Your effective rate, and why it is the only number that matters.
Two figures off one statement give you the only percentage that describes what accepting cards actually costs your business. It takes a minute, it needs nothing from your processor, and it is the figure every quote should be compared against.
What this page settles.
Three questions, in the order most people ask them.
The arithmetic
Take one complete month. Find two figures on the statement:
- Total card volume — everything you processed on cards that month. Sometimes labelled total sales, gross volume, amount submitted or deposits.
- Total fees — every charge for that month added together. Not the discount rate line. Everything.
Divide the second by the first and multiply by one hundred.
On the statement beside this article: 1,687.50 ÷ 48,500.00 × 100 = 3.48%.
That is the effective rate. It is the percentage of your card revenue that accepting cards costs you, and it is the only figure that describes the whole relationship in one number.
Our calculator does this and splits the result into the part that is interchange and the part that is your processor’s margin. It asks for no email and stores nothing.
Why it beats the quoted rate
The rate on your proposal describes one kind of transaction under one set of conditions. Your effective rate describes every transaction you actually took, plus every fixed charge, plus anything that was added since you signed.
On the worked statement above, the gap is 1.69 percentage points. On 48,500 a month that is roughly $820 a month that the quoted rate does not describe.
Neither number is a lie. The quoted rate is real — some transactions genuinely settle at it. It simply is not the cost of doing business, and it was never meant to be compared with anything.
If a provider quoting you a new rate will not also tell you what your effective rate would have been on last month’s volume, they are quoting you the same kind of number you already have.
Getting the two numbers right
Three mistakes make the figure useless, and all three are easy to avoid.
Including cash. Card volume only. Cash in the denominator makes the percentage smaller and the comparison meaningless.
Using the discount rate line as “total fees”. On most statements that line is one charge among a dozen. Look for a summary box — often called fees charged this month or total amount deducted — and prefer it to any percentage printed in large type.
Taking a partial month. Fees that bill once a month land on one statement and not another. A fortnight tells you nothing. Use one full billing period, and ideally check a second month to see whether your mix moved.
If your fees are deducted daily rather than once a month, you will not find a single debit to point at. Add up the deductions. Daily discount billing is one of the main reasons merchants have never seen their own total.
What a normal effective rate looks like
There is no universal benchmark, and anyone quoting you one is selling something. What drives the figure is mostly outside your control:
- How you take payment. Tapped and inserted in person is cheapest. Keyed and card-not-present costs more, because the fraud risk is higher.
- What your customers carry. A premium rewards card costs more to accept than a basic debit card, under every pricing model that exists.
- Your average ticket. Per-transaction fees hurt a $9 average ticket far more than a $90 one.
- Your trade. Supermarkets, fuel, charities and a few other categories have their own interchange tables.
Which is why two honest providers can quote the same business different effective rates and both be telling the truth. The figure that strips all of that out is the markup over interchange — the only part a processor actually sets. That is what interchange-plus pricing exposes and what tiered pricing hides.
What it does not tell you
An effective rate is a single number describing a relationship with several dimensions, so treat it as the opening question rather than the verdict.
It says nothing about how quickly you are funded, whether anyone answers the phone, whether your terminal will be replaced when it fails, or whether a payout will be frozen for a fortnight while someone reviews your account. Those are worth money too, and some of them are worth more than a few basis points.
It also says nothing about why the figure is what it is. A rate of 3.48% could be an expensive provider on an ordinary card mix, or a fairly priced provider on an expensive one. Separating those two is the entire point of looking at interchange and markup separately — and it is the first thing we do when a statement lands with us.
What we charge
Interchange + 0.50% + 10¢ in person, interchange + 0.75% + 25¢ keyed. No contract, no monthly fee, no PCI fee. Send us a statement and we will work out your effective rate, show you the markup inside it, and tell you honestly if the answer is that you are already priced fine.
While we are on the subject
Is a high effective rate always bad?
No. A business taking mostly keyed, card-not-present payments from rewards cards will have a higher effective rate than a corner shop taking debit taps, with identical pricing. The figure is only meaningful against your own card mix, or against a quote priced on the same month.
Should I include cash sales?
No. Use card volume only. Including cash makes the percentage look better and makes it useless for comparison.
What if my fees are deducted daily?
Add up every deduction for the month rather than looking for one debit. Daily discount billing is exactly why so many merchants have never seen their own total.
What is a good effective rate?
There is no single answer, because interchange varies with your card mix. The useful question is not the effective rate but the markup over interchange, which is the part a provider actually controls.