Ways to Reduce the Cost of Your Credit Card Processing Fees

Kreg Bale
Kreg Bale January 14, 2022
Updated 2022/01/14 at 3:54 PM
Ways to Reduce the Cost of Your Credit Card Processing Fees

In order for merchants to accept credit and debit card payments, they will need to acquire several essential services. These different types of services work together on several different parts of the transaction, and every single one of them charges you with a fee. Moreover, you will need a credit card processor, a merchant account provider, and a payment gateway (if applicable).

As mentioned, you will face several charges when it comes to credit card processing. However, it is vital to know that you don’t have to overpay. There are several ways you can reduce the cost of these fees.

How To Lower Your Credit Card Processing Fees

Whether you are looking for a new credit card processor or want to have lower rates from the one you are currently working with, here’s how you can lower the fees on your transactions:

Research First Before You Contact Your Credit Card Processor

It is never easy to negotiate your credit card processing fees. Given that credit card processing involves so many moving parts, it can be challenging to determine exactly what the fees are meant to, let alone if they can be negotiable. However, if you don’t understand these fees, you might not get the lowest cost possible.

Assess your statement to find fees that can possibly be lowered before you decide to engage with your processor. Keep in mind that knowledge is a great advantage when negotiating.

Focus on the Fees You Can Negotiate

Concerning the first tip provided earlier, it will help to focus on the fees you can possibly negotiate. When accepting a customer’s credit card for payment, there is an agreement or communication between the acquiring bank, issuing bank, the payment processor, and the payments network.

Obviously, many moving parts are involved, even with just one transaction made. These movements add up to your processing fee. Below is how they are broken down:

  • Assessment fees: are fixed percentages rendered to the payments network
  • Interchange rates: considered as the base cost for every type of card the merchant accepts
  • Fixed monthly network fees: this is a fee that is paid to the network monthly
  • Authorization costs: this is a cost to authorize and charge a debit or credit card
  • Discount rates: this is considered the margin the card processor charge to make a profit

It is vital to know that authorization, fixed monthly network fees, and assessment are not variable or negotiable. The only factors that can be negotiated are the interchange and discount rates. Hence, it is vital to focus on those two to get a reduced cost on your credit card processing fees.

Select the Best Pricing Plan for your Business

There are three common pricing structures available that experts in card processors charge several businesses. They are the following:

Tiered Pricing

Tiered pricing is a type of pricing that will charge you more depending on the card type your customer uses, with every single card belonging to predetermined percentage categories.

For example, when using a business credit card, the card processing fees can cost more than a regular debit card. Moreover, it is essential to know that cards from different issuer types may also charge different rates.

Interchange Plus

This type of pricing is obtained when you compensate an interchange reimbursement fee and a dollar fee or a flat-rate percentage fee. This means that you will need to pay for the base cost of every card type and something of about 0.25 percent.

Flat Rate Pricing

This type of pricing is a non-variable sort of interchange plus pricing. You have to pay the same rate for each transaction made regardless of what type of card the customer uses. The only time flat rate pricing changes is when you charge a “card not present” order (usually happens if you get the customer’s information over the phone).

Take Advantage of Your Purchase Volume as Leverage

One of the most significant leverage points and weapons for negotiating your card payment processor’s discount rates is your purchase volume.

If you have a profitable business and are currently processing many transactions every day, your card payment processor is getting a piece of all the purchases. When it continues to boom and outperforms expectations, it might be time to present your case to the card payment processor.

When you have some high purchase volume, you can become a compelling customer that the card payment processor will not want to lose. They will most likely lower your card processing fees in exchange for you not replacing them with another card processor.

Follow The Best Practices to Reduce Fraud

As mentioned earlier, you can incur a higher charge when you choose to enter a customer’s credit card number manually. This is because it is easier for credit card fraud to take place. Plus, some networks need to protect themselves from that kind of risk by charging higher rates.

To Wrap It Up

Credit card processing fees are unavoidable if you are a merchant that accepts credit card payments. However, it is vital to know that you don’t have to overpay. You can consider the tips we have provided in order to lower the costs of your credit card processing fees and lighten up your current financial situation.

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