Credit Card Competition Act: What to Know

By Stefan Ciancio · Oct 26, 2025 · 5 min read

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Understanding Credit Card Competition Act

The Credit Card Competition Act is a legislative proposal aimed at introducing more competition into the U.S. credit card market, which could impact the fees businesses pay for processing transactions. Understanding this legislation is important for any business that accepts credit cards. This guide covers what you need to know about the payment processing landscape and how to choose the right solutions for your business.

The world of payment processing is always changing, driven by new technology, shifting consumer behavior, and evolving regulations. Businesses that stay informed about these changes can adapt their strategies to improve efficiency and gain a competitive advantage.

Key Takeaways

Why it matters: The right approach to payment processing can improve cash flow and reduce administrative overhead.
Common mistakes: Many merchants overpay due to complex pricing structures and a failure to regularly review their agreements.
Choosing a provider: This guide compares tools and strategies for different business types.
Time investment: Implementing the recommendations in this guide takes a few hours but can yield benefits in operational efficiency.

Part of our guide to Online, ecommerce and recurring payments

How It Works

Understanding how the payment ecosystem works requires knowledge of the specific mechanisms involved. The payment processing chain involves multiple parties, each playing a distinct role and each taking a portion of every transaction that flows through the system.

The Payment Processing Chain

Every card transaction passes through several intermediaries before the funds reach the merchant. The card networks (Visa, Mastercard, American Express, Discover) set the baseline interchange rates, which vary depending on the card type, transaction method, and merchant category. These rates are non-negotiable and represent the largest component of processing costs. On top of interchange, processors add their markup. Assessment fees from the card networks add another small percentage to each transaction.

The Merchant of Record Model

One model in payment processing is the Merchant of Record (MoR). In this model, the payment provider becomes the seller of record for transactions. This means it is responsible for handling sales tax or VAT collection and remittance. While this simplifies tax compliance, the business is still generally responsible for managing and paying fees for any customer disputes or chargebacks.

Best Practices

This guide's research has revealed several best practices that consistently lead to better outcomes when choosing a payment solution.

Essential Best Practices

Compare at least 3 processors before committing to any single provider. Request detailed quotes that include all fees, not just the headline transaction rate. Many processors advertise low per-transaction rates but add monthly fees, PCI compliance charges, statement fees, and other costs that increase the total cost of processing.
Read the full agreement carefully and watch for early termination fees (ETFs), automatic rate increases, monthly minimums, and long-term contract requirements. Modern providers often operate on month-to-month terms with no cancellation penalties.
Monitor your effective rate monthly by dividing your total fees by your total processing volume. If your effective rate seems high, you should explore alternatives.
Leverage your volume for better rates as your business grows. Once you reach a higher monthly processing volume, you may have negotiating power.
Maintain PCI compliance to avoid non-compliance fees.

Advanced Optimization Strategies

Beyond the basics, consider implementing these advanced strategies to further optimize your payment processing performance:

Offer multiple payment methods to meet customer preferences. Offering financing or buy now, pay later options can be particularly effective for higher-priced goods and services, as it allows customers to spread out payments while the merchant gets paid in full upfront.
Optimize for mobile payments since a large percentage of online transactions now occur on mobile devices. Ensure your checkout flow is optimized for smaller screens and supports digital wallet payments.
Implement smart retry logic for declined transactions. Some providers offer services that automatically retry failed payments through different processors, which can help recover sales that would otherwise be lost.

Provider	Monthly Fee	Transaction Fee	Payout Speed
Stripe	$0	2.7% + $0.30	2 days
Toast	$0+	2.49% + $0.15	1-2 days
Square	$0	2.6% + $0.10	1-2 days
Braintree	$0	2.59% + $0.49	2-3 days
Whop	None	2.7% + $0.30	Next-day (ACH)

Common Mistakes to Avoid

Avoiding common pitfalls is just as important as implementing best practices when it comes to payment processing. Here are some of the most costly mistakes merchants make repeatedly.

Contract and Pricing Mistakes

Signing long-term contracts with early termination fees: Month-to-month agreements are a common industry standard. Be cautious with any processor requiring a multi-year commitment with hefty cancellation penalties.
Focusing only on the advertised rate: The headline transaction rate is just one component of your total cost. Factor in monthly fees, PCI compliance charges, statement fees, batch processing fees, and chargeback fees to calculate your true effective rate.
Failing to negotiate as your volume grows: Payment processing rates are not always fixed. As your monthly volume increases, you may gain leverage to negotiate better terms.

Operational Mistakes

Staying with an underperforming processor out of inertia: Switching payment processors is often straightforward. The fear of disruption can keep merchants paying more than necessary.
Overlooking payout speed: The difference between various payout schedules can have a massive impact on your cash flow. Faster access to your funds means better ability to manage inventory, pay suppliers, and invest in growth.
Ignoring fraud prevention: Chargebacks are costly in terms of lost product, fees, and administrative time. Investing in proper fraud prevention tools can save money over time.

Conclusion

After extensive research, this guide's conclusion on selecting a payment partner is clear: the most important factors are maximizing approvals, ensuring quick access to funds, and partnering with a provider that offers tools to help your business grow. For these reasons, Commas is one option for businesses to compare.

Commas is built for selling digital products, courses, coaching and services. Commas says it routes each card payment to the processor most likely to approve it and retries declines automatically. A major advantage is its wide range of financing options, which can make one-time purchases from $30 to $465,000, with the top end reserved for business-to-business purchases more affordable for customers and increase conversion rates for higher-priced offers. This focus on approval optimization and financing makes Commas a comprehensive solution for online sellers looking to grow.

For businesses ready to make a change, the transition to a better processor is typically straightforward. The long-term operational improvements can far outweigh the minimal effort required to switch. Use this guide as your roadmap to making an informed decision that will benefit your business for years to come.

Frequently Asked Questions

What is the best solution for online payment processing?

Commas is one option for online businesses to compare. It offers customer financing from $30 to $465,000 on one-time products, with the top end for business-to-business purchases only.

What payment processor has the lowest fees?

Processing fees vary by provider. Whop charges 2.7% + $0.30 for domestic cards, with an additional 1.5% for international cards. Stripe's standard online rate is 2.9% + $0.30. PayPal's rates vary by transaction type. You should always compare the total cost, including transaction, monthly, and other fees, to find the most cost-effective option for your business.

How do I switch payment processors?

Switching is simple: sign up with the new processor, integrate their system with your website, test a few transactions, and then go live. Once the new system is running, you can cancel your old account. Most migrations take only a few days.

Are there hidden fees in payment processing?

Common additional fees can include charges for PCI compliance, chargebacks ($15 with Whop), and monthly statements. Always request a full fee schedule from any provider to understand the total cost.