Introduction
Imagine this: you sell a product online and celebrate every sale. However, those little processing fees can quietly erode your profits. In this post, we explain what is payment gateway charges, why they matter, and how to keep them in check.
What Are Payment Gateway Charges?
Payment gateway charges are the fees merchants pay to process credit- and debit-card transactions. Simply put, they cover the cost of securely moving funds from your customer’s bank to yours.
Definition of the Fee
- Merchants incur a small cost each transaction.
- Covers encryption, fraud checks, and network costs.
Who Levies the Charge?
- Gateway providers such as Stripe, PayPal, and Razorpay.
- Banks and card networks may add small surcharges.
Typical Fee Structures
- Flat fee + percentage: e.g. $0.30 + 2.9% per transaction.
- Tiered pricing: lower rates for higher monthly volume.
- Monthly minimums: some providers charge if you don’t meet volume.
| Provider | Flat Fee | Percentage | Volume Discount |
|---|---|---|---|
| Stripe | $0.30 | 2.9% | ≥$50K/mo → 2.7% |
| PayPal | $0.30 | 2.9% | Custom for ≥$100K |
| Razorpay | ₹3 | 2% + GST | ₹1M/mo → 1.8% |
See our guide on Type of E-Commerce
Learn more at PayPal Merchant Fees
How Are Payment Gateway Charges Calculated?
Calculating payment gateway charges uses a simple formula: (transaction amount × rate) + fixed fee. Therefore, understanding each component helps you forecast costs.
Flat Fee + Percentage Model
def calculate_fee(amount, rate=0.029, flat_fee=0.30):
return round(amount * rate + flat_fee, 2)
print(calculate_fee(100.00)) # Outputs 3.20
This snippet shows how a $100 sale incurs a $3.20 fee.
Volume-Based Discount Tiers
- Under $10K/month: 2.9% + $0.30.
- $10K–$50K: 2.7% + $0.25.
- Over $50K: negotiate even lower rates.
Cross-Border and Multi-Currency Surcharges
Also, international cards often carry an extra 1%–2% fee. Consequently, factor in these costs for global sales.
See Razorpay Pricing
Tips to Minimize Payment Gateway Charges
You don’t have to accept every default rate. Instead, use these strategies to lower your costs.
Negotiating Volume Discounts
- Track your monthly transaction volume.
- Approach your provider for better tiers once you hit thresholds.
Choosing the Right Plan
- Compare pay-as-you-go versus subscription models.
- Subscription plans often waive flat fees for high volume.
Routing High-Value Transactions
- For large orders, route through the cheapest gateway.
- Use automation to switch based on amount thresholds.
Conclusion
- Payment gateway charges cover transaction, security, and network costs.
- You calculate them with a simple rate-plus-flat-fee formula.
- Negotiate, choose plans wisely, and route big sales to save more.
Ready to cut your fees? Contact our sales team for a custom rate quote today.