5 Tricks to Lower Credit Card Processing Fees
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Credit card processing fees don't seem like a lot at first. But those few cents here and there and the small percentage cuts processors take for every transaction quickly add up. Combine those costs with minimum, statement, gateway and other monthly fees, and the next thing you know, you're staring at your monthly credit card processing bill in utter sticker shock. Sound familiar?

The bad news is that these credit card processing expenses are unavoidable. The good news is that there are several things merchants can do to take control and save up to hundreds of dollars every month. Here are five simple ways to cut your credit card processing fees.

1. Negotiate with credit card processors

The best way to negotiate with payment processors is to be seen as a merchant that adds value, thus making the vendor want your business, said Rey Pasinli, executive director at Total Apps, a merchant services provider. 

You can negotiate with credit card processors by leveraging your transaction volume. This is because the more you sell, the more transactions you perform and the more value it adds to the processor, Pasinli said.

"Processors, just like any other business, can negotiate with their suppliers off of the volume of processing their clients complete," he said. "The more you give them, the more negotiating power they have upstream to lower their overhead in different areas. In turn, they can lower your rates if it is worthwhile to them."

2. Reduce risk of credit card fraud

The higher security risk you pose as a merchant, the higher your credit card processing fees will be. You have two primary ways of reducing the risk for credit card fraud: swiping credit cards and entering security information, said Jeffrey Gehrs, president at Electronic Merchant Systems, a credit card processing company.

"Swipe as many cards as you can," Gehrs said. That's because the rates set by the card brands like Visa and MasterCard are higher when the cards are keyed in based on fraud risk, he explained. "With new technology like cell phone swipers offered by full merchant-service providers and micro-processors like Square, there are few excuses to not be swiping the majority of your cards."

Merchants can also lower the risk of fraud by providing security information that protects the cardholder and validates the purchase. An effective way is to always enter the billing zip code and security zip code when prompted, Gehrs recommended.

"This seems like a small nuisance, but bypassing this step could cost your business over 1 percent of each sale," he said. "Similar to keying in sales, foregoing this process means a higher rate due to fraud risk."

3. Go straight to the source

Did you know that most credit card processors don't actually process credit card transactions themselves? Save on processing fees by signing up with a bank that does the processing in-house, such as big banks, not local or small, hometown banks.

"There are very few banks left processing — Bank of America, Chase, Fifth Third, US Bank and Wells Fargo are a few," said David H. White, an independent merchant services specialist at Hathaway 51, who represents eight of the 10 largest credit card processors.

Although you can still keep your deposits at local banks and have big bank processors deposit funds there, foregoing smaller banks for your processing needs will save you money by eliminating middleman markups, White said.

"If a merchant uses their small, hometown bank, that bank is outsourcing the processing to one of the big boys," he said.

Moreover, smaller banks have overhead and other costs that are passed on to merchants, White said.

"The small, hometown bank has a building, employees, salaries, insurance — lots of overhead that people like me do not have," he said. "Since interchange is set in stone, all that is left are the fees we mark up to make a profit for the processor."

[For a side-by-side comparison of the best credit card processing services visit our sister site Top Ten Reviews.]

4. Properly set up your account and terminal

Sometimes, a simple mistake can lead to higher credit card processing fees. Avoid this by setting up your account the right way from the start, said Fenella Kim, founder and CEO of Reliance Star Payment Services. If you set up your account improperly, you risk getting higher processing fees from providing the incorrect business information.

"Setting up the account properly [impacts] how the fee structure works," Kim said. "The type of business, type of transactions and frequency of transactions matters."

Similarly, the way your terminal is set up and used also affects processing fees. Kim suggests making a habit of processing transactions within 24 hours, which lowers the number of transactions for that period and thus reduces processing fees.

"If you do your batch process every day, it is more cost effective instead of every few days or a few times a week," she said. "Don't wait, [because] the longer you wait to process, the higher the fees and rates."

5. Ask a credit card processing expert

Most small business owners know next to nothing about credit card processing. Get a better understanding and have an advocate by your side by consulting a credit card processing expert. Not only can these professionals help debunk credit card processing myths, but their knowledge and relationship with processors can also help you get lower rates for your business.

"Here is the secret that merchants are always shocked to find out: Regardless of their size or amount of volume, virtually all credit card processors buy their rates directly from Visa, MasterCard and Discover for the exact same price," said Robert Livingstone, president of IdealCost.com, a credit card processing consulting company. "Therefore, all credit card processors have the capability to resell these rates at the exact same price to different businesses."

Knowing insider information like this can help small business gain an edge with vendors, for instance, as leverage to attract lower rates. 

"Businesses are under the false impression that they have to keep switching their credit card processor in order to see a savings," Livingston said. One reason is that when businesses try to call their current credit card processors to negotiate better rates, they'll get almost nowhere, he said.

Instead, Livingstone and his staff negotiate the lowest possible credit card processing fees with their existing vendors. "This means no switching or cancellation fees and zero downtime by switching from one processor to another," Livingston said. "If there is a savings, then we split it with the client. If there is no savings, our services are free."