Merchant payment processing in the US: The complete 2026 guide
Nicolas Straut
Business Finance Writer - AMER
Key takeaways
U.S. merchants paid $187.2 billion in processing fees in 2024 — up 8.8% from $172.05 billion the year before.¹
Every card transaction runs in two stages: authorization happens in seconds, the bank checks funds and either approves or declines. Clearing and settlement comes later, moving the actual money over the next one to three business days.
Fintech platforms like Airwallex and competitors such as Stripe, PayPal, and GoCardless offer varying balances of developer flexibility and cost, with Airwallex prioritizing multi-currency settlement to eliminate forced exchange fees.
US merchants paid $187.2 billion in card processing fees in 2024, and that number keeps climbing.¹ Most businesses accept that cost without really understanding it. But every dollar in fees has a destination: interchange goes to the issuing bank, assessments go to the card network, and markup goes to your processor. This guide covers how the transaction lifecycle actually works, how fees are built, and what to look for before signing with a provider.
Understanding merchant payment processing
What is merchant payment processing?
Merchant payment processing is how your business gets paid when a customer doesn't hand you cash. It covers everything from capturing the card data at checkout to routing that transaction through the card networks and landing the money in your bank account.
Selecting the wrong infrastructure can drain capital through hidden transaction markups and slow settlement timelines.
How does merchant payment processing work?
The transactional journey separates into two distinct chronological phases. The first phase manages the immediate risk of authorization in real time. The second phase handles the physical movement of cleared funds after the buyer has left the checkout.
Phase 1: Real-time transaction authorization
This first phase occurs in the seconds immediately after a buyer initiates a purchase, focusing on validating the customer’s identity and confirming fund availability.
Step 1: The customer submits card details at checkout
The customer either types in their card details online or taps at the terminal. That action kicks off either a card-present or card-not-present transaction, the distinction matters because they carry different fraud risk and different fee rates.
Step 2: The payment gateway encrypts and transmits the details
The payment gateway encrypts the card data and sends it to the payment processor.
Step 3: The payment processor forwards the request to the network
The payment processor picks up the request and routes it to the right card network: Visa, Mastercard, Amex, or Discover.
Step 4: The issuing bank checks and approves the purchase
The card network forwards the request to the issuing bank. The bank checks the balance, runs its fraud checks, and sends back an approval or decline.
Step 5: The card network relays the decision back to the merchant
The issuing bank transmits its approval or decline code back through the card network to the payment processor, which forwards the result to the merchant.
Phase 2: Transaction clearing and settlement
Once approved, the actual movement of funds begins. This back-end process takes place after the consumer has left the checkout and typically completes within one to three business days.
Step 1: The merchant submits daily transaction batches
At the end of each business day, the merchant batches all authorized transactions and sends them to the processor for clearing.
Step 2: The card network coordinates the transfer of funds
The card network coordinates with issuing banks to pull authorized funds and clear them to the acquiring bank.
Step 3: The settled funds land in the merchant account
The acquiring bank deposits the funds into the merchant account, minus processing fees, within one to three business days.
Merchant services vs merchant accounts, payment processors, and payment gateways
Merchant services, merchant accounts, and payment processors are often used interchangeably but each describes a specific component in the payment stack. Understanding the difference between merchant services vs payment processors vs payment gateways helps you build the right treasury controls and negotiate more effectively.
| Merchant services | Payment processor | Payment gateway |
|---|---|---|---|
What it is | The full suite of tools and accounts needed to accept non-cash payments | Once the customer is gone at the end of the business day, you batch all your approved transactions and submit them to the processor to kick off clearing. The full process settles within one to three business days. | The front-end software that captures and encrypts card data at checkout |
Core function | Bundles gateway, processor, and merchant account into one agreement | Authorizes, clears, and settles every card transaction | Secures and transmits payment details to the processor |
Who manages it | Your payment service provider or acquirer | Specialized fintech provider or acquiring bank subsidiary | Standalone provider or bundled with your processor |
Merchant payment processing fees and pricing models
Processing fees are split between multiple parties, which is why your statements can be hard to parse. Once you know what each line item actually represents, hidden markups become a lot easier to spot.
