Credit card fees and surcharges

Any ERP

Decision guideIntermediate9 min read

In short. Card fees are a cost of getting paid sooner and with less collection effort, so compare them to what slow payment costs you, not to zero. Send enhanced card data first, because it lowers the fee on business cards, then decide whether to absorb, surcharge or discount within network rules and your states' laws.

Written for Finance and operations, leaders.

More B2B customers want to pay by card, and every card payment costs the distributor a few percent of the invoice. On thin wholesale margins, that fee can be a large share of the profit on the order. You can lower part of it with better transaction data, and then choose whether to absorb the rest, pass it on or steer customers to cheaper payment methods.

What card acceptance costs

Every card payment carries three layers of cost. Together they make up your merchant discount rate (MDR), the total percentage you pay to accept cards.

Layer	Paid to	Set by	Can you negotiate it?
Interchange	The card-issuing bank	The card network's published schedule, by card type, how the card was taken and the data sent	No, but you can qualify for lower categories
Network assessments	Visa, Mastercard and the other networks	The network	No
Processor markup	Your acquirer or processor	Your contract	Yes

Interchange is the largest layer, and it is highest on the cards B2B customers use. Visa's published schedule with rates effective April 18, 2026 (retrieved 2026-09-28) lists purchasing and corporate cards taken card-not-present at 2.70% plus $0.10, and business credit card categories ranging from about 1.90% to 3.15% plus a per-item fee, depending on product and spend tier. Business cards also carry rewards, which the issuer pays for through interchange.

How your processor bills matters as much as the rate. Processors use one of three pricing models.

Pricing model	What your statement shows	Watch for
Interchange-plus	Actual interchange and assessments, then a fixed markup	Clearest model, so compare markups between processors
Tiered	Transactions sorted into "qualified", "mid-qualified" and "non-qualified" rates	Business cards often land in the expensive tiers
Flat rate	One percentage for every card	Simple, but you pay the same on cheap and expensive cards

Level 2 and Level 3 data

Card networks charge less interchange on business cards when the merchant sends extra transaction detail, because the customer's accounts payable team can use that data to reconcile the purchase. The industry calls this Level 2 data (tax amount, customer code or PO number) and Level 3 data (line-item detail such as item, quantity, unit of measure and unit price).

Visa has restructured this. Per Stripe's support documentation (retrieved 2026-09-28), Visa replaced its Level 3 program with the Commercial Enhanced Data Program in October 2025, calls the qualifying rates "Product 3" and retired its separate Level 2 rates on April 18, 2026. In Visa's April 2026 schedule, the purchasing and corporate card Product 3 rate is 1.75% plus $0.10, against 2.70% plus $0.10 for the same cards taken card-not-present without it. Other networks run their own enhanced data programs. Ask your processor which apply.

For a distributor this is the cheapest win available. The data already exists in the ERP on the sales order and invoice. The work is making sure the payment integration sends it with every card transaction, and that it is accurate, since Visa now checks the data it receives.

Options at a glance

Option	How it works	Who bears the cost	Main constraint
Absorb the fee	Price as usual and treat card fees as a cost of collection	You	Margin
Surcharge	Add a fee to credit card payments only	The customer paying by credit card	Notice and disclosure rules, network caps and state law
Cash discount	Set a price, then give a discount for paying by cash, check or ACH	Customers who pay by card pay the full price	Discount must be real and clearly shown, and state rules differ
Convenience fee	A fee for using a payment channel that is not your normal one, such as paying by phone when you normally take payment online	The customer using that channel	Separate network rules apply, so confirm with your acquirer
Minimums or steering	Accept cards only below a set invoice size, or offer ACH as the default	Varies	Customers who insist on cards

Network surcharge rules

Both major networks allow surcharging on credit cards in the US, with conditions. In our own words, from each network's public merchant material:

Rule	Visa (Q and A dated 2024-02-15)	Mastercard (merchant surcharge FAQ)
Which cards	Credit cards only. No surcharge on debit or prepaid cards, even when a debit card is run as credit	Credit cards only. No surcharge on debit or prepaid cards
Cap	The lower of your merchant discount rate for that card and 3%	Your merchant discount rate for Mastercard credit, with an absolute cap of 4%
Notice	Notify your acquirer at least 30 days before you start	Notify your acquirer 30 days before you start
Disclosure	Shown at the point of entry and point of sale, and as a separate line on the receipt	Clear disclosure at the point of sale, with the dollar amount on the receipt
State law	Network rules do not override state law	Network rules do not override state or federal law

Retrieved 2026-09-28. A merchant can choose a brand-level surcharge (the same on all of one network's credit cards) or a product-level surcharge (on specific card products), with the cap calculated differently for each.

State restrictions

States differ, and some restrict or prohibit credit card surcharges. Visa's surcharge Q and A says that, as of February 15, 2024, Visa understood Connecticut, Maine, Massachusetts, Oklahoma and Puerto Rico to prohibit surcharging, and Colorado, Minnesota, New Jersey and New York to have their own requirements. Visa itself warns that its list may be incomplete and is not legal advice, and state laws have changed since.

