How To Get the Lowest Credit Card Processing Fees

Credit card processing fees don’t seem like a large expense at first. But the more transactions your business completes and the more consumers look to use cards over cash, the fees quickly begin to add up. In addition, merchant accounts can be costly if you choose the wrong provider.

Navigating the credit card processing industry can be extremely confusing, especially for new and small business owners. With dozens of payment processors to choose from, and with each company offering different rates, fees, and contract terms, it can be difficult to know what provider is the best fit for your business.

The bad news is that credit card processing fees are unavoidable. But the good news is that there are plenty of ways you can save money on them! Use our tips below to score the lowest credit card processing fees for your small business.

Credit Card Processing Fee Tips for Small Businesses

1. Look for a Payment Processing Company that has No Hidden Fees

You can’t save money on payment processing if you don’t know what fees you are paying. While every company has its own fee structure, choosing one with no hidden fees will allow you to expect them, which helps prevent from you being caught off guard. In addition, you can know exactly what you are paying for.

It pays to shop around to find the best deal, especially when it could be a difference of a percentage point or more of your credit sales. But be sure to do your research – saving a point on credit sales can be great for your bottom line, but you want to make sure it’s the best fit for your business model. You need to pick a company who offers the features that your business needs, which may include EMV compliance, customized reporting, and support.

2. Purchase a Credit Card Terminal Rather Than Leasing One

Many credit card processing companies will give you the option to rent the equipment as well. While it sounds convenient, think of it like renting anything else: you’re putting money into something you don’t own. Because of that, you’ll end up spending more money in the long run.

3. Set a Credit Card Minimum for Your Customers

Ever walk into a small business and see a credit card minimum sign? That’s a tactic they use to help keep their credit card processing fees down. Since you are often charged per transaction, setting a $5 or $10 minimum can help reduce the amount of fees your small business will pay.

When faced with a set minimum, your customers will either turn to cash or choose to spend more money to meet the minimum, both of which are great for your business. Cash helps you avoid fees altogether, and the extra revenue can help offset credit card processing fees.

To implement this change, all you need to do is prominently display a sign to your customers and ensure your employees follow through with it.

4. Swipe All Credit Cards

Transactions that are manually entered by the merchant have higher fees than cards that are either swiped or inserted. This is because cards that are entered manually are at a higher risk of fraud, as thieves often obtain credit card numbers without a physical credit card to make purchases. The higher the risk of fraud, the more credit card processors charge you in fees.

The chip technology and magnetic stripe contain built-in security features that help reduce the risk of credit card fraud. If an employee suspects fraud, he or she can ask to see a photo ID to ensure the name on the ID matches the name on the card.

5. Negotiate With Your Credit Card Processor

If you’re looking to negotiate with your credit card processing company, you need to prove your business is a merchant that adds value. To do this, you want to show your transaction volume. The more transactions you perform, the more value it adds to the processor. The more you give them, the more negotiating power they have upstream to lower their overhead in different areas.

6. Settle Transactions Quickly

Settling your transactions helps reduce interchange downgrades. To qualify for the lowest interchange rates for many US cards, the capture, or clearing call, must happen within one day of the authorization. For certain industries, like travel and entertainment businesses, the capture can happen within 8 days.

7. Understand the Three Main Fee Structures

There are three main fee structures charged by payment processors. The best option for you depends on the size and type of your business. They are:

Flat Fee Pricing Structure

This is the easiest model to understand. The merchant pays the processor a flat fee for all credit and debit card transactions. While it is easy to understand, this pricing structure often comes with high flat fees.

Interchange Plus Pricing Structure

This pricing model charges a flat fee percentage that combines the interchange rate and assessment fee, plus a dollar amount per transaction that the processor pockets. Compared to tiered pricing, the interchange plus pricing structure is more transparent and less expensive to the merchant.

Tiered Pricing Structure

A tiered pricing model takes into account the interchange rates for various transactions and categorizes them as a qualified rate, mid-qualified rate, or non-qualified rate. Because it is based on transactions, tiered pricing is difficult for merchants to predict and prepare for. This allows the merchant to estimate and manage monthly processing fees at a significant higher processing cost.

The better you understand credit card processing options, alternatives, and the fees associated with it, the more money you can save. Following our tips above can help you achieve low credit card processing fees and save your business money.