Selling online, where every sale is card-not-present.
Online sellers pay more per transaction than counter businesses for structural reasons that will not change. What is in your control is decline rate, chargeback rate and whether you are paying twice for a gateway you already have.
What this page settles.
Three questions, in the order most people ask them.
The cost you cannot change
Every online sale is card-not-present. The card was never physically read, the chip never authenticated, and the issuer is carrying more fraud risk as a result. Interchange reflects that, and the gap is roughly 0.3% to 0.5% above the card-present tier on the same card.
That is not a markup your processor invented and it is not something a better salesperson gets you out of. It is the networks’ own schedule. What interchange is.
What follows from it:
Comparing your rate to a retailer’s is meaningless. A coffee shop at 2.3% and an online store at 2.8% can be paying identical markups. Effective rate is still the right number to track — just not across channels.
Card mix hits you harder. Rewards cards, which already cost more, cost more again card-not-present. If your customers are consumer rewards-card holders — and online, they usually are — your blended interchange is high before anyone adds a margin. What rewards cards cost.
Downgrades still exist and still bite. Card-not-present is a tier, not a floor. Missing AVS data, missing descriptor data, or late settlement push you below it. Card-not-present downgrades.
So the honest framing is: accept the structural cost, then go after the three things that are genuinely yours.
The gateway, and paying for it twice
A gateway is the piece that takes a card from your checkout page and hands it to the processor. Online you cannot not have one.
What you can do is pay for it once.
The common arrangement that costs people money: a processor supplies a gateway for a monthly fee plus a per-transaction fee, and the e-commerce platform also includes gateway functionality in its own plan, and the merchant pays both. Or a gateway monthly fee of $25 sits on the statement for a service the processor now bundles free and never removed.
Three questions worth asking this week:
What gateway am I on, and who bills me for it? If the answer takes more than a minute to establish, there is a decent chance the answer is two parties.
Is there a per-transaction gateway fee on top of the processing per-item? There often is, and it is often not in the quote. At 5¢ a transaction and 3,000 transactions a month, that is $150.
Does my platform’s own fee duplicate it? Some platforms charge an additional percentage when you use an outside processor. That is a real cost of choosing your own processor and belongs in the comparison honestly.
Declines are your biggest recoverable number
Most online sellers can tell you their processing rate to two decimal places and have no idea what their decline rate is. The decline rate is worth more money.
A store doing $80,000 a month with a 9% decline rate is having roughly $7,900 of attempted purchases refused. If a third of those are recoverable — and on stored-card and subscription volume, more than a third usually is — that is $2,600 a month, which dwarfs any plausible rate negotiation.
The things that actually move it:
Account updater. For any stored card, the networks offer a service that updates expired and reissued card numbers automatically. Without it, a renewed card is a decline. This is the single highest-yield fix for subscription businesses and it is frequently just switched off.
Retry logic that is not stupid. Retrying a hard decline immediately, repeatedly, gets you flagged. Retrying a soft decline (insufficient funds, issuer unavailable) after a sensible interval recovers a real share. The distinction is in the response code, and most platforms expose it.
AVS handling that matches your risk, not your paranoia. Rejecting every mismatch on the street-address line rejects a meaningful number of legitimate customers who typed their billing address slightly differently. Rejecting on ZIP mismatch is more defensible. Decide deliberately rather than inheriting a default.
3-D Secure configured, not just enabled. Modern 3-D Secure is supposed to be frictionless for most transactions and shift liability when it does step up. Configured badly it adds a challenge screen to good customers and costs you conversions. Configured well it reduces fraud chargebacks and your abandonment barely moves.
Why transactions get declined.
Chargebacks and the online dispute problem
Online sellers get more disputes than counter businesses, and the single largest category is not stolen cards. It is customers who made the purchase and disputed it anyway — unrecognized descriptors, buyer’s remorse, “item not as described”, and the deliberate version.
The controls, in order of how much they pay back:
Your billing descriptor. If what appears on the statement is not obviously your store, you are generating disputes from your own customers. This is the cheapest fix available and a great many stores have never checked it. Billing descriptors.
Delivery evidence. Tracking, delivery confirmation, and for higher-value items signature. A dispute on an item-not-received claim is won with the carrier record and lost without it.
Pre-dispute alerts. The network services that notify you of a pending dispute and let you refund before it becomes a chargeback. Each one costs a fee and avoids a chargeback fee plus a ratio hit.
Watching the ratio, not just the count. Both networks monitor your chargeback-to-transaction ratio and the consequences of breaching their thresholds are serious. Chargeback monitoring programs.
How to fight a chargeback covers the representment process. Preventing them is the better investment.
Platform payments versus your own merchant account
The default on every modern e-commerce platform is the platform’s own payments product. It works, it takes ten minutes, and it is an aggregator arrangement: you are a sub-merchant under the platform’s master account, not an underwritten merchant yourself.
That trade is real in both directions.
In favour of the platform default: instant setup, no underwriting, integrated refunds and reporting, nothing to configure.
Against it: you did not get underwritten, which means the risk assessment happens after you start trading. A volume spike, a product category review, or a chargeback cluster can lead to a hold on your funds decided by a model rather than a conversation. What happens when an aggregator freezes you.
For a store doing a few thousand a month, the default is fine and the convenience is worth it. For a store where a two-week funding hold would be an emergency, your own underwritten merchant account is the sturdier arrangement, and the cost difference at that volume usually favours it anyway. Merchant account versus payfac.
Subscriptions and stored cards
If you bill repeatedly, three things matter more than your rate:
Stored credentials must be tokenized and flagged correctly. Recurring transactions carry their own interchange treatment and need the right indicator. Sent as plain keyed transactions, they sit at a worse tier and look more like fraud to issuers.
Account updater is not optional. See above. Card expiry is the largest single cause of involuntary churn in subscription businesses.
Dunning sequence beats retry spam. Email the customer, give them a way to update the card, and space the retries. Subscription pricing and processing.
What we charge
Interchange + 0.75% + 25¢ for card-not-present, interchange + 0.50% + 10¢ in person, with no contract, no monthly fee and no monthly minimum.
Online, the most useful thing we do is separate the three costs — processing, gateway, platform — so you can see which one is actually large. Send us a statement and we will do that first.
While we are on the subject
Why do I pay more than a shop does?
Because the card was not physically read, so the issuer carries more fraud risk and charges more interchange for it. The same card, the same amount, a higher tier.
Do I need a gateway if I use Shopify?
You need gateway functionality, and your platform may already provide it. What you should not do is pay a separate monthly gateway fee for a service your platform or processor already includes.
Is an aggregator or my own merchant account better?
An aggregator is faster to start and much easier to lose. Your own underwritten account takes days instead of minutes and does not get frozen by an automated review.
How do I reduce declines?
Account updater for stored cards, retry logic that is not aggressive, correct AVS handling, and a 3-D Secure setup that is not rejecting good customers. Usually in that order.