Check two points with counsel. The first is which state's law applies. Visa's guidance is that each merchant location follows the law of the state it is in, so for invoices paid remotely, confirm whether the customer's state also matters.

The second is what counts as a surcharge. Some states regulate cash discounts, convenience fees and surcharges differently, and some cap the amount below the network caps. Check your state, and every state you invoice into, before you surcharge.

The effective rate

The number to track is your effective rate: everything you paid to accept cards, divided by what you accepted.

Effective card acceptance rate

(Interchange + network assessments + processor markup + other processing fees) ÷ card sales volume

Where:

Other processing fees include monthly, gateway, PCI, chargeback and statement fees.
Card sales volume is the gross value of card payments in the same period.

Your effective rate is also the ceiling for a surcharge under both networks' rules, so you need it before you can set one.

A worked example

The numbers below are invented and round.

Calculate the effective rate

A distributor takes $100,000 of card payments in a month. The statement shows $2,100 of interchange, $140 of network assessments and $360 of processor markup and fees, a total of $2,600.

Effective rate: $2,600 ÷ $100,000 = 2.60%

After the payment integration starts sending enhanced line-item data, suppose interchange on the same volume falls to $1,600. Total fees become $2,100 and the effective rate falls to 2.10%, without changing a price.

Compare with an early-pay discount and with waiting

Take one $10,000 invoice on net 30 terms. The customer's actual payment habit matches the distributor's days sales outstanding (DSO) of 45 days. Card payments settle in about two days. The distributor's cost of capital is 8% a year.

Payment method	Cost	Cash day	Days sooner	Annualized cost
Check or ACH at the usual pace	$98.63 of carrying cost ($10,000 × 8% × 45 ÷ 365)	45	0	None
Card at 2.60%	$260	2	43	22.7%
Card at 2.10% with enhanced data	$210	2	43	18.2%
ACH on day 10, taking a 1% early-pay discount	$100	10	35	10.5%

The annualized figures use the same arithmetic as passing up a supplier discount in The cash conversion cycle: fee ÷ (100% − fee) × 365 ÷ days sooner. For the card at 2.60%, that is 2.60 ÷ 97.40 × 365 ÷ 43 = 22.7%.

To run your own numbers in the calculator below, enter the card fee or discount as the discount, the day cash arrives as the discount period, your DSO as net due and the invoice amount. The annualized cost it returns is the cost of getting paid sooner.

Calculator

Cost of skipping an early-payment discount

The annualized rate is what you effectively pay to keep the cash for the extra days. If you can borrow for less than that, taking the discount usually wins.

Reading the result

At an 8% cost of capital, every option in the table costs more than waiting for the customer's money. The card at 2.60% is the most expensive way to get paid early, at more than twice the cost of a 1% early-pay discount. On speed of cash alone, card acceptance does not pay for itself.

It can still be the right choice, because the table leaves out bad debt, lost orders and credit limits:

A card payment is guaranteed, apart from disputes, while a slow payer costs staff time and sometimes the whole invoice.
A customer who must pay by card, such as one using a purchasing card program, may buy elsewhere if you refuse.
A card payment clears the customer's balance and frees credit for the next order.

The example also shows the order to work in. Sending enhanced data cut the cost by $50 on this invoice with no customer-facing change. Surcharging, if your states allow it, can recover the rest, but only up to your effective rate.

The questions that decide

Question	If yes	If no
Are your largest card payers using business, corporate or purchasing cards?	Send enhanced data first, since the savings are largest there	Enhanced data matters less, so focus on the processor markup
Is card volume a small share of receipts?	Absorbing the fee is often simpler than a surcharge program	Model the fee against margin by customer
Do you sell into states that prohibit or restrict surcharges?	Consider a cash discount or ACH incentive instead, with counsel	A surcharge is an option within network caps
Do customers use cards mainly to stretch their own payment terms?	Offer ACH with an early-pay discount, which is cheaper for both sides	Card may be a sales tool worth the cost
Is the processor on tiered or flat pricing?	Ask for interchange-plus quotes and compare markups	Compare the markup you pay with other processors' quotes

Our recommendation

Calculate your effective rate from the last three months of processor statements.
Send Level 2 and Level 3 data, now Visa's Product 3 program, from the ERP with every card payment. It is the only lever that lowers cost without touching the customer.
Move to interchange-plus pricing if you are not on it, and compare markups.
Offer ACH with a modest early-pay discount to customers who pay by card only for the float.
Surcharge last, and only after checking network rules, your states' laws and your competitors' practice. Set it at or below your effective rate, give your acquirer the required notice and disclose it on every invoice and receipt.

Track the cost over time

Record card fees in their own expense account, reconciled to the processor statements each month as part of Month-end close for distributors. Report the effective rate next to DSO, and card fees next to discounts given, so the cost of getting paid is visible in one place. Revisit the choice when the network settlement is decided, and whenever your processor changes its pricing.