Tips For Negotiating Lower Credit Card Processing Fees

Tips for Negotiating Lower Credit Card Processing Fees

Are you tired of seeing your profits skimmed by credit card fees? Let’s turn the tables and have those fees work for you! A credit card processing fee is the cost a business incurs every time a customer swipes, dips, or types in their credit card information. It’s not a single charge but a combination of fees paid to different parties involved in the transaction. 

Based on various factors, it usually falls between 1.3% to 3.5% per transaction. I understand the importance of maximizing earnings to maintain a healthy cash flow that ensures sound financial management. Therefore, this guide focuses on finding effective strategies to negotiate lower credit card processing fees. Let me share what I have learned to help you do the same.


Understand Your Current Fees

Providing different payment choices to your customers brings benefits, such as boosting your revenue by almost 30%. However, there is a cost associated with using credit cards as payment options. They come from three primary sources:

  1. The credit card processor is the company you hire to handle all my payment transactions.

  2. Then there’s the card network. This includes major credit card companies like Visa, Mastercard, American Express, and Discover.

  3. There’s also the card issuer, the bank that gave the credit card to the customer. 


Types of Fees 

You’ll encounter various types of fees when dealing with credit card transactions. Let me break these down for you in simple terms:

  1. Interchange Fees

Credit card processing fees, averaging around 2% per transaction, make some businesses wary of promoting credit card payments. Fortunately, merchants can lower these fees with interchangeable optimization for more significant benefits. The amount can vary based on how you make the purchase (whether in person or online), the transaction amount, and the type of item you buy.

  1. Payment Processing Fees

Payment processing fees are set by the company that handles your credit card payments. These processors make their money by charging fees for each transaction. Sometimes, you pay a small fee for each transaction; other times, there could be a monthly fee.

  1. Assessment Fees

Assessment fees go to the card network, such as Visa, Mastercard, or American Express. For example, if you use a Capital One Visa card, Visa gets a tiny portion of every transaction.

  1. Payment Gateway Fees

When you buy something online, a payment gateway processes the transaction. This is called a card-not-present transaction. Your payment processor can help you set up a payment gateway if you need one, but you’ll have to pay a fee for this service.

  1. PCI (Payment Card Industry) Compliance Fees

To keep your data safe, processors charge a PCI compliance fee. This is usually a monthly fee, and it ensures that your credit card information is secure.

  1. Other Fees

  • If you dispute a charge or return an item, the processor might charge you a fee.

  • You might be charged a fee if you don’t complete a certain number of monthly transactions.

  • If you cancel your credit card processing contract early, there could be a fee.

  • Some processors charge a fee to keep your account active.

  • If the processor needs to verify a customer’s address during a transaction, they might charge a small fee.

  • When you send a batch of transactions to the processor for settlement, you may be assessed a batch fee.

  1. Hardware Costs

Even though there are no technical fees, hardware costs must be considered. If you accept credit cards in person, you’ll need a credit card machine, like a point-of-sale (POS) system or a card reader. You can either rent this equipment for a monthly fee or buy it outright.

Learn More: A Guide To Reducing Wholesale Credit Card Processing Rates


How to Negotiate Lower Credit Card Fees?

Negotiating credit card processing fees might sound tricky, but with some know-how, it can lead to significant savings. Here’s how you can do it:

Step 1: Learn About the Fees

First, understand the different fees involved in credit card processing. Some costs, like interchange and assessment fees, can only be changed if the credit card companies set them. However, other expenses, like account or monthly minimum payments, might be negotiable. Knowing the difference is critical.

Step 2: Pick the Right Pricing Model

Different pricing models can affect how much you pay in fees. Here are the main ones:

  • Interchange-Plus Pricing: This model adds a fixed cost to the interchange rate set by the card network. It’s transparent and often cheaper if you handle many credit card transactions.

  • Tiered Pricing: This breaks down rates into different levels. Most of your customers paid with standard debit cards because these transactions are cheaper.

  • Flat-Rate Pricing: You pay the same rate for all transactions. It’s a simple choice if your monthly credit card sales are under $5,000.

Step 3: Find the Right Processor and Ask About Fees

Once you know what fees to expect and which pricing model suits you, start looking for a credit card processor. You want one with transparent pricing, low fees, and flexible contracts. Clearly, explain your business needs when talking to a sales representative about reducing costs. Here are some fees you might be able to lower or eliminate:

  • Account fees

  • Address Verification System (AVS) fees

  • Charge-back fees

  • Early termination fees

  • Hosting fees

  • IRS reporting fees

  • Minimum monthly processing fees

  • Payment gateway fees

  • PCI compliance fees

  • Service fees

Step 4: Get a Sample Account Statement

Before you make a final decision:

  • Ask the processor for a sample account statement. This will show you all the details regarding the processing fees.

  • Make sure everything is clearly labeled.

  • If you spot any fees that seem higher than what you discussed, ask if they can be lowered.

Learn More: Breaking Down Level 3 Data and Level 3 Credit Card Processing For B2B Wholesalers


Finding the Best Credit Card Processors with Low Fees

I’ve spent a lot of time researching to help you find the best credit card processors that offer reasonable fees. Here are some top choices that are great starting points for your search.

1. Clover

Clover stands out with its competitive rates and tailored options for different types of businesses, such as retail shops, professional services, and restaurants. A basic POS setup with payment processing starts at $14.95 per month. The fees for in-person transactions vary. Clover offers many customized pricing options, making it a flexible choice.


2. Merchant One

Merchant One charges a base fee of $13.95 monthly and offers low interchange-plus pricing. However, there is an early termination fee, so it’s a good idea to ask if they can remove this if you choose their service. Merchant One is also known for its easy setup and quick approval process, making it a convenient option.

Merchant One

3. Payment Depot

Payment Depot uses a flat monthly “membership fee” model with low transaction fees that depend on your business’s monthly volume. They don’t charge setup fees, PCI compliance fees, or early-cancellation fees, which can save you money and simplify your budgeting.


What Next?

Understanding credit card processing fees gives you the confidence to review contracts and negotiate better terms. When comparing different credit card processors and their costs, it’s essential to consider your business’s specific needs. 

Unlike most POS systems, WizCommerce supports level 3 credit card processing by capturing detailed transaction information such as line-item details, tax, and shipping data. It seamlessly integrates with accounting and ERP systems to automate data transfer and reduce errors. Finally, by partnering with level 3-capable gateways and processors, WizCommerce ensures accurate data transmission and lower interchange rates. 

Curious to see it in action? Book a demo now and experience the difference for yourself!

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