Your effective rate is total fees divided by total card volume. Nothing else on the statement matters as much. Work it out for three months, and you will know more about what card acceptance costs you than most owners ever do. Everything below is how to find those two numbers and what the lines around them mean.
Step one: find two numbers
Total fees charged for the month. Total card volume processed for the month. Divide the first by the second, multiply by a hundred, and you have your effective rate as a percentage.
Do it for three consecutive months. One month can be thrown off by an annual PCI fee or a chargeback, and you want the figure that describes a normal month.
Write the three numbers on a sticky note and put it in your office. When a rep quotes you something, that note is what you compare it against.
What are interchange, assessments and markup?
Interchange goes to the bank that issued your guest's card. It is set by Visa and Mastercard, it is published, and every processor pays the same. Nobody can discount it.
Assessments go to the card networks themselves. Small, fixed, also non negotiable.
Markup is your processor's cut. It is the only part anybody can actually compete on, and it is the part that gets buried when a statement is designed to be hard to read.
A statement that shows interchange separately from markup is called interchange plus, and it is the format you want. A statement that lumps everything into tiers labelled qualified, mid qualified and non qualified is a format that exists to make comparison hard.
Which line items should make you ask questions?
Monthly minimum, statement fee, PCI compliance fee, PCI non compliance fee, batch fee, gateway fee, annual fee, IRS reporting fee, and anything called a service or regulatory fee with no explanation.
None of those are automatically wrong. Several are legitimate costs. What matters is that they are in your effective rate whether you noticed them or not, and that a quote comparing headline rates ignores every one of them.
The PCI non compliance fee is worth a specific look. It is often charged because a questionnaire was never completed, which is a solvable paperwork problem costing some restaurants several hundred dollars a year for nothing.
A real person calls you back within two hours, Monday to Saturday, 8am to 7pm Central.
How do I compare two offers honestly?
Ask both to quote an effective rate on your actual volume and card mix, in writing. Not a headline rate. Not a tier. An effective rate, on your numbers.
Any processor who will not put that in writing has told you something useful. Ours will, and you should hold us to it the same way.
Then weigh the rate against contract length, early termination fees, and whether you own the hardware at the end. A rate a fraction lower is poor value if you are locked in for three years with equipment you cannot take with you.
What if the gap is big?
Then you have found real money. A restaurant running fifty thousand a month at 3.1% pays about eighteen thousand six hundred a year to accept cards. Half a point is roughly three thousand a year, every year.
At that point you have three options. Negotiate with your current processor, who will often move once they know you have done the math. Move. Or look at dual pricing and take the cost off your profit and loss entirely.
Look at your rate before you look at dual pricing. Sometimes a better rate gets you most of the way there with no change at the table at all.
Questions restaurant owners ask
What is a good effective rate for a restaurant?
It depends on your average ticket, your card mix and how much of your volume is keyed rather than tapped. Rather than chase a benchmark, get quotes on your own numbers in writing and compare those. A number from a forum is describing somebody else's restaurant.
My statement does not show total fees anywhere. Now what?
Add up every line the processor charged you, including the ones buried under summary sections. If the statement makes that genuinely hard, that is worth noticing. Ask your rep for a fee summary in writing. A processor confident in its pricing will send one.
Is interchange plus always better than tiered?
It is almost always more transparent, which is the point. It shows you what is passed through and what your processor keeps. Tiered pricing can occasionally price out similarly, but you will not be able to tell, and not being able to tell is the problem.
Can I negotiate with my current processor?
Often yes, especially once you can quote your effective rate and a competing offer. Processors keep accounts that ask. What they rely on is that most restaurants never work the number out, which is exactly why this guide exists.
Vendor pricing and tax rates change without notice. Confirm current figures with the vendor, the city or your accountant before you rely on them. Not tax, legal or accounting advice.
Every number on this page traces to a primary source
- Federal Reserve, Regulation II debit interchangefederalreserve.gov / regii about.htm
- Visa interchange rates, publishedusa.visa.com / visa rules.html