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Effective Tips for Negotiating Lower Credit Card Processing Fees

Updated Sep 07, 2023

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Rebecka Green
Contributing Writer at
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Credit card processing fees are notorious among small business owners, most of whom rely on as many transaction cents to go back into their enterprise as possible. Credit card fees can be a huge expense for these professionals. But what if you could pay less for these fees?

Never underestimate your own power to negotiate and advocate for your business, however. By building market knowledge, refining your negotiation skills and properly navigating the processing terrain, you’ll have all the tools you need to land the lowest credit card processing fees available to you. Here’s how to reduce credit card processing fees for your small business and save money on every transaction.

How to negotiate credit card processing fees

Negotiating credit card processing fees may seem daunting, but having the conversation could result in some serious savings. The negotiation will work as long as you understand what you are negotiating and the process that’s involved. We can break it all into a few simple steps. Follow them, and you can pursue better credit card fees and rates that help your business thrive.

1. Understand the key players.

There are two key categories to know about: the types of credit card processing fees and the bodies that charge, measure, and collect the fees. Many business owners make poor decisions about credit card processing because they don’t know any better, so it is crucial to understand credit card processing. Above all, you need to understand what it means for your unique business, said Antara Dutta, SCORE business mentor and president of Delaware SCORE.

“Credit card processing is not always a transparent world,” Dutta said, “which is why it’s so important for small business owners to learn about it.” This begins with understanding the “what” and “who” involved in credit card processing. [Find out more about how to accept credit card payments]

Editor’s note: Looking for the right credit card processor for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

Many factors come into play to determine your overall fees. It takes time to organize all these players batting for your earnings, but understanding them is integral to credit card processing negotiation.

Who determines merchant fees?

There are several kinds of merchant fees, and all of it can vary. Before we get into that, it helps to understand who is making the rules. A merchant transaction ultimately involves several parties. There is the customer, the business, the banks, the credit card network and the payment processor. Clearly, the business and the customer have little say in credit card processing fees. Instead, the fess are mostly determined by the other three parties. Banks, networks and payment processors negotiate with each other to offset risks and split costs. These negotiations are what ultimately determine your processing fees.

That means that these institutions will share information. Your business credit rating and financial information will be at the center of determining your fees. The types of fees you incur will also be important.

Types of credit card merchant fees

Merchant fees

Merchant fees are usually classified according to three different billing styles: flat rate, tiered or interchange fees. Flat rate fees are what the name implies. You pay a flat rate, and the merchant handles the credit card transactions. Typically, the rate will be a percentage of the transaction.

Tiered fees

Tiered fees are based according to how the credit card is processed. A qualified rate is usually the cheapest. This is where customers swipe the card through a machine. A mid-qualified tier is when the credit card number is used (most common for online purchases). A non-qualified rate is the riskiest and most expensive tier. This is when a transaction happens without strictly adhering to the processor’s rules (such as allowing a transaction without a signature).

Interchange fees

Interchange pricing is per-swipe pricing, but rather than a flat rate, the type of purchase will affect the fee. Food purchases would not be charged at the same rate as a car rental, for example.

Types of Credit Card fees

Merchant fees are not the limit of fees associated with credit cards. In addition to what you pay to process the credit transactions, you will find additional fees that are tacked into the process. Negotiating any one of these fees down can help you save money. Lowering all of them will transform your business.

Transaction fees

These are a fixed percentage your business pays for each transaction that is processed with a credit card. This fee is calculated depending on the pricing model, ranging from 1.5% to 3.5%. These are the same fees that were covered in more detail under the merchant fee section.

Service fees

These are the fees you’ll pay using a payment gateway or services provider. To use the service, you will likely pay $5 to $15 on a monthly basis, not including PCI compliance fees, which can be around $100. These can technically be considered merchant fees, but they are distinguishable from transaction fees.

Incidental fees

These are fees charged per occurrence if something is up on your end – like nonsufficient funds or transaction chargebacks. Be sure to specifically ask the processing company what circumstances would cause it to charge you for below-minimum monthly funds or a faulty customer transaction. Fortunately, these are not regular fees. They will depend on customer interactions, but with enough payments, you can rest assured that incidental fees will be incurred.

Third parties in the process

As for who is collecting the money accrued by these fees and rates, there are players related to both your business and your customers that join the conversation. Here are the main four.


Associations are card-issuing banks that set transaction terms for merchants. Visa, Mastercard, American Express and Discover are all credit card associations. Having access to association processing is the only way for a business to accept a major credit card for payment.


