The Real Cost of Card Payments

Most merchants know roughly what card acceptance costs them, because it appears on a statement every month. Far fewer could say where the money goes, and almost none can change it. That combination is large, visible, structurally a non-negotiable cost and it’s worth understanding exactly how it got that way.

Four parties, one transaction

When a customer taps a card, the money takes a longer route than the two-second confirmation suggests. Four distinct businesses are involved, and three of them are paid out of the merchant’s proceeds.

The issuing bank gave the customer their card and carries the credit risk and fraud liability. The card network Visa or Mastercard, mostly operates the rails and sets the rules. The acquiring bank holds the merchant’s account and settles funds to it. The payment processor provides the terminal, the gateway and the software, and is often the only one of the four the merchant ever speaks to.

The merchant sees a single deduction. Behind it are three separate fees.

Where your card processing fee actually goes

Interchange the big one

Interchange flows from the acquiring bank to the issuing bank. It is the largest component, frequently 70-80% of the total cost, and it is set unilaterally by the card network in published rate tables running to hundreds of rows.

The economic justification is that the issuer bears real costs: fraud, chargebacks, funding the interest-free period on credit, servicing the account. That’s genuine, as far as it goes.

The complication is that interchange also funds rewards. Cashback, airline miles and lounge access are paid for substantially out of interchange, which is why a premium card carries a higher rate than a basic one. A merchant who accepts cards accepts all of them, generally cannot tell which is being presented until after the sale, and in most jurisdictions cannot decline or surcharge selectively.

Schema Fees

Visa and Mastercard charge their own assessment and scheme fees on top of interchange. Individually these are small, commonly a fraction of a per cent but they apply to essentially every transaction on rails with no substitute. The networks are not lenders and carry no credit risk; they operate a protocol and a rulebook.

The acquirer and processor

This is the only part genuinely subject to competition. The processor bundles interchange and scheme fees with its own markup and quotes the merchant a rate.

Pricing models matter enormously here and are frequently opaque:

• Interchange-plus discloses the pass-through costs and states the markup separately. It is the transparent option and generally the cheapest for a merchant with volume.
• Blended or flat-rate pricing quotes one number for everything. It is simple, predictable, and means a merchant with a favourable card mix subsidises the processor’s margin without knowing it.
• Tiered pricing sorts transactions into “qualified”, “mid-qualified” and “non-qualified” buckets whose definitions are set by the processor. It is the least transparent model in common use.

Why merchants can’t negotiate card fees

The structural oddity is this: the party that pays the largest fee has no relationship with the party that receives it.

A merchant cannot negotiate with a customer’s issuing bank. They have no contract with it, no alternative to it, and no ability to reach it. Interchange arrives as a fixed input, set by a network that also has no commercial relationship with the merchant.

Meanwhile, network rules have historically constrained the merchant’s remaining options. Rules against surcharging, against steering customers to cheaper payment methods, and requirements to accept all cards carrying the brand. Litigation and regulation have loosened some of these in some markets, but the basic asymmetry survives: the merchant absorbs a cost set by parties they cannot reach, on terms they cannot decline, for access to customers they cannot afford to turn away.

That last clause is the whole game. A merchant who stops accepting cards doesn’t save 3%; they lose most of their revenue.

Regulations

The clearest natural experiment is the difference between jurisdictions.

The EU capped consumer interchange in 2015 under the Interchange Fee Regulation: 0.2% on debit and 0.3% on credit. The UK retained equivalent caps. Australia has regulated interchange since the early 2000s. In the US, the Durbin Amendment capped debit interchange for large issuers but left credit interchange untouched.

The result is that the identical transaction - same card brand, same terminal, same two seconds costs a merchant roughly twice as much in the US as in the EU. The cost is not a technical property of moving money. It is a policy outcome.

What a flat fee changes

Every fee described above is a percentage. That’s the property worth isolating, because it has nothing to do with cost.

The work involved in authorising a $10 sale and a $1,000 sale is identicals. There is no cost basis for charging a hundred times more for the second. Percentage pricing exists because value-based pricing captures more surplus, and because merchants cannot go elsewhere.

Settlement on a public blockchain prices the actual work instead. A Solana transfer costs a fraction of a cent whether it moves $10 or $10,000, because it’s the same transaction either way. There is no issuing bank taking a cut, because there is no issuer. No interchange, because there are only two parties.

For a business running on thin margins, this is not a rounding difference. A cafe at 3% on a $4 coffee pays 12 cents; the same sale settled for a flat cent costs one. Over a year of small-ticket transactions, that gap is often the difference between a viable margin and a marginal one which is precisely why card economics punish low-value sales hardest.

What DYNK is building for merchants

A flat $0.01 fee per transaction, settling in about 400ms directly to a wallet you control; no percentage, no intermediary, no chargebacks.

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The trade-offs, stated fairly

Cards do things that a raw blockchain transfer does not, and pretending otherwise helps nobody.

Chargebacks cut both ways. Card payments are reversible, which costs merchants money in disputes but is exactly what makes consumers willing to enter card details with a stranger online. On-chain settlement is final. That’s a feature for the merchant and a genuine loss of protection for the buyer, and any serious alternative needs an answer for it.

Credit is a product, not an overhead. A meaningful share of card volume is customers spending money they don’t yet have. Interchange partly funds that. Removing the fee removes the credit too.

Universality is worth a lot. Cards work essentially everywhere, and a payment method most customers don’t hold has no value at any fee.

The realistic position is not that cards disappear. It is that a 2-3% toll on every sale and what accepting crypto instead actually involves is a consequence of a particular architecture with a particular set of intermediaries not a law of nature and that once a cheaper rail exists and enough customers hold it, the toll becomes very hard to justify.