Payment Processor Effective Rate Analyzer
What you are really paying to accept cards, and how much of it is markup.
Replaces: Merchant statement analysis, normally sold per review by consultants
How to use it
Take three numbers off your monthly statement — volume, transaction count, and every fee added together — and the calculator gives you the effective rate. Add an interchange assumption and it splits that rate into network cost and your processor’s markup. Add a competing quote and it prices the switch.
Where the number comes from
- The effective rate is total fees divided by total volume. Every headline rate a processor quotes is a subset of this; only this figure counts everything.
- Estimated interchange is volume times the assumed percentage plus the count times the assumed per-item fee. This is the floor no processor can go below, because they pay it to the card networks.
- Markup is total fees minus estimated interchange — the part that is actually being sold to you.
- The comparison holds interchange constant across both rows, because it does not change when you switch processor. Only markup and monthly fees move.
- Savings are calculated at this month's volume and card mix, then multiplied by twelve.
What goes wrong
The part most calculators leave out.
- Interchange is not one number. It varies by card type, by whether the card was present, by whether the customer was a consumer or a business, and by country. The default here is a blended guess — a business taking mostly corporate or cross-border cards can sit far above it, and a debit-heavy retailer far below.
- Because interchange is assumed, the split between interchange and markup is an estimate. The effective rate is not: that one is exact.
- One month is a weak sample. Seasonality, refund volume and chargebacks all move the rate, so run three months before acting on the result.
- Blended and tiered pricing hide the split deliberately. If your statement does not show interchange separately, this estimate is the only view you have — which is precisely why the pricing model exists.
- Switching has costs this does not price: integration work, terminal replacement, early termination fees, and the risk of a failed migration during your busiest week.
The 2.9% that is really 2.88% — and the 0.94% that is markup
A business processes 850,000 across 12,500 transactions and pays 24,500 in total fees. That is an effective rate of 2.88%, close enough to the headline 2.9% that nothing looks wrong. But at a blended interchange of 1.8% plus 10 cents, the network cost is about 16,550. The remaining 7,950 a month — 0.94% of volume — is markup. An interchange-plus quote at 0.30% plus 10 cents with 100 of monthly fees would cost about 20,450, saving roughly 4,050 a month. The headline rate never moved; the markup did.
Questions
- What is a good effective rate?
- It depends almost entirely on your card mix and average ticket, so the useful comparison is against your own markup rather than someone else’s headline. A card-present retailer with a debit-heavy mix should sit far below an online business taking international corporate cards, and neither tells you anything about the other.
- What is interchange-plus pricing?
- Your processor passes through interchange at cost and charges a stated markup on top. It is the only model where you can see what you are paying for the service as distinct from what the card networks charge.
- Why can’t I just compare the headline rate?
- Because the headline rate typically covers one card type in one scenario. Monthly fees, PCI charges, gateway fees, per-item fees and non-qualified downgrades all sit outside it. The effective rate is the only figure that captures every one of them.
- Does anything I type get sent anywhere?
- No. The whole calculation runs in your browser. Nothing is transmitted, stored, or logged, and there is no account to create.
Last updated .
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