Business & Management

The Ultimate Guide to Restaurant Payment Processing

For restaurant owners, payment processing fees charged by restaurant point-of-sale (POS) systems, credit card processors and networks can be frustratingly complex and confusing to navigate.

Opaque fee structures, hidden charges, and difficulty comparing merchant services providers lead to a lack of transparency and feelings of being taken advantage of.

But it doesn’t have to be this way.

This guide aims to demystify credit card payment processing for restaurants in today’s evolving payments landscape.

Illustration of a mobile device showing a payment screen

Key Takeaways

Navigating payment processing fees requires understanding the complex fee structures and being diligent in monitoring your costs. However, with the right knowledge and proactive management, you can simplify payment processing and minimize fees.

  • Learn the fees charged by processors to uncover savings opportunities
  • Regularly analyze your statements to catch irregularities
  • Optimize your payment mix to lower interchange costs
  • Select the right pricing model for your business needs
  • Compare multiple providers to get the best rates
  • Negotiate fees aggressively – you have more leverage than you think
  • Continually monitor your rates and renegotiate when possible

What is a Payment Processor?

A payment processor serves as a liaison between merchants and card networks, such as Visa and Mastercard, authorizing and settling card transactions made through a POS system. Key considerations in choosing a restaurant POS system include:

  • The processor’s secure connection capabilities to major card networks
  • Ability to accept payments from major cards through card readers in sync with the POS system
  • Management of fund transfers from customer bank accounts to the restaurant’s merchant account post-transaction
  • Provision of technology for safe encryption and transmission of payment card data from the POS to the processor network
  • The standard processing charges encompassing interchange, authorization, statement fees, generally expressed as a percentage of each transaction

A well-chosen payment processor serves as an efficient and secure foundation for all credit and debit card transactions via your POS system, thereby reducing headaches and costs.

Understanding Processing Fees

When running a restaurant, fees from your credit card processor and network can quickly add up and impact your profits. To minimize these, you first need to understand the most common types of fees charged:

The Basic Fees

  • Transaction Fees – A percentage fee charged on the total transaction amount
  • Flat Rates – A fixed fee charged per transaction
  • Statement Fees – Monthly fees for maintaining payment processing

Additional Fees

  • Assessment Fees – Charged by the credit card networks
  • Chargeback Fees – Occur when customers dispute a charge

Minimizing Your Fees

  • Choose an interchange-plus pricing model to reduce interchange fees
  • Negotiate rates – don’t accept the first offer
  • Explore cost-saving tools like aggregation to combine transactions

The key is to understand exactly what you are being charged for and negotiate the best deal possible. Don’t hesitate to push back on unnecessary fees from your credit card processing service.

Reading Your Processing Statement

Analyzing your monthly processing statements regularly is crucial to understanding and managing your fees. Follow these key steps:

1. Identify Total Fees – Look for the total fees line – this is the total amount you paid in fees for the month.

2. Understand the Fee Breakdown – Review the fee breakdown section – this shows you what fees made up the total. Watch for any irregular fees.

3. Calculate Your Effective Rate – Divide total fees by total sales to get your effective rate (the % of sales you paid in fees).

4. Scan for Inconsistencies – Verify fees match your pricing model. Watch for unexplained increases.

Carefully reviewing statements helps you catch any issues early. Don’t hesitate to contact your processor with any fee questions.

Optimizing Your Payment Mix

The types of credit cards and prepaid cards your customers use can significantly impact your credit card processing costs. Understanding your “payment mix” is key to optimizing fees.

  • Debit cards have lower interchange rates from the credit card networks, reducing processing fees
  • Rewards cards tend to have higher rates, increasing your credit card processing costs
  • Transactions, where the card is present in person, have lower rates than card-not-present

Tips for Optimizing Your Mix:

  • Provide incentives like discounts to encourage debit card or prepaid card usage to reduce interchange fees
  • Consider limiting high-fee card types like certain rewards cards if feasible for your business
  • Promote and encourage on-site dining and card-present payments to increase lower-rate transactions
  • Use your credit card processing statements to analyze your mix in detail and identify opportunities to shift toward lower-cost payment options

Carefully analyzing your payment mix and customer payment preferences allows you to steer volume toward lower-cost card types through targeted incentives and promotions. This can significantly reduce your overall credit card processing volumes on high interchange fee cards, resulting in savings.

Choosing a Credit Card Processing Pricing Model

Two primary credit card processing pricing models exist – fixed rate and interchange-plus. Understanding the differences is key to choosing the right model.

