How do payment gateway fees work?

Payment gateways charge a combination of a variable percentage fee (e.g. 2.9%) based on transaction volume and a fixed dollar fee (e.g. $0.30) per transaction to cover interchange, network, and gateway risk assessment.

What is the difference between a Payment Processor and a Merchant of Record (MoR)?

Payment processors like Stripe or PayPal process the transaction while you remain liable for tax compliance. Merchant of Record (MoR) platforms like Paddle or Lemon Squeezy charge higher base fees (e.g. 5% + $0.50) but handle global sales tax, VAT, and compliance automatically.

How do I calculate how much to charge so I receive a specific net amount?

To receive a target net payout (N), calculate the gross price (G) using the formula: G = (N + Fixed Fee) / (1 - Variable Percentage Rate).

💳 Payment Gateway Fee & Net Payout Calculator

Compare actual net merchant payouts across Stripe, PayPal, Paddle, Lemon Squeezy, and Square.

Sale / Asking Amount ($)

Card Location / Origin

Est. Monthly Transactions

Calculate "Pass Fee to Customer" (Gross Charge to receive exact net) Include Currency FX Conversion Fee (+1.0% avg)

Top Net Payout (Stripe) $0.00 Fee: $0.00 (0.0%)

Target Gross Charge (To Net $100) $0.00 Add $0.00 to price

Monthly Loss to Fees $0.00 Based on 50 sales/mo

Live Provider Comparison

Gateway / Platform	Fee Structure	Per-Sale Fee	Pass-Fee Price	Net You Keep

Net Payout Comparison Across Processors

Reviewed by TheToolsPedia Financial Engineering Team

Our payment comparison models are built and routinely validated by fintech software engineers and quantitative financial analysts. We regularly monitor merchant fee disclosures across primary payment networks to reflect standard domestic and cross-border interchange rates accurately. Learn more on our About Us page.

1. Introduction to Payment Processing Fees

For online businesses, SaaS platforms, and e-commerce merchants, credit card processing fees represent one of the most substantial direct operating expenses. Every time a buyer submits a credit card payment online, multiple intermediaries take a fraction of the transaction value.

Understanding the components of credit card processing fees—including interchange fees, assessment fees, and merchant processor markups—allows business owners to optimize pricing models, evaluate Merchant of Record (MoR) solutions, and choose payment gateways that maximize net margins.

2. How Merchant Fees Are Calculated: The Two-Part Formula

Most modern online payment processors utilize a standard two-part rate structure consisting of a **percentage-based fee** and a **fixed per-transaction fee**:

Total Fee = (Sale Amount × Variable Rate %) + Fixed Transaction Fee

Variable Rate (%) Covers interchange risk and card brand fees (Visa, Mastercard, Amex). Increases for international cards due to cross-border settlement risks.

Fixed Fee ($) Flat dollar surcharge per transaction (e.g., $0.30 or $0.49) to cover network authorization and gateway communication.

3. The Reverse Fee Formula: How to Pass Fees to Customers

Merchants often want to charge customers a gross price that ensures they receive a specific net payout after the payment gateway takes its cut. Simply adding the fee percentage to your desired price will leave you short because the processor calculates their fee on the **new higher gross total**.

To calculate the exact price to charge (Gross Amount, $G$) to receive your desired Net Payout ($N$), use the algebraic reverse equation:

G = (N + Fixed Fee) / (1 - Variable Rate Decimal)

For example, to net $100.00 on Stripe (2.9% + $0.30), calculate ($100 + $0.30) / (1 - 0.029) = $103.30 / 0.971 = **$103.30**. Charging $103.30 yields exactly $100.00 net after Stripe's $3.30 fee.

4. Payment Gateway vs. Merchant of Record (MoR)

Category	Standard Processors (Stripe, PayPal)	Merchant of Record (Paddle, Lemon Squeezy)
Base Pricing	2.9% + $0.30	5.0% + $0.50
Global Sales Tax / VAT	Merchant handles filings manually	Handled automatically worldwide
Chargeback Liability	Merchant bears full risk ($15 fee)	MoR manages chargebacks & fraud

5. Frequently Asked Questions (FAQ)

Why are international credit card fees higher?

International transactions involve cross-border currency conversion, foreign bank settlement networks, and elevated fraud risk. Payment processors add a 1.0% to 1.5% surcharge to cover these operational costs.

Is it legal to pass payment fees to customers?

In many jurisdictions, credit card surcharging is legal provided it does not exceed your actual cost of processing and is disclosed clearly at checkout. Check local consumer laws before implementing surcharges.