Restaurant Credit Card Processing: What You Need to Know to Ensure Smooth Payments in Your Business

Restaurant Credit Card Processing: What You Need to Know to Ensure Smooth Payments in Your Business

Fact: People like to use their credit and debit cards when they eat out. Research shows that 75% of consumers use their debit or credit cards when dining it at a restaurant.

Credit and debit cards are clearly an important payment method for consumers, which is why if you’re still operating on a “cash only” basis, you’re leaving a lot of money on the table.

Yes, accepting credit cards comes with fees, but in today’s business environment, the cost of not keeping up with consumers far outweigh the fees you could be paying. Besides, if you choose the right merchant service provider, you can minimize your credit card processing cost and keep a healthy amount of profits for your restaurant or cafe.

And that’s exactly what we’ll discuss today. This post will walk you through you the ins and outs of restaurant credit card processing. Go through the points below and see if you can apply them to your business.

Choosing the right payment processor for your restaurant

Optimizing your payment processing starts with selecting the best payment processor for your restaurant. Here are some of the top considerations when shopping around for a payment solutions provider:

Caters to your industry

Choose a credit card processor that caters to your business. This should be fairly easy, as most merchant services providers can support restaurants and food businesses. That said, if you’re running an experimental type of place, you may be considered high-risk, in which you’ll need to do more research to find a processor that can serve your business.

Offers low fees

This is one of the most important considerations when choosing a credit card processor. Restaurant margins are notoriously tight, and that lasting thing you want is to pay for unnecessary fees.

How do you avoid doing so?

Start by figuring out the payment structure of your processor. As we explained before, there are generally 4 types of payment models in the credit card processing world: tiered pricing, blended pricing, interchange-plus, and membership.

Before getting into what each of those means, you first have to understand the fees that come into play when someone swipes their card. They include:

  • Interchange fees – These are fees that are charged by banks to process credit cards. The merchant’s bank (aka acquiring bank) deducts interchange fees from the total amount processed which is then paid to the issuing bank.
  • Assessments – Assessment fees are paid to credit card networks — i.e., Visa, MasterCard, Discover, American Express, etc. This is how these brands make money from every transaction.
  • Markups – These are the fees of your credit card processor. Merchant service providers typically make their money by marking up the interchange and assessment fees mentioned above.

IMPORTANT: Payment processors do not have control over interchange and assessment fees. These are set by banks and credit card networks, and every merchant has to pay them. In short: these costs are non-negotiable.

What’s negotiable are the markups and they can vary from one provider to the next. That’s why you need to be smart when looking into payment processors and make sure that their fee structures are reasonable.

Here’s a breakdown of the different payment models that credit card processors use:

Tiered pricing

With this pricing model, your processor will bundle up the interchange and assessment fees with their markup, and they will then charge you based on three tiers: qualified, mid-qualified, and non-qualified.

The nature of a transaction will determine the tier in which it belongs. Debit cards and non-rewards credit cards are usually considered qualified charges, while business credit cards and high rewards cards would fall under the non-qualified category.

Here’s where it gets murky: because all the fees are bundled up into categories, tiered pricing lacks transparency around what you’re actually paying.

As Merchant Maverick writes, “Tiered pricing models make it impossible to tell how much of a processing charge is going to the issuing bank, the credit card associations (i.e., Visa, MasterCard, etc.), and how much is going to your merchant account provider.”

Another downside? Processors that use tiered pricing will usually only advertise their low qualified rates when luring in merchants. So, as the business owner, you sign up thinking that you’ll be paying for a certain low rate, when in reality most of your transactions will have higher mid- and non-qualified fees attached to them.

Blended pricing

Like tiered pricing, a processor that uses a blended fee structure bundles up assessments and interchange fees into their rate. The key difference is instead of using tiers, the provider just charges one simple fee for all transactions.

While it still lacks transparency, you’re at least not misled into thinking that you’re paying a low rate. This pricing model uses fixed pricing, so you’ll have a better idea of what you’re paying.


Interchange-plus is a lot more favorable than the two pricing models above. This is because unlike tiered or blended pricing, an interchange-plus fee structure transparently breaks down the rates charged by banks and card networks (i.e., interchange and assessment fees) and then adds their markup — hence the term “interchange PLUS”

The markup depends on a variety of components. As CardFellow puts it:

Many factors such as business type, processing method, owner credit worthiness and others are used to determine the basis point markup that a processor offers. For example, a quote of interchange plus 25 basis points would be competitive for a bail bonds company, but average for a retail business.

Do note just because interchange-plus pricing is more transparent, doesn’t necessarily mean that you’ll end up paying a low rate. To really figure out how much you’re being charged, you’ll calculate your effective rate and use that figure when comparing and negotiating with providers.

Not sure how to find your effective rate? We give you a step-by-step guide in this post. (Scroll down to the section titled “Finding the right interchange-plus deal”).

Also, remember that interchange-plus providers take their fees out of each transaction, so you’ll want to lower your rate as much as possible.


Now let’s talk about membership pricing. Arguably the best payment structure out there, providers that use a membership model charge you an annual membership fees for access to wholesale credit card processing rates.

These providers don’t take a cut out of your sales, nor do they markup interchange and assessment fees.

The membership pricing model is similar to interchange-plus because it also separates interchange and assessment costs from the processor’s fees. However, instead of taking an additional percentage out of every transaction, your membership provider will simply charge your membership dues.

If you see a lot of credit card transactions in your restaurant, membership pricing is typically the best option and can lead to lower rates.

Payment Depot is one example of a provider that uses membership pricing. Talk to us if you want to learn more.

Works with your existing technology

So, you’ve found a provider that serves your business and offers good rates. Your next consideration should be technology.

If you have existing payment equipment, talk to your payment processor and see if they can work with the devices you already have.

Let’s say you’re a busy cafe with limited countertop space you’re using a tablet or mobile POS. Or, maybe you’re using a new tabletop device that lets customers pay right from their table.

In any case, make sure your providers can work with your current system — or at least reconfigure them. Some payment processor, for example, can help you reprogram your equipment for free so you don’t have to replace your technology.

If this isn’t possible, then look into the POS solutions that your provider works with. They may offer special prices and deals if you work with their preferred partners, and this can help lower your equipment costs.

Just be sure to run the numbers. Sometimes, it may be worth replacing your equipment if you can score significantly lower payment processing rates. Other times, the costs aren’t worth it. Analyze your payments and financial situation and go from there.

Final words: Stop leaving money on the table

Credit card processing is critical for any restaurant or cafe. Whether you’re running a small coffee shop or offering sit-down meals, a sizeable chunk of your customers are using their credit cards to pay for their orders.

That’s why it’s so important to score the lowest payment processing rates possible. As a restaurant owner, you need every bit of revenue to effectively run your business.

If you need help selecting the best credit card processor, get in touch with Payment Depot. Tell us more about your business or send us your merchant statement. We can analyze the numbers and see if there’s room for more business savings in your cafe or restaurant.

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