When a buyer pays online, the money passes through several parties before it reaches your bank account, and each of them can take a share. For a small shop, payment processing fees are a cost on every order, and many owners only notice how they add up when the first payout is smaller than expected.
This guide explains how payment processing fees are usually structured, which extra charges to look for, and how to calculate what one order really costs you. All numbers below are examples, not the prices of any real provider. This is general information, not financial, legal or tax advice.
Who is involved in a card payment
A typical online card payment involves:
- the buyer's bank, which issued the card;
- the card network, which connects banks;
- your payment provider, the service that accepts the payment for your store;
- your bank, where the payout arrives.
You usually deal only with your payment provider, and it bundles the costs of the others into its own fees. How it bundles them is what the pricing model describes.
How payment processing fees are calculated
Many providers charge a percentage of the payment plus a fixed amount per transaction:
Fee per payment = payment amount × percentage + fixed fee
The fixed part matters most for small orders. Here is an example with made-up rates of 2% plus 0.30 per payment:
- On an order of 10: 10 × 2% + 0.30 = 0.50, which is 5% of the order.
- On an order of 50: 50 × 2% + 0.30 = 1.30, which is 2.6% of the order.
Effective fee rate = fee per payment ÷ payment amount
The same rates take a much bigger share of a small order. If your average order is low, compare providers on the effective rate at your typical order value, not on the headline percentage.
Common pricing models
- Flat rate: one percentage and one fixed fee for most cards. Simple to understand and predict.
- Interchange plus: the provider passes on the bank and network costs as they are, and adds its own margin on top. It shows the underlying costs separately, but the total per order is harder to predict.
- Tiered or blended: payments are sorted into groups with different rates, for example by card type. Ask exactly which payments fall into which group.
Rates can also differ by card type, by whether the card was issued in another region, and by payment method.
Extra fees to look for
The per-payment fee is only part of the picture. Ask every provider about:
- Currency conversion. If the buyer pays in one currency and you are paid out in another, the provider converts the money, and its rate may include a margin on top of the exchange rate. Ask how it is calculated.
- Cross-border payments. Cards issued in another country or region may carry an extra percentage.
- Refunds. Some providers keep the original fee when you refund an order; others return part of it.
- Disputes and chargebacks. When a buyer disputes a payment with their bank, many providers charge a dispute fee. Ask whether it is returned if the dispute is decided in your favour.
- Payouts. Fees for transfers to your bank, especially in another currency.
- Monthly or minimum fees, setup fees and fees for extra features.
Payout timing and reserves
Fees are not the only cost. When you get the money also matters for a small business:
- Payout delay: the number of days between the payment and the money reaching your bank.
- Payout schedule: daily, weekly or on request.
- Rolling reserve: some providers hold back a share of payouts for a period, especially for new accounts or riskier categories.
A longer delay means you pay suppliers and shipping before the money from sales arrives. Plan your cash flow around the real payout schedule.
One month of payment fees: an example
Here is an example for a hypothetical month. All rates are made up.
Your store (example): 200 orders, average order 40, so 8,000 in card payments. Assumed rates: 2% plus 0.30 per payment, 1.5% extra on 25% of payments that need currency conversion, 4 refunds where the fee is not returned, 1 dispute with a fee of 15.
- Base fees: 8,000 × 2% + 200 × 0.30 = 160 + 60 = 220
- Conversion: 8,000 × 25% × 1.5% = 30
- Dispute fee: 15
- Fees kept on refunds: already included in the base fees, but the sales are gone, so the cost per completed order rises.
Total payment cost = 220 + 30 + 15 = 265
Cost per order = 265 ÷ 200 = 1.33, or about 3.3% of sales
The headline rate in this example was 2%, but the real cost was closer to 3.3%. Run the same calculation with each provider's own published rates for your order size, currencies and refund rate.
How to keep payment costs under control
- Know your effective rate at your typical order value.
- Check payout currencies. Pricing in the buyer's currency avoids a converted price at checkout, but if you are paid out in a different currency, the provider still converts the money.
- Reduce disputes with clear product descriptions, a recognisable store name on bank statements, fast replies and visible returns terms.
- Watch refund rates, since some fees are not returned.
- Read the full fee schedule before signing, including payouts and disputes.
- Review once a year as your volume and order mix change.
A payment fees checklist
- [ ] Percentage and fixed fee per payment.
- [ ] Effective rate at your average order value.
- [ ] Currency conversion and cross-border fees.
- [ ] Refund and dispute fees.
- [ ] Payout delay, schedule and any reserve.
- [ ] Monthly, setup and payout fees.
Where RedCart fits
RedCart takes no commission on sales; payment provider fees are separate and not included. How platform fees and provider fees differ is covered in Transaction Fees vs Flat Subscription: How to Calculate the True Cost of an E-commerce Platform. The platform part of your cost is a fixed figure, so the calculation above covers the variable part on its own.
Two RedCart features are relevant here. You set the price of every SKU in each currency you sell in, so buyers see a fixed local price rather than a converted one; whether a payment is then converted depends on your payment provider and your payout currency. Your store pages, such as delivery and returns, show buyers your terms before they pay, which can help prevent disputes.
Key takeaways
Payment fees are a percentage plus a fixed part, plus conversion, refunds, disputes and payouts. Calculate the effective rate at your own order value, check payout timing and review the full fee schedule.
If you would like to set up your store and prices with us, create a RedCart account.