Interchange fees
Interchange fees are the largest portion of transaction fees, ranging from 1.15% to 3.15% per transaction, and goes directly to the cardholder’s issuing bank. Rates vary based on card type, transaction risk, and whether the card is physically present. Premium rewards and commercial cards carry higher interchange rates than standard debit cards.
Assessment fees
Assessment fees are paid directly to card networks like Visa and Mastercard for operating their global payment systems. These fees run 0.13% to 0.15% of transaction volume. Unfortunately, there's no negotiating with them as they go straight to the card networks.
Processor markups
The processor markup is the fee charged by your provider to handle routing and settlement. Markups typically combine a small percentage from 0.10% to 1.00% with a flat per-transaction fee of $0.10 to $0.30. This is the only payment processing fee a business can negotiate, so it’s vital to review it regularly.
Additional fees
Beyond the core fees, processors tack on charges for specific events — gateway fees, batch settlement fees, PCI compliance fees. Chargebacks will run you $20 to $100 per dispute. None of this gets advertised upfront. You'll find it buried in your monthly statement.
Blended flat-rate pricing
Flat-rate pricing charges one rate across every transaction: usually 2.9% + $0.30 online. It's easy to predict, but you pay the same rate whether the customer uses a debit card or a premium rewards card. That's a bad deal if debit makes up a significant slice of your volume.
Interchange-plus pricing
Interchange-plus pricing passes the raw, non-negotiable interchange and assessment fees directly to the merchant with a separate, clearly defined processor markup. This model is recommended by industry analysts because it shows exactly what goes to the network, the issuing bank, and the processor.
Tiered pricing
Tiered pricing groups transactions into qualified, mid-qualified, and non-qualified categories. Processors advertise the lowest qualified rate but use network rules to reclassify common transactions into higher-cost tiers. If your finance team cares about understanding what they're actually paying, skip this model.
Hidden fees
A lot of processors bury extra charges in the contract: early termination fees, statement fees, compliance penalties. Read the fine print before you sign. In 2025, Visa raised its Misuse of Authorization Fee from $0.09 to $0.15, and Mastercard increased its Excessive Authorization Attempts Fee. Network fee updates scheduled for April 2026 are estimated to add up to $3.0 billion in additional costs to U.S. merchants.³
Without transaction-level validation on your monthly statements, these increases go unnoticed and accumulate into significant annual cost overruns.
How to choose the best merchant payment services for your business
Your payment infrastructure affects checkout conversion, fee structure, and how easily you can grow. Before you commit to a provider, work through these three areas.
What to look for in a merchant payment processor
The right processor must match your transaction volume, geographic footprint, and accounting workflow.
Direct integrations with your existing systems
Your processor should connect directly to your eCommerce platform, inventory system, and accounting software. If it doesn't, you're reconciling manually and that adds up fast.
Security standards and PCI compliance
Look for PCI DSS Level 1 certification and tokenization as baseline requirements. Beyond that, check how the fraud engine is tuned: a system that creates too many false declines costs you legitimate sales.
Payout speed and daily funding timelines
Traditional bank processors often hold funds for two to three business days before clearing your account. Digital-first providers like Airwallex Payments offer faster settlement through local payment rails, improving daily working capital.
Multi-currency payment processing for global eCommerce
Most domestic processors weren't built for international volume. Once you're selling across borders, you need infrastructure that can hold and settle in multiple currencies, not one that forces a conversion every time you get paid.
How forced currency conversions eat your margins
Legacy processors frequently force automatic currency conversion back to the merchant’s home currency. These forced conversions carry FX markups of 3% to 4%, and for businesses with significant European or UK sales, that means paying a markup on every EUR to USD and GBP to USD conversion.