Fixed Rate Model:

  • Charges a flat percentage fee + fixed fee per transaction
  • Provides simple and predictable per-transaction processing rates
  • But can cost more for cheaper transaction types like debit and card-present

Interchange-Plus Model:

  • Charges the exact interchange rate from the card networks + markup per transaction
  • Rates vary based on the interchange fees of each transaction type
  • Is often cheaper overall, especially for debit cards and other lower-cost transactions

Comparing the Models:

The interchange-plus model allows you to pay the true cost of each transaction and then add your markup. This results in lower fees for the cheapest transaction types. But the fixed rate model provides consistent per-transaction rates that are easier to predict.

Evaluate your typical payment mix and transaction types. If you process a significant share of lower-cost debit transactions, interchange-plus offers an opportunity for fee savings given the interchange rate pass-through.

ModelProsConsBest For
Fixed RateSimple, predictable per-transaction feesPotentially higher fees for cheaper transaction typesBusinesses with higher card-not-present transactions
Interchange-PlusPass on lower interchange rates for cheaper transaction typesMore complex, less predictable per-transaction feesBusinesses with more debit/card-present transactions

Choosing a Processor

Choosing the right credit card processor is a critical decision for any restaurant business. Focus on these key factors when evaluating merchant services providers:

  • Pricing and Fees – Thoroughly compare rates and fees across multiple processors. Look for the most competitive interchange rates and transaction fees.
  • Data Security – The processor should offer point-to-point encryption, tokenization, and other security measures to safeguard payment data. Confirm PCI compliance.
  • Payment Reliability – Look for processors with high uptime and redundancy to avoid systemic outages that could impact business operations.
  • Omni-channel Capabilities – Seek processors that seamlessly support in-person, online, and mobile payments from one platform.
  • Customer Support – Assess responsiveness, issue resolution, and availability of support. Look for dedicated account management.
  • Developer APIs – Processors with APIs make custom integrations and new app features easier.

Take the time to thoroughly evaluate and compare features across multiple credit card processing companies. Get multiple quotes and be prepared to negotiate the best rates and fees.

How POS Companies Make Money from Payment Processing

Cloud-based restaurant point-of-sale providers offer a variety of services, but a significant portion of their revenue often comes from payment and credit card processing.

This is because every time a customer pays with a credit or debit card, the POS company charges a fee for processing the transaction. These fees can add up quickly, especially in high-volume businesses like restaurants.

There are several reasons why POS companies prefer their customers to use their own payment processing services rather than third-party processors:

1. Revenue Generation: As mentioned, transaction fees are a major source of revenue for POS companies. By encouraging their customers to use their payment processing services, they can ensure a steady stream of income.

2. Simplified Support and Troubleshooting: When a restaurant uses the same company for both its POS system and payment processing, it can simplify support and troubleshooting. If there’s an issue, there’s only one company to contact, and there’s no risk of the POS company and the payment processor blaming each other for the problem.

3. Integrated Reporting: POS companies can offer integrated reporting and analytics when they handle payment processing. This can make it easier for restaurant owners to track sales, identify trends, and make data-driven decisions.

4. Competitive Advantage: Finally, offering payment processing can give a POS company a competitive advantage. If a restaurant is choosing between two similar POS systems, they might choose the one that also offers payment processing to simplify their operations.

While POS companies have valid reasons for wanting their customers to use their payment processing services, it’s important for restaurant owners to do their homework.

The convenience of using a single company for both services can be beneficial, but it’s also important to compare fees and ensure you’re getting the best deal.

Negotiating Lower Fees

As a restaurant business, you have more influence than you think when negotiating your credit card processing rates and fees. Follow these tips to drive savings:

  • Leverage your transaction volume – Emphasize monthly processing volumes and project growth. Highlight the revenue opportunity you represent.
  • Use competitors strategically – Politely mention better rates from competitors and use for leverage.
  • Bundle services – Offer to use the processor for additional services like payroll in exchange for better processing rates.
  • Request custom packages – Ask reps to design a customized quote with incentives that cater to your business needs and situation.
  • Seek promotions – Inquire about new customer promotions, referral bonuses, or other incentives that can be applied to your deal.
  • Change providers – Don’t stay complacent. Change providers to incentivize the best offers.
  • Sign a longer contract – Offer a 3-year contract or more in exchange for significantly lower rates.

With preparation, persistence, and negotiating savvy, you can often reduce your credit card processing costs substantially. The competition for your business gives you influence – learn how to use it.

