go to Visa and Mastercard. Your processor passes both through and keeps the rest. Asking a processor to lower your rate without knowing the split is asking them to cut into a number you cannot see.

Find total sales volume and total fees first. They are usually on page one, sometimes labelled as gross processing volume and total discount plus other fees. Every other number on the statement is a subdivision of these two.

Then look for an interchange section. On interchange-plus pricing it is itemised by card type, and adding it up gives you the pass-through figure directly. On flat-rate or tiered pricing it is not shown at all, because the whole point of those models is that the split is hidden. In that case, estimate: for a typical US small business mix, interchange plus assessments usually lands between 1.7% and 2.1% of volume.

Finally, list every fixed line item. Statement fee, monthly minimum, PCI compliance, PCI non-compliance, batch fees, gateway fees, account maintenance, and anything described as a regulatory or network access fee. These are the ones that do not scale, and the ones most often left in place for years after they stopped being justified.

For a typical US small business, a markup of 20 to 50 basis points over interchange is competitive. Under 20 basis points is very good. Over 100 basis points, on a merchant with no unusual risk, is a conversation worth having with your processor or with a competitor.

On the effective rate itself, the ladder that merchants actually use is simple. Around 1.6% to 1.7% is excellent. About 2% is fine. 2.5% is high. 3% is expensive. Above 3%, something specific is wrong rather than slightly off.

One caveat that matters. A high effective rate is not always a bad deal. A business with a $6 average ticket, a lot of keyed transactions, or a genuinely high-risk classification will have a higher rate than a jewellery shop taking $900 card-present sales, and no processor can change that. The markup number is the fair comparison, because it strips out the parts nobody controls.

Search for merchant statement analysis and every result asks you to upload a PDF of your financials and hand over a phone number, to a company that sells payment processing, so that it can tell you whether you are overpaying. Some of them charge for the paid version, which tells you the output has real value.

This calculator runs entirely in your browser. Nothing is uploaded, nothing is stored, and no one calls you. If you want a quote afterwards that is your decision to make with the number in hand, which is the right order.