Credit Card Fee Structure - Where the Merchant Fee Actually Goes

When you buy something for 10,000 yen with a credit card, the merchant pays a fee to the card company. In a survey report on credit card transactions published by the Japan Fair Trade Commission in April 2022, the simple average merchant fee rate was 2.70%, rising to 3.58% for merchants with annual sales below 10 million yen. Rates vary by industry and transaction volume: large chains that process high volumes negotiate lower rates, while small shops and e-commerce sellers tend to pay more.

That fee is divided among three parties.

The issuer (card-issuing bank). The company that issued the card to the consumer - Sumitomo Mitsui Card, Rakuten Card, and so on. The issuer receives the largest share of the fee. This revenue funds the points and rewards cardholders enjoy.

The acquirer (merchant processor). The company that manages the merchant relationship and processes transactions. It receives a set portion of the fee.

The card network (Visa, Mastercard, etc.). The company that provides the payment network. It receives the smallest share of the fee.

In other words, the 1% cashback you earn on your card is a slice of the fee the merchant pays. The money behind the points economy ultimately comes out of the merchant's revenue.

Do merchants pass card fees on to the prices consumers pay? The answer is "indirectly, yes."

In Japan, merchant agreements with card companies generally prohibit charging different prices for card and cash payments. A sign saying "3% surcharge for card payments" violates those agreements. However, merchants do bake the fee cost into their overall pricing.

Take restaurants as an example. As explained in restaurant cost structure, operating margins are thin. Card fees hit that thin margin hard. Many restaurants quietly build the cost into their menu prices.

The result is that cash-paying customers also pay prices inflated by card fees. Card users get points back, but cash users pay the same price with no reward. This structure can be read as "cash customers subsidize the points that card customers earn."

At electronics retailers and gas stations, you sometimes see signs like "X% off for cash payment." Card merchant agreements ban surcharges on card payments, but offering a cash discount occupies a gray zone that is generally tolerated.

The logic for electronics retailers is straightforward. Card fees on big-ticket items add up fast. If a customer pays for a 300,000-yen TV by card, the fee runs from several thousand to well over ten thousand yen. Getting that customer to pay cash eliminates the fee entirely. Even after giving a small cash discount, the store comes out ahead.

For consumers, the decision comes down to comparing the cash discount rate with the card's reward rate. If the cash discount is 3% and the card gives 1% back, cash wins by 2%. If the cash discount is only 1% and the card gives 1.5%, the card wins by 0.5%.

Build a habit of running the numbers on the spot using the principles in the math of discounts.

QR code payment services like PayPay charge merchants lower fees than credit cards. PayPay's official site lists a payment system usage fee of 1.60% to 1.98% (excluding tax; 1.60% for merchants on the Light plan) as of August 2026, below typical credit card rates.

The reason is a fundamentally different cost structure. Credit card transactions involve three intermediaries - the issuer, the acquirer, and the card network - each taking a cut. QR code payments are processed end-to-end by a single provider, which eliminates the middlemen.

Setup costs are also lower. A card terminal costs tens of thousands of yen; a QR code can be printed on paper. As discussed in the global comparison of cashless payments, this low barrier to entry fueled the rapid adoption of QR code payments in Japan.

For merchants, QR code payments mean a lighter fee burden than cards. For consumers, QR code reward rates can match or beat card rates depending on the conditions. Both sides benefit.

With an understanding of how card fees work, here is a practical guide to choosing the optimal payment method as a consumer.

Compare reward rates. The same purchase yields different returns depending on how you pay. Based on the official sites of major providers as of September 2026, standard reward rates mostly fall in the range of 0.5-1% for credit cards, 0.5-1.5% for QR code payments, and 0.5-1% for e-money. Keep the points economy in mind and pick the method with the highest effective return.

Do the math when a cash discount is available. Compare the cash discount rate against your card's reward rate and choose whichever is higher. The larger the purchase, the bigger the difference, so the calculation is worth doing.

Take advantage of campaigns. QR code services frequently run bonus-point campaigns. A service with a normal 0.5% return can offer a far higher rate during a promotion. Combine that with a referral code for even greater savings.

Weigh annual fees against reward rates. Cards with annual fees tend to offer higher rewards, but only make sense if you spend enough to recoup the fee. A card with an 11,000-yen annual fee and 1% rewards breaks even at 1.1 million yen in annual spending.