Table of contents
Updated 1st September 2026 to reflect the RBA’s review of merchant card payment costs and surcharging.
Card processing fees are costs that a merchant pays for each credit or debit card sale. These fees are predetermined by your merchant services provider and can include various components such as interchange fees, assessment fees, the payment processor’s markup and other related costs.
Who decides on credit card processing fees?
Credit card processing fees are set by several entities involved in the payment process and generally include three parties: the card issuer, the card network and the payment processor.
- Card issuer: The card issuer is the bank or financial institution that issues cards directly to consumers. CommBank, ANZ, NAB and Westpac are examples of card issuers. For each card transaction, the card issuer charges an interchange fee to the payment provider for accepting the card, usually a percentage of the transaction amount or a flat fee.
- Card network: The card issuer partners with a card network such as Visa, Mastercard, American Express, eftpos and JCB. These card networks set the rules for scheme fees (which are fees charged by the card networks themselves) and interchange fees (which are paid to the card issuers).
- Payment processor: The payment processor is the financial institution that works in the background to process and complete a credit or debit card transaction. To facilitate all of this, payment processors usually have partnerships with other companies or brands that work directly with consumers and merchants. They typically charge a percentage of the transaction amount plus a flat fee for each credit or debit card purchase.
What goes into typical credit card processing fees?
The total percentage your provider charges you per card sale is called the merchant service fee (MSF), or your cost of acceptance.
Across the whole Australian market, the Reserve Bank of Australia publishes what businesses actually pay. These are market-wide averages weighted by transaction value, meaning they’re heavily influenced by very large retailers who negotiate the lowest rates (think Coles, Woolworths, Bunnings, JB Hi-Fi). What a small to medium business pays is usually much higher. For the June 2026 quarter, average merchant fees were:
| Card type | Average merchant fee |
|---|---|
| eftpos debit | 0.43% |
| Visa debit | 0.48% |
| Mastercard debit | 0.59% |
| Mastercard and Visa credit | 1.00% |
| American Express | 1.36% |
The RBA’s 2026 review found that a small business on a single-rate plan or blended pricing (one flat percentage for every card) pays around 1.4% on average. Only 19% of small businesses are on unblended plans.
What’s inside that fee
Whatever rate you pay, it’s made up of three things:
| Part of your fee | Who it goes to | What it’s for |
|---|---|---|
| Interchange | Your customer’s bank | Approving the payment, carrying the fraud risk, handling chargebacks |
| Scheme fees | The card network (eftpos, Mastercard, Visa) | Running the network the payment travels across |
| Your provider’s fee or margin | Your payment provider | Software (like Square Point of Sale), processing, settlement, support, data analytics and everything else in your plan |
Interchange and scheme fees are what the RBA calls wholesale fees. Your provider pays them out and recovers them from you. The third part is what your provider keeps.
One thing worth understanding: the RBA caps interchange, but it doesn’t cap what you’re charged. From 1 October 2026 those caps come down. That’s a limit on one component of your merchant service fee, not a limit on your rate. What you pay comes down to your agreement with your provider.
Comparing the total cost of ownership, not just the rate
A headline rate on its own won’t tell you what you’ll pay. Most providers charge a percentage plus fixed costs — a monthly account fee, terminal rental, a software subscription, PCI compliance, sometimes a minimum monthly charge. Those fixed costs don’t scale with your takings, so the smaller your card volume, the more they matter.
Square pricing works on a blended pricing, with a single fee for all types of cards including American Express so you know exactly how much you’re paying to process credit and debit cards.
- For in-person payments such as contactless and chip + PIN, it’s a simple rate of 1.6% per transaction.
- For manually entered or card-not-present payments (such as Square Online, eCommerce API, Invoices or Virtual Terminal), a simple rate of 2.2% applies.
- Businesses that process over $250,000 annually may be eligible for custom pricing. Contact our sales team to find out if you’re eligible.
There are no monthly or hidden fees or long-term contracts. PCI compliance, customer support, fraud prevention, chargeback and dispute handling, and monthly account or minimum-volume fees are included in these rates, too. Learn about specific fee information with Square here.
Square also offers software that is free to use, letting you create items, modifiers, categories, discounts, reports and analytics, with paid software tiers as you need more advanced features. You can even compare your total cost of ownership to your current provider.
Overseas cards cost most businesses a lot more
This is where a flat rate makes the biggest difference. Cards issued overseas are the most expensive to accept in Australia, because the wholesale costs behind them are higher than on an Australian-issued card. Most providers pass that difference straight through, so the same sale costs you more when a tourist pays than when a local does.
Square charges the same rate, 1.6% in person, regardless of where the card was issued. If you serve tourists, sell to overseas customers, or trade anywhere with international foot traffic, that difference adds up.
What’s actually inside your merchant service fee
Your merchant service fee looks like one number, but it’s three costs bundled together. Two of them your provider doesn’t keep. They’re wholesale costs paid to other institutions and passed through to you. The third is what your provider charges for its own service.
1. Interchange: paid to your customer’s bank
When your customer taps, the bank that issued their card decides in about a second whether to approve the payment. It carries the risk if that payment turns out to be fraudulent, and it handles the process if your customer later disputes the charge.
Interchange is the fee that funds that work. Your provider pays it to your customer’s bank on every transaction, and you never deal with the issuing bank directly. It covers authorising and processing the payment, fraud prevention and fraud losses, handling disputes and chargebacks, and mobile wallet costs.
This is the part the RBA caps, and the caps come down on 1 October 2026.
Two things are worth knowing. Interchange varies enormously by card: a basic debit card sits at the low end, a premium rewards credit card is far more expensive because the rewards are partly funded from interchange, and a card issued overseas is the most expensive of all. And small businesses have typically paid more than large ones. The RBA found large retailers negotiate rates well below what small businesses pay. Narrowing that gap is one of the stated purposes of the October 2026 caps.
