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Updated Apr 11, 2024

Effective Tips for Negotiating Lower Credit Card Processing Fees

Some fees are negotiable, and others aren't. Learn how to lower your credit card processing fees where possible.

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Rebecka Green, Business Strategy Insider and Senior Writer
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This guide was reviewed by a Business News Daily editor to ensure it provides comprehensive and accurate information to aid your buying decision.

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Credit card processing fees are a necessary part of doing business when you accept credit and debit cards and digital payments. However, most small businesses are concerned about maximizing their earnings to ensure adequate cash flow and proper financial management. Credit card fees can be a confusing and significant expense. 

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.

While credit card processors’ pricing models vary, small business owners can explore their options and negotiate some costs and rates. We’ll explain more about credit card processing fees to empower business owners to reduce their expenses and get the most from each transaction. 

FYIDid you know
Many leading credit card processors also support NFC mobile payments and mobile wallets, but these payment types are also subject to processing fees.

What are credit card processing fees?

Credit card processing fees are the fees and costs involved when you accept credit cards. These fees are charged by various entities, including the following:

  • The credit card processor: The credit card processor is the company you contract to handle your payment processing.
  • The card network: The card network refers to the big credit card companies, like Visa, Mastercard, American Express and Discover. 
  • The card issuer: The card issuer, or issuing bank, is the financial institution that provides the credit card. For example, if you have a Capital One Visa, Capital One is the issuing bank and Visa is the card network. 

Here are some typical fees you’ll encounter:

  • Interchange fees: Credit card companies set interchange fees. You’ll pay interchange fees on every transaction; they’re typically 2 to 3 percent of each transaction. Various factors affect your interchange fees, including how the purchase is made (in person or online), the transaction amount, and what’s being purchased. These fees are set by the credit card company.
  • Payment processing fees: Your credit card payment processor determines your payment processing fees. Processors make their money by charging these fees. Some processors charge a set fee per transaction, while others charge a monthly fee.
  • Assessment fees: Assessment fees are paid to the card network (e.g., Visa, Mastercard, American Express). For example, if a consumer has a Capital One Visa card, Visa receives a small portion of every transaction they make with the card.
  • Payment gateway fees: Payment gateways typically facilitate online purchases, also called card-not-present transactions. Your payment processor can set you up with a payment gateway if necessary. You’ll pay a payment gateway fee to process online transactions.
  • Payment Card Industry (PCI) compliance fees: You may pay your processor a PCI compliance fee monthly. This fee ensures your customers’ data is secure.
  • Other fees: You may encounter several other fees as you explore credit card processing services, including the following:
    • Charge-back fees are imposed by the processor if a customer disputes a charge or returns a purchase. 
    • Minimum monthly fees are charged by the processor if you fall below a monthly transaction quota as specified in your credit card processing service agreement
    • Early-termination fees may be charged if you cancel your credit card processing contract early.
    • Your processor may charge a monthly service fee.
    • Your processor may charge an Address Verification System (AVS) fee for each transaction for which it must verify a customer’s address.
    • You might be charged a batch fee when you send a batch of new transactions to your processor for settlement.
  • Hardware costs: Although they’re not actually fees, hardware costs must be considered. Accepting credit cards in person requires a credit card machine, typically a point-of-sale (POS) system or card reader. You may rent this equipment and pay monthly, or buy it outright. 
FYIDid you know
Your credit card processor will set up a merchant account for your business. After that, you can start accepting credit and debit card transactions.

How to negotiate credit card processing fees

Negotiating credit card processing fees may seem daunting, but these discussions with potential processors could result in serious savings. It’s critical to conduct these steps before you sign a contract with a processor; after signing, you’re likely locked into the terms and fees you agreed to.

Consider these best practices for negotiating your credit card processing fees:  

1. Understand credit card fees and which ones can be negotiated.

The first step is to learn about the various credit card processing fees, who charges them, and what is and isn’t set in stone. 

Not all credit card fees can be negotiated. For example, you won’t be able to negotiate interchange fees and assessment fees. However, depending on your processor, you may be able to lower or eliminate other fees, including account fees, monthly minimum fees, early termination fees and more. 

Familiarize yourself with typical credit card processing fees so you’re well versed in the terminology, understand the various components, and feel empowered about the right type of processing services for your business. 

