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Federal agencies paid about $784 million in payment-card fees in fiscal year 2023, according to a 2025 review by the U.S. Government Accountability Office (GAO) covering more than 85 federal entities. These fees are a per-transaction cost built from several layers, and they apply whether a customer pays at a counter, on a website, or through a mobile app. Interchange, the largest layer, dominated the fees GAO examined in detail. Moving payments online can make paying easier and reduce cash and check handling, but it does not by itself remove these fees.
What GAO’s FY 2023 figures show
The most current national federal figures in this article come from GAO’s 2025 report, which uses fiscal year 2023 data. The Treasury Bureau of the Fiscal Service (BFS) is shown separately because GAO reports its figures on their own.
| Measure (FY 2023) | All federal entities in GAO’s fee total | Treasury Bureau of the Fiscal Service (BFS) |
|---|---|---|
| Card transactions | 743 million | 153 million |
| Card revenue | $43.604 billion | $18.602 billion |
| Card fees paid | About $784 million | About $312 million |
| Average fee per transaction | $1.06 (GAO-reported) | About $2.04 (calculated: $312 million divided by 153 million transactions) |
| Fees as a share of revenue | 1.8% (GAO-reported) | About 1.7% (calculated: $312 million divided by $18.602 billion) |
The two averages describe different sets of transactions and should not be read as a verdict on efficiency. GAO’s summary does not explain the gap, so the difference shows that averages vary, not why.
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GAO describes a typical Mastercard or Visa transaction as carrying three kinds of charges. The participants and settlement arrangements vary by network and by agency, so the labels below describe the common structure rather than every contract.
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Interchange
Interchange is paid to the card issuer, the institution that issued the customer’s card. It is the largest layer. GAO states: “Interchange fees accounted for nearly 90 percent of the fees selected entities paid in FY 2023” (GAO-25-107298, published April 30, 2025). That share covers the selected entities GAO examined in detail, not every federal entity.
Network fees
Network fees are paid to the card network, such as Mastercard or Visa, for operating the payment system.
Processing and acquirer fees
Processing and acquirer fees pay for routing transactions and related services through the acquirer and processor.
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GAO says BFS settles transactions “at par,” meaning the full transaction amount settles and acceptance costs are paid separately. In FY 2023, BFS’s roughly $312 million in fees broke down into about $299 million in interchange and network fees and about $13 million in processing and other fees.
Because interchange dominates, switching processors alone does not remove the largest cost. An agency that wants to change its bill has to look at the merchant category assigned to its business, the rate categories its transactions qualify for, its card mix, and how transactions are routed.
What modernization can and cannot change
Card and electronic channels offer payers convenience. GAO also identifies two benefits for agencies: less administrative work handling cash and checks, and meeting customer expectations for card and electronic payment. These gains are real, and they are the main reason card acceptance is valued beyond its fee line.
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- Can change: the channels customers use, the volume of cash and check handling, and the agency’s ability to accept the payment types customers expect.
- Does not automatically change: interchange, network and processing fees, fraud prevention, infrastructure and equipment, and staff operations.
- May shift cost to payers, but only where lawful and contract-compliant: a surcharge or convenience fee. The legal limits are covered below.
Cost levers agencies reported using
GAO found selected federal entities using several levers to manage card costs. The table shows what each lever is and what GAO reported about it.
| Lever | What GAO reported | Limits and conditions |
|---|---|---|
| Meeting volume thresholds | Five entities reported reducing fees by meeting volume thresholds | Results depend on contract terms and transaction mix |
| Pricing-model and merchant category review | Entities examined merchant category codes and pricing models | Not stated: GAO’s findings give no savings figure for this lever |
| Debit routing | Entities routed eligible debit transactions over lower-cost networks | Depends on contracts, networks, transaction mix, technical capability, and applicable rules |
| Card-type and transaction-amount restrictions | Entities restricted specific card types or transaction amounts | Not stated: GAO’s findings give no savings figure; restrictions also limit what payers can use |
| Transaction analysis | Entities analyzed their transactions | Not stated: GAO’s findings give no savings figure for this lever |
| Processor and acquirer comparison | Entities compared processors and acquirers | In the BFS breakdown, processing and other fees were about $13 million of $312 million |
Two entities described difficulty navigating network rules, and two reported unsuccessful network negotiations. Treat the levers as reported experiences, not a guaranteed playbook.
A state example: operations checklist from Delaware
An earlier Delaware state review offers a concrete operations checklist. It is a single state’s guidance, not a national standard. It recommends that agencies:
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- Check whether merchant category assignments match the agency’s actual line of business.
- Use available fraud-prevention measures for card-not-present payments, such as online and telephone transactions.
- Monitor interchange qualification and batching practices, since these affect the rate a transaction receives.
- Assess processor costs alongside reporting and accounting needs, not on price alone.
The review’s contract savings estimates apply to the contract it examined. They should not be carried over to another contract, and current terms should be checked before relying on any figure.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Who can pass card costs on to payers
No national rule lets every government add a card surcharge. Authority depends on statute, network rules, and contract terms.
Federal agencies
- GAO reports that IRS card-payment fees are borne by taxpayers under the applicable authority.
- GAO identifies a separate statutory fee at the Defense Commissary Agency.
- BFS officials told GAO they were unaware of general surcharge or convenience-fee authority for other entities using the Card Acquiring Service, apart from that statutory exception.
A state example: Florida
Florida Statutes section 215.322, as codified in 2026, is a concrete but limited example. Covered local governments must accept specified card and electronic-funds-transfer payments, must have an online acceptance method, and are authorized to surcharge specified types of obligations in an amount sufficient to cover service fees. This applies to Florida’s covered local governments only. Other jurisdictions can differ, and any real agency decision needs current jurisdiction-specific legal review, network-rule review, and contract review.
Reading the federal numbers accurately
- The SmartPay refund figure is separate. GSA SmartPay refunds totaled $488 million in FY 2023, against $37 billion in net eligible spending. These refunds come from the federal employee card program, so they should not be subtracted from the $784 million in acceptance fees. They are distinct sides of card use.
- Coverage is partial. GAO’s detailed cost-structure work covers seven selected entities. Treasury’s data is described as representing an estimated 81 federal entities, and the $784 million total draws on more than 85 entities. The figures are not a census of every public payment channel.
- Federal figures do not transfer to state and local governments. The GAO totals say nothing about the fee totals of states, counties, or cities.
A checklist for comparing payment options
When weighing a modernization option, compare it on these six points:
Quick Recap
- Total cost per transaction and as a share of collections, with each fee layer shown separately.
- Payer experience and access to non-card alternatives.
- Legal authority, network rules, and contract restrictions.
- Transaction mix, volume tiers, routing, and which card types are accepted.
- Settlement, reporting, reconciliation, fraud controls, hardware and software, and staff workload.
- Whether any projected savings are measured against a documented baseline.
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