2. Scheme fees: paid to the card network
The payment also has to get somewhere. It travels across a card network, which routes the authorisation to the right bank, returns the answer, settles the money, and maintains the security and fraud systems that keep the whole thing working.
Scheme fees pay for that. The networks charge your payment provider for authorisation, processing, fraud prevention, and building and maintaining the network. They’re usually smaller than interchange, though they’re a bigger factor on overseas-issued cards.
Unlike interchange, scheme fees aren’t capped. The RBA has noted they’ve grown faster than transaction values in recent years, and has asked each network to publish a roadmap covering how it will simplify its fee schedules, give longer notice of changes, and make bills easier to check. The networks will also have to publish their scheme fees regularly.
3. Your provider’s margin: everything else
What’s left is what your payment provider charges for its own work: running the transaction, settling money into your bank account, monitoring for fraud, handling disputes on your behalf, keeping you compliant with card security standards, supporting you when something goes wrong, and providing whatever software and hardware comes with your plan.
This is the part that differs most between providers, and the only part any provider directly controls.
Why the split matters to you
Whilst some payment providers may offer lower MSF rates, this rate may just be for payments. You may still have other fees associated with trading, like hardware rentals, or you may need a separate provider for your point of sale software or loyalty program or online store, which is another cost to your business.
Square offers powerful point of sale software that is free to use and hardware that you purchase once with no ongoing rental fees, with optional paid tiers as you need more features. And businesses processing more than $250,000 annually may be eligible for custom rates. Talk to our sales team to see if you qualify, and compare your total cost of ownership to see if Square is the right fit for you.
How can you reduce credit and debit card transaction fees?
Here are a few ways to help you manage and reduce your card transaction fees:
Accept cards in person when possible
Online, manually entered, invoiced or mail-order transactions (also known as card-not-present or CNP transactions) have higher processing fees than in-person (POS) transactions because they’re more susceptible to fraud. Try to accept cards in person whenever possible if it makes sense for your business.
Reduce your risks of chargebacks
A high chargeback rate can put your account under review and, with some providers, lead to higher fees, held funds or added conditions. On Square your processing rate doesn’t change based on your chargeback history. but chargebacks still cost you the disputed sale and your time, so they’re worth preventing.
Require a minimum amount for credit card sales
To offset processing fees, some businesses (especially those that tend to handle smaller transactions, for example, cafes or food market stalls) choose to require a certain dollar threshold before they accept credit cards. This is relevant if your payment processor charges you a flat rate plus a percentage for certain types of payments (e.g. 10c + 0.6%). Depending on what makes sense for your business and what is realistic for your customers, you might consider setting a minimum card transaction amount of $10-20. Make sure that the minimum is clearly displayed and communicated to avoid unnecessary confusion.
Shop around for payment processors
Choosing the right card payment processor depends on many factors, such as your industry, sales volume and business size.
If you process fewer transactions per month, finding a payment processor with no monthly fee but higher individual transaction fees might help you save money. Conversely, if you have a higher sales volume, a payment processor with a monthly fee but lower per-transaction fees could be more cost-effective. Weigh the different types of fees against each other and calculate your potential interchange, assessment and processor fees for each option. You can use our free total cost of ownership calculator to compare your current provider with Square.
Be sure to factor in how you plan to do business in future, and don’t be afraid to ask for better rates. If you have a history of high sales volume or a low rate of chargebacks, you might be able to negotiate terms.
Is it legal for merchants to charge customers credit and debit card processing fees?
From 1 October 2026, card surcharging will no longer be permitted in Australia, following the Reserve Bank of Australia’s decision. This applies to all businesses that accept cards, not just Square sellers, and it covers debit, prepaid and credit cards, including cards issued overseas. The RBA has published answers to common questions about the change on its website.
Until 30 September 2026 the current rules still apply. You can surcharge, as long as the surcharge doesn’t exceed what accepting that card costs you.
What you can still do from 1 October:
- Offer a discount for a payment method you prefer. Discounting is permitted, and the RBA points to it as the way to steer customers.
- Charge weekend and public holiday service charges, and booking, service or delivery fees, provided they’re genuinely for those things.
- Set a minimum card transaction amount. A minimum isn’t a surcharge. Charging a fee on payments below that amount is, so you can’t add one to a card payment.
Two things to avoid, both flagged by the ACCC. Don’t rename a card surcharge as another kind of fee, because calling it a processing or card handling fee doesn’t change what it is. And don’t tell customers a price rise is only because of the surcharging change when other costs are also involved.
FAQs about Square processing fees and rates
How does Square offer credit and debit card processing with no monthly fees?
We believe credit and debit card processing should be as simple and transparent as possible. That’s why we offer clear pricing that includes everything you need to securely process credit and debit cards at your business.
What can I save in credit card processing fees?
If you sell above $250,000 per year and have a consistently high transaction size, your business may qualify for a competitive custom rate from Square. Contact our sales team to learn more.
How can Square help me run my whole business?
Payments are just the start. Square helps take care of the day-to-day stuff, too. From point-of-sale systems to tools that help you manage your staff rostering and payroll, Square has everything you need to save time and run more smoothly.
This article is for informational purposes only and does not constitute legal, personal or tax advice. The information contained herein is subject to change and may vary from time to time. For specific advice applicable to your business, please contact a professional.
1.6% card present rate applies for Square Sellers who sign up on or after 30 May 2024, or who signed up prior to this date and subscribed to a paid software plan. The rate of 1.9% will apply for all other Square Sellers who signed up prior to this date when using Square Reader, Square Stand or Tap to Pay, as listed in the Square Fee Schedule.
