5 Ways to Reduce your Credit Card Processing Fees
Credit card processing fees aren’t always top of mind for merchants and business owners, with everything else that they have to manage. Just by themselves, the fees may seem insubstantial. However, those small percentages charged on every transaction can add up to create a substantial dent in your profit.
Moreover, several businesses emerged from the pandemic having taken a financial beating. Now they find themselves having to contend with increased e-commerce competition, volatile supply chain costs, and even geopolitical challenges. As a matter of fact, Visa and Mastercard recently announced that they’re going to raise credit card fees for precisely those reasons. These costs can eat into your revenue and degrade your ability to compete.
While you can’t avoid credit card expenses altogether, you can certainly do a lot to minimize them and maybe even eliminate per-transaction fees. Here are five things you can do to reduce your credit card processing fees:
- Negotiate with Your Acquiring Partner
With credit card processing fees, some are negotiable, and some aren’t. Usually, you have some wiggle room to negotiate with your credit card processor to lower their markup on each transaction. You can do this by leveraging your transaction volume. The higher your sales and transactions, the more value it creates for your processor, since it gives them power to lower their upstream overheads.
The fees you pay to the card-issuing banks, including interchange costs, are usually non-negotiable. However, a lesser-known trick to reduce these is to capture more customer data. Interchange costs are a complex subject, but basically, depending on your pricing tier, the more information you obtain from the customer at checkout, the lower your assessed interchange fees are.
- Switch to a Zero-Fee Payments Processor
Free credit card processing may sound too good to be true, but rest assured it exists. This is a different pricing model, wherein your payments processor will charge you a flat basic fee based on the range of transactions your business normally executes.
This model eliminates per-transaction fees for you, which means that even if there is some volatility in the number of transactions, such as during a sale or offer period, you can still expect consistent pricing. Depending on how much fluctuation there is in the size and volume of your transactions, this can save you a significant amount of money.
- Avoid PCI Fees
The Payment Card Industry (PCI) Data Security Standard is a set of regulations put in place to protect cardholders. They’re meant to prevent sensitive or personal credit card data from falling into the hands of hackers or fraudsters. Merchants are usually granted a set amount of time to become PCI compliant — around 60 to 90 days. After this period, your payments processor is likely to charge you a noncompliance fee. Most processors will also provide services to help you become compliant as soon as possible.
By ensuring you do this, you can avoid extra costs for your business. Moreover, many PCI providers also offer an insurance policy against breaches, which is useful in case your customer credit card data does get compromised.
- Try to Get More Card Swipes
Online transactions are riskier than in-person ones since it makes the cardholder more susceptible to fraud. As a result, processors will usually charge you higher fees for your e-commerce transactions.
There are two ways you can avoid these surcharges. One way is to increase card swipes, whether that’s at your physical store or on handheld card readers, when the delivery person drops off the purchase. The other way is to provide security information, such as the billing ZIP code or security code when prompted during a transaction. This adds a little bit of work for your salespersons, but can help validate the purchase, protect the cardholders, and reduce the risk of fraud.
Alternatively, you can also use an address verification service to confirm the billing address with the card issuer. This service will come with a licensing fee, but depending on the volume of your transaction, it can turn out to be cheaper for you in the long run.
- Consider ACH Payments
If paying credit card fees is untenable for you, you can always explore other mechanisms to accept and send payments. ACH transfers, for instance, are something all merchants should incorporate into their payments mix.
ACH or Automated Clearing House is the primary U.S. network for managing fund transfers. Transfers via ACH are direct bank-to-bank electronic transfers that are faster, safer, and more reliable than credit card payments or checks. The best part is, ACH transactions are not subject to expensive interchange and card-issuer fees, making it cheaper for your business.
Credit and debit cards can sometimes feel like a poison pill you just have to swallow as a business. After all, they accounted for a whopping 70% of point-of-sale transactions in 2021. However, in practice, there are many financial instruments to choose from. Talk to your payments provider to see what else they can offer you in the way of processing mechanisms or pricing models. The payments industry is a hotly contested space, and providers are always willing to negotiate an arrangement that provides better value for their merchants if it helps keep them on board.