2. Determine which pricing model works best for your business. 

Fees aren’t the only factor to consider; you must also evaluate the credit card processor’s pricing model. The right pricing model can save your business significant money, but signing up for an unsuitable model can be costly. 

The typical pricing models are interchange-plus, tiered pricing and flat-rate pricing. 

  • Interchange-plus pricing model: With interchange-plus pricing, the processor adds a fixed cost to the card network’s interchange rate. (The card type and other factors affect these rates.) Interchange-plus is considered a transparent pricing model that’s favorable for businesses that process many credit card transactions. 
  • Tiered pricing model: Tiered pricing breaks down your processing rates into qualification levels as 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. If you go with this pricing model, it’s imperative to find out as much as possible about the potential processor’s rates so you don’t get stuck with unexpected fees.
  • Flat-rate pricing: With flat-rate pricing, you pay a fixed rate for all transactions, no matter what cards your customers use. (Card-not-present transactions may still incur higher fees due to the increased risk of payment fraud.) Flat-rate pricing is typically an affordable option for businesses that process less than $5,000 monthly or have very small sales tickets.

3. Choose a suitable processor, and ask about all negotiable fees.

Your next step is to evaluate credit card processors and create a short list of promising vendors that match your needs affordably. It’s not all about finding the cheapest credit card processor. However, as a general rule, look for credit card processing companies with transparent pricing, low rates and fees, and month-to-month contracts. 

When you find a processor you like, discuss all fees and pricing models with the sales rep. Discuss your business’s unique situation, and ask about ways to lower your costs. For example, if your business processes many transactions of small amounts, you may qualify for lower interchange rates.  

Additionally, ask about removing or lowering the following fees:

  • Account fees
  • AVS fees
  • Batch fees
  • Charge-back fees
  • Early-termination fees
  • Hosting fees
  • IRS reporting fees
  • Minimum monthly processing fees
  • Payment gateway fees
  • PCI compliance fees
  • Service fees
  • Miscellaneous fees
TipTip
If you rely primarily on online and mobile transactions, Square and Stripe are excellent options. Square has transparent flat-rate pricing, free business tools, and support for remote, mobile and virtual terminal transactions. Our Square review explains this provider's features in depth.

4. Ask for a sample account statement to assess all charges.

When you’ve settled on a promising processor, ask your rep for a sample account statement that outlines all fees. Ensure that each fee is itemized and that all lines are clearly labeled. A legitimate processor will be happy to provide this statement. If you find rates and fees lower than the ones you’ve been quoted, ask for the lower fee. 

Be wary of situations that seem too good to be true. For example, “free” or upgraded credit card terminals may mean higher fees and contract terms. Also, if you leave that processor, you’ll have to give up the “free” equipment, too.

The best credit card processors for reasonable fees

We’ve conducted extensive research to help you find the best credit card processors and select the right one for your needs. The following vendors have reasonable fees and are excellent places to begin your search. 

  • Clover: Clover is known for competitive rates and customized options for retailers, professional services, restaurants and more. You can get a basic POS setup with payment processing for $14.95 per month and in-person transaction processing fees of 2.6% plus 10 cents (3.5% plus 10 cents for card-not-present transactions). Our Clover review explains more about this service’s many customized pricing options. 
  • Merchant One: Merchant One’s base fee is $13.95 per month; it also offers low interchange-plus pricing. However, it does charge an early-termination fee, so inquire about getting it waived if you decide on this processor. Our Merchant One review explains more about the vendor’s easy setup and quick approval process.
  • Payment Depot: Payment Depot charges a flat monthly “membership fee” and low transaction fees based on your business’s monthly volume. It doesn’t add setup fees, PCI compliance fees or early-cancellation fees.

Lower processing fees help boost your bottom line

Learning about credit card processing fees will arm you with the confidence to assess any offered contracts and negotiate fees and terms. Keep your business’s unique situation in mind as you evaluate credit card processors and their fees. Your goal is to lower your credit card processing fees to keep as much of your hard-earned sales income as possible while increasing customer convenience and satisfaction. 

Elizabeth Crumbly contributed to this article.

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Rebecka Green, Business Strategy Insider and Senior Writer
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 rebeckag@gmail.com or connect with her on Twitter.
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