Bypassing FX markups with local acquiring networks
Platforms that support local acquiring networks process transactions domestically across multiple regions, improving authorization rates, avoiding international card surcharges, and enabling like-for-like settlement so you keep revenue in the currency it was earned.
How to set up merchant payment services
Setting up credit card processing is a sequential process that requires coordination between your finance and technical teams.
Submit your underwriting application with tax identification, proof of business registration, and processing history to establish your merchant status.
Choose your integration method: a simple pre-built checkout plugin or a customized API implementation.
Turn on local payment methods for each market: the right wallets and payment rails vary by region, and missing them means lost checkouts.
Get your fraud rules configured before you go live. That means setting up 3D Secure authentication, dialing in your fraud engine thresholds, and turning on address verification.
Test everything in sandbox before you flip the switch. Make sure authorizations, batch settlements, and GL reconciliation all work the way you expect.
Why Airwallex is the best merchant payment processing solution
Airwallex Payments is built for businesses that deal in multiple currencies and don't want to convert every time they get paid. You can accept payments in 130+ currencies and settle like-for-like in 20+ currencies directly into your Global Accounts, no forced conversion, no unnecessary FX fees.
Airwallex routes payouts through local payment rails in 120+ countries, bringing transfer fees to near-zero and settling 93% of international payments on the same day or within hours. For comparison, Stripe provides strong API customization but charges an extra 1.5% on international card fees and 1% FX markups. Square works well for local retail but lacks multi-currency accounts and forces all international sales into immediate conversion.
For a complete breakdown of the competitive landscape, see our guide to the best online payment processing solutions.
Frequently asked questions about merchant payment processing
What is the difference between merchant services and a payment gateway?
Merchant services refers to the full package: hardware, software, and accounts, that lets you accept non-cash payments. The payment gateway is one piece of that: it's the software that encrypts and moves card data at checkout.
How much are typical merchant payment processing fees?
Fees typically run 1.5% to 3.5% per transaction, depending on the card network and how the payment is taken. In-person transactions tend to cost less than online ones , card-not-present carries more fraud risk, and that's priced in.
Can a business process card payments without a dedicated merchant account?
Yes, payment facilitators like Airwallex Payments aggregate merchants under a shared account, which means you can get up and running faster without going through full underwriting.
How long does it take to receive funds from merchant card processing?
Standard credit card settlement takes one to three business days. Airwallex Payments settles 93% of international payouts same-day or within hours via local payment rails.
Why do payment processors freeze or hold merchant balances?
Processors freeze balances when they detect sudden volume spikes, elevated chargeback rates, or potential fraud. Keeping your chargeback ratio below 1% and maintaining consistent processing patterns reduces the risk of holds.
What is the difference between interchange-plus and blended flat-rate pricing?
The difference is that interchange-plus separates raw card network costs from the processor’s markup for full billing transparency while blended flat-rate bundles all fees into a single rate, prioritizing simplicity over cost control.
How does a business process international payments without high bank fees?
The best way to process international payments without high bank fees is to use Airwallex Payments, which provides local acquiring networks in 120+ countries so you can collect, hold, and spend local currencies natively without bank conversion fees.
Sources
1. https://nilsonreport.com/news-events/nilson-in-the-news/
2. https://staxpayments.com/blog/credit-card-processing-rates/
3. https://cmspi.com/april-2026-u-s-network-fee-updates-3-billion-estimated-cost-impact-for-merchants/
4. https://www.airwallex.com/us/blog/top-payment-processors
5. https://www.airwallex.com/us/blog/best-online-payment-processing
Nicolas Straut
Business Finance Writer - AMER
Nicolas is a business finance writer at Airwallex, where he writes articles to help businesses in the United States and Canada find solutions to their banking and payments questions. Nicolas has written for financial publications including Forbes Investor Hub, This Week in Fintech, and NerdWallet Small Business.
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