5 Tricks to Lower Credit Card Processing Fees | Fora Financial Blog
5 Tricks to Lower Credit Card Processing Fees
April 09, 2019

5 Tricks to Lower Credit Card Processing Fees

In our increasingly digital age, with fewer and fewer people carrying cash or using personal checks, shoppers expect to use their credit cards at even the smallest businesses.

According to a survey by Square, 84 percent of customers say it’s “important” be able to pay with a credit card. And a study by Finder shows that younger generations — led by Millennials — are more likely to leave a store where they can’t pay with a card. It appears that the future of payment is in plastic (as well as digital apps).

There’s one obvious problem with this more convenient payment method: It costs businesses money. Credit card processors charge fees on every transaction, which means that every time you let a customer pay with their card, you allow the credit card processor to take a little off the top of what you made.

If you’re a small business owner, simply ignoring credit cards isn’t really an option, as you may end up losing that business altogether and gaining nothing. Instead, you should focus on lowering your credit card processing fees.

With that tactic in mind, let’s review five tricks to lower those fees and boost your bottom line.

How to Lower Your Business’s Credit Card Processing Fees:

1. Focus on the Fees You Can Negotiate

When you accept a customer’s credit card as payment, there’s communication between the issuing bank (your customer’s credit card issuer), the acquiring bank (which accepts funds on your behalf), a payment processor (which communicates on behalf of the acquiring bank), and the payments network (such as Mastercard or Visa, which connects all the parties).

As you can see, there are a lot of moving parts involved in just one transaction. The points that are given to each piece of the puzzle add up to your processing fee. They can be broken down as follows:

  • Assessment fees: Fixed percentage paid to the payments network
  • Authorization costs: Cost to authorize and charge a card
  • Fixed monthly network fees: A fee paid to the network each month
  • Discount rates: The margin the processor charges to make a profit
  • Interchange rates: The base cost for each card type that merchants accept

Assessment, authorization, and fixed monthly network fees are not negotiable or variable — only discount and interchange rates are. When meeting with your processor or network to negotiate, focus on the interchange rate (more on that in a moment) and the discount rate, and shop around until you find a processor that takes a smaller cut of the margin.

2. Pick the Right Pricing Plan for Your Business

There are three common pricing structures that payment processors charge businesses: tiered pricing, interchange plus pricing, and flat rate pricing.

Tiered pricing charges you more depending on the kind of card your customer uses, with each card falling into predetermined percentage categories. For example, a business credit card — which some customers could insist on using due to their rewards and perks — can cost more to process than a debit card. Cards from different issuers (Visa or American Express, for example) also charge different rates.

Interchange plus pricing is when you pay an interchange reimbursement fee plus a flat-rate percentage or dollar-fee. That means you’ll pay the base cost for each card type, plus something in the ballpark of 0.25 percent.

Flat rate pricing is essentially a non-variable version of interchange plus pricing, where you pay the same rate for every transaction regardless of what kind of card the customer uses. The only time this changes is when you charge a “card not present” order, which might happen if you take a customer’s information over the phone.

You might find that most of your customers pay with debit cards, or whichever type of card charges the least amount of money per transaction, which would make a tiered pricing plan a good bet. Or you may discover that using your flat rate plan is more expensive than an interchange plan.

Be sure to study the habits of your customers, as well as the plans of your payment processor, to see which plan is best for you.


3. Use Your Purchase Volume as Leverage

When negotiating with payment processors about their discount rates, your biggest weapon and leverage point is your purchase volume.

If business is booming and you’re processing hundreds or thousands of transactions each day, your payment processor is getting a piece of every purchase. If you continue to thrive and outperform expectations, it’s time to take your case to the processor.

When your purchase volume is high enough, you make for a compelling customer that the processor won’t want to lose. They’ll be more likely to reduce your rate in exchange for you not taking your business elsewhere.

4. Follow Best Practices to Reduce Fraud

As mentioned above, you can sometimes incur higher charges when you manually input a customer’s credit card number (such as when taking an over-the-phone order).

The reason for this? It’s easier for credit card fraud to take place, and networks need to protect themselves from that risk in the form of higher rates.

There are a couple of best practices you can follow to reduce charges related to fraud prevention, as well as prevent chargebacks and disputes, which also can result in fees:

  • Swipe (or insert) on every charge: Rates set by networks are higher when you key in a customer’s information due to said fraud risk. Insert the chip, or swipe the card, every time.
  • Ask for security information at purchase: Requesting that cardholders input their billing zip code or security code when prompted is another way to reduce fraud, saving as much as 1 percent on each purchase.
  • Use an Address Verification System: An AVS — a common tool on e-commerce purchases —verifies the cardholder’s address with the card issuer. Some card issuers will reward businesses by offering lower interchange rates for using an AVS.

5. Institute a Credit Card Sale Minimum

There’s a reason you’ll see some small businesses tell customers they need to spend a certain amount to use their credit card: If transactions are too small, the cost of accepting their card will eat into all their profit.

Although you run the risk of scaring off customers by instituting a minimum, it’s a fairly common practice that you can easily and transparently explain to customers if they take issue with it.

Discourage lots of small, individual purchases and move towards larger, bulk purchases to cut your fees (depending on your pricing plan).

Rather than charge customers a surcharge (which is illegal in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas), you’re asking them to recognize the cost that their credit card takes on your small business.


Credit cards — and by extension, credit card processing fees — are here to stay, like it or not. Your best bet as a business owner is to encourage customers to patronize your business and pay however they’d like. Now that you have some tips for lowering the fees you’ll need to pay, you can get out ahead of some of your competitors, who no doubt deal with the same dilemma.

Fora Financial

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author's alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

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Eric Goldschein is a staff writer at Fundera, a marketplace for small business financial solutions such as business loans. He covers entrepreneurship, small business trends, finance, and marketing.