Merchant Fee

What is a merchant fee?

A merchant fee is the charge you pay to accept credit and debit card payments from customers. Payment processors like Square, Stripe, and traditional merchant account providers charge a percentage of each transaction plus a fixed per-transaction fee. These fees reduce your net revenue and should be tracked as a cost of doing business.

Understanding fee structures

Fees typically range from 1.5% to 3.5% per transaction, varying by card type, transaction method, and your processor. Card-present transactions cost less than keyed or online transactions. Debit cards often cost less than credit cards. American Express typically costs more than Visa or Mastercard. Some processors offer flat-rate pricing while others use interchange-plus models.

Recording merchant fees

Your bank deposits show net amounts after fees are deducted. Record the gross sale as revenue and the fee as an expense. Some businesses record fees in cost of goods sold; others use a separate operating expense account. Either way, tracking fees separately helps you evaluate whether your payment processing costs are reasonable and compare providers.