Negotiation Checklist

  • Understand your monthly transaction volume and processing needs
  • Get fee quotes from multiple providers for comparison
  • Ask about available discounts for higher volume
  • Be prepared to make a case for lower rates
  • Offer to sign a longer contract for better rates
  • Set a timeline for reviewing rates and fees

Tips for Negotiating

  • Don’t accept the initial offer – there is usually room to negotiate
  • Focus on driving down your basis points fee
  • Request caps on higher fees like monthly minimums
  • If declining, clearly explain why to encourage a better offer
  • Be persistent yet professional – negotiate firmly but fairly

With preparation and persistence, you can often negotiate significantly lower processing fees. The competition for your business gives you leverage – use it!

Managing Ongoing Fees

Payment processing costs need vigilant ongoing monitoring and management. Here are some best practices:

  • Review statements closely – Scrutinize your merchant services statements each month and note any rate or fee increases. Watch for new fees.
  • Calculate effective rate regularly – Divide total monthly fees by processing volume to routinely check your effective rate.
  • Analyze transaction data – Use processor reporting tools to analyze your transaction mix, volume trends, and other data.
  • Stay informed on industry changes – Technology changes, new rules, security standards, etc. can impact costs. Stay in the know.
  • Reassess needs periodically – Shop competitors regularly even while under contract to evaluate market rates.
  • Renegotiate contract renewals – Leverage contract expiration as an opportunity to negotiate better pricing.
  • Leverage higher volumes – As your sales and transaction volumes increase over time, press for lower rates.
  • Explore cost-saving tools – Aggregation, interchange optimization, and other tools can drive savings.

Continual vigilance will allow you to catch unnecessary fees early and be proactive. Avoid complacency – there are always opportunities to reduce payment processing costs.

Read more: How Your Restaurant POS Can Be Your Secret Weapon


Payment processing is a necessary expense for any restaurant but it should not be a black box. Follow the steps in this guide to take control of your payment costs. With the right approach, you can establish transparency and ensure you are getting the best deal for your business.

You might also like:

How Much Does a Restaurant POS System Cost?
22 Benefits of a Cloud-Based Restaurant POS vs Legacy
6 Best Restaurant POS Systems
5 Best iPad Restaurant POS Systems


  • Highlight your average transaction volume and growth potential – processors want long-term, high-volume customers so emphasize this. Provide projections showing increasing transaction volume over time.
  • Talk up additional business opportunities like adding terminals or locations. Suggest you’re considering expanding and will bring them more transactions.
  • Politely mention better rates offered by their competitors. Say you want to stay with them but the rate gap is substantial. Ask what they can do to match or beat the competitor’s rate.
  • If you’ve been a loyal customer, kindly remind them of the length of your relationship and that you’ve referred others to them as well. Mention you hope the loyalty goes both ways.
  • Ask about any new customer promotions or incentives for switching providers. See if those can be applied to your existing account to retain your business.
  • Offer to sign a longer-term contract in exchange for better rates. This provides them with guaranteed business, sometimes for a year or more.

The key is demonstrating you are a valuable long-term client worth retaining and incentivizing. Be persistent yet positive – by making a solid case backed with data, you can often negotiate very favorable rates.

Common fees include interchange fees, assessment fees, transaction fees, chargeback fees, and statement fees. Understanding the fee structure is crucial.

Reputable processors use encryption, tokenization, and other security measures to protect card data and ensure PCI compliance.

On average, merchants see funds in 2-3 business days after the transaction is authorized. This is known as settlement.

Look for processors that provide easy access to transaction history, statements, insightful reporting, and data analytics.

Most POS systems come integrated with a payment terminal or card reader. Wireless, portable, and countertop options are available.

Most processors enable accepting major cards like Visa, Mastercard, American Express, Discover, JCB, and Diners Club. Ensure your processor supports the card mix typical for your customer demographic.

Look for processors that enable omnichannel payments like online ordering, virtual terminals, and mobile POS.

Choose interchange-plus pricing, optimize your payment mix, offer incentives for cheaper payment types like debit cards, and negotiate rates.

Avatar photo

Jan is a writer and content creator at with a focus on the restaurant and food service industry. Drawing from his background in tech and UX design, Jan breaks down complex systems into digestible, actionable insights.

We Help Restaurants Build A Thriving Business
Our free online education guides restaurants through practical technology upgrades, marketing strategies, and business operations fine-tuned for 2024 and beyond.


Content Brand AB
Norrbackagatan 14.
SE-11341 Stockholm