Issuers are the financial institutions that offer credit cards. It is important to note that Visa and Mastercard are not issuers; they are transaction processors. American Express and Discover, on the other hand, are both associations and issuers, so they will yield a higher interchange rate. Visa and Mastercard partner with issuers when credit cards are issued. This is why a Bank of America credit card can still have a Visa or Mastercard logo on it. In this example, the bank is the issuer.


The main machine is a merchant point-of-sale (POS) system. Business owners often rent these to take and process credit cards during transactions, whether or not the card is present. Dutta urges business owners to be cognizant of when cards are present versus non-present, as transactions with cards not present pose a higher risk.

Online payment systems

In today’s digital market, online payment is common for all kinds of businesses. This payment gateway is like the POS system, but found online instead.

Now that you know who you’ll be dealing with, let’s move on to what aspects of your credit card processing fees are in your control.

2. Negotiate upfront.

Dutta admits that, as a business owner, “there isn’t much you can do to negotiate lower credit card processing fees” once you’ve entered into a contract and processing system. You just have to wait out the contract if you aren’t in a month-to-month agreement or try hard to negotiate within the contract. Because of this, it is crucial to negotiate fees and processors before you make a commitment.

Interchange-plusis a pricing model that details the charges of issuing banks and credit card associations. “Interchange” is the fee you pay per transaction, and “plus” is a flat fee paid to the processor on top of that. This model can complicate your statements if you’re not a financial whiz. However, it is considered the most transparent pricing model. The complicated statements are a small price to pay, because the rates will ultimately be lower than those you’d pay with tiered pricing.

Tiered pricingbreaks down your processing rates into levels of qualification. The level a transaction falls into is determined by the processor. Tiered pricing takes advantage of your small business’s transactions by advertising low rates for transactions that don’t hit the “qualified” level. This pricing model can be favorable for businesses whose customers usually pay in person with standard debit cards, especially since it costs less to process debit cards. For those who go with this pricing model, it is imperative to find out as much as possible about the potential processor’s rates so you don’t get stuck with unexpected fees.

Of course, processing companies want your business, so they’re willing to compete a bit to take you on as a customer. However, small businesses will have different needs from large businesses when choosing a processor, and those needs diversify even more depending on what kind of transactions you process the most.

Choose the right processor for your business.

Now you’ve got all your cards on the table – it’s time for the processors to show theirs. Choosing a credit processing plan is not a black-and-white deal. As with any major business decision, different businesses have different needs. There are plenty of excellent credit card processors out there that fit these needs. For example, if your business relies on online and mobile transactions, you’ll be better off with a company like Square or Stripe. If your business needs more flexibility on contract timelines, consider Flagship. In general, look at credit card processing companies with transparent pricing, low rates and fees, and month-to-month contracts.

4. Ask the key players for the receipts.

If you’re going to enter into a credit card processing service contract, you should work your hardest to find out how much of your money will go where. This may seem like an obvious question to ask, but it is all too easy to sign off without reading the fine print, especially in the case of tiered pricing, which can make it difficult to tell where money from various fees is going. “This is where business owners will find some power,” Dutta said, as the companies you are working with want to keep your business.

Ask for a sample monthly statement for insight into what your business’s processing could look like. Request that the processor send a sample monthly statement from a merchant it works with. A legitimate processor will provide this statement, in which each fee should be itemized and all line items clearly labeled.

If you find rates and fees lower than the ones you have, ask for the lower fee. In fact, ask and keep asking the processing company, your bank, and whichever cloud software you use for online sales about lowering your rates and fees. This is especially effective if you can prove that taking your business elsewhere would yield lower costs for you.

Conversely, if things seem too easy with a processing company, it is probably too good to be true. This comes in the form of “free” credit card terminals or POS systems. Don’t get too excited – with processing companies, these gifts mean higher fees and contract terms. Also, if you leave that processor, you’ll have to leave its “free” equipment behind.

A balance of industry knowledge and negotiation guts will take you far in your quest to achieve the lowest credit card processing fees available to your small business. It is well worth the time to learn about the world of credit card processing. When you do, you’ll be prepared to tackle all manner of rate and fee negotiations that will help you keep more of your business’s hard-earned money.

Rebecka Green
Contributing Writer at
In December 2018, Rebecka received her bachelor's in English composition and religion from Luther College. She currently resides in Saint Paul, Minnesota, where she does communications and marketing for two local nonprofits. In her free time, she enjoys writing projects of all shapes and sizes and exploring her new home city. You can reach her by email at or connect with her on Twitter.
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