The Ultimate Guide to Lowering Credit Card Processing Costs

Credit card processing fees can seem inevitable and a necessary part of business, but there are ways to lower them without compromising customer convenience. The first step is to educate yourself about how these fees work and why they vary from processor to processor.

Fractions of a percent might seem like little on a contract, but they add up quickly and can cost your business thousands of dollars over time.

Shop Around

Credit card processing fees may seem like an inevitable cost of running a business. Still, many small business owners are surprised that these expenses eat into profits and add up quickly. The key to lowering these costs is to shop around and learn more about the fees charged by processors.

This is especially important regarding per-transaction fees, as these can vary significantly between providers. For example, some payment processors may charge a flat fee for each transaction while others charge a higher percentage of the total sale, resulting in drastically different overall rates.

Also, keep in mind that merchant account fees are often negotiable. While interchange and assessment fees imposed by the card networks are non-negotiable, markups or service fees from payment processors can be reduced or eliminated.

To reduce the money you pay in fees, consider reducing or eliminating card payments for low-cost products, such as bottled water, ice cream, and similar items. This can help you cut your fees and increase your bottom line while minimizing the fraud risk. Also, for those transactions in which you accept cards, follow the steps outlined in this blog to reduce the percentage of your sale that goes towards processing fees. Finally, be aware that tiered or bundle pricing structures are some of the worst in terms of payments for merchants, so try to avoid these at all costs.

Compare Fees

Credit card processing fees might seem like unavoidable business costs, but if you know what to look for, they can be pretty avoidable. The key is understanding that these fees aren’t single, set values; they comprise several parts to make up the total cost of processing a transaction. Understanding these fees and how they differ from provider to provider is critical to reduce credit card processing costs.

When determining your average credit card processing rates, reviewing and comparing your last few statements is best. This will give you a good idea of your baseline rates and help you spot any jarring fluctuations in the totals on your monthly account. This will also allow you to gauge whether or not your merchant service providers have been increasing their fees, which can be a big red flag that it’s time to shop around.

An excellent place to start when comparing fees is with the discount rate, the broad term used to refer to the fraction of each sale that goes toward credit card processing fees. This typically comprises a non-negotiable interchange fee (for the card type) and a markup from the payment processor.

Negotiate

Credit card processing fees can be a significant drain on your bottom line. However, there are ways to lower these costs without sacrificing customer satisfaction or payment options. These strategies include shopping for the best rates, negotiating with your processor, and optimizing your payment setup.

If you aren’t familiar with credit card processing rates, consider consulting a specialist to gain a better understanding of how they work and to serve as your advocate. This person can debunk myths and help you negotiate with your processor for the best possible deal.

It’s also important to remember that your processor is in the business of making money, too. While accepting credit cards will never be free, you can often leverage your transaction volume for a lower rate. This is because the more you sell, the more value you add to your processor’s network, which translates into a lower fee.

It’s also worth noting that many business owners are unaware that their credit card processing fees are negotiable. Following the recommendations outlined above, you can save thousands of dollars monthly in credit card processing fees while ensuring your customers can access their preferred payment method.

Look for Alternatives

Accepting credit card payments is an essential part of running any business. However, those fees can quickly add up and eat into your profits. Fortunately, several ways exist to reduce processing costs without compromising customer convenience or security.

Start by evaluating your options for merchant services providers. Look for one that offers flat-rate pricing with few additional fees beyond the standard rate. This will make predicting your credit card processing fees easier and save you money. Additionally, consider using a payment gateway that specializes in high-volume transactions. These platforms often have more competitive rates than central banks, especially for small businesses and low-risk merchants.

Whether you opt for a flat rate or interchange plus pricing, always negotiate. The processor’s portion of the fees is typically non-negotiable, but that doesn’t mean you can’t try to minimize the cost representing your business markup. Also, avoid processors that offer tiered pricing because those plans tend to bury the fees inside complex rates and make them difficult to compare or negotiate.

Another option is to pass the processing fees directly onto customers by implementing a surcharge. This strategy can be effective, but you should never forget that it may violate state laws and card network regulations. In addition, it can lead to fewer customer purchases and a weakened brand image.