Ways to Reduce Credit Card Processing Fees

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Kevin Sage

February 12, 2024

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Accounting & Finance

Every time your business processes a credit card payment, there are fees you must pay. These include:

  1. Account Service Fees - Like monthly fees, monthly minimum fees, payment gateway fees, Payment Card Industry (PCI) compliance fees, and PCI non-compliance fees
  2. Transaction Rate Fees - Like interchange fees, assessment fees, and payment processor markup fees
  3. Incidental Fees - Like chargeback fees, batch fees, AVS fees, voice and authorization fees

Fortunately, there are many ways to reduce credit card processing fees. And, by retaining more of those funds previously lost to fees in your coffers, you have more available to devote to other costs that can help you further grow your business, such as website building or optimization and sales lead generation.

Stay PCI Compliant

PCI Compliant

One of the foremost tools for reducing credit card processing fees is to remain PCI (Payment Card Industry) compliant. The PCI Data Security Standard lays out the rules and restrictions for processing credit card payments to ensure sensitive data security. You could be charged a recurring noncompliance fee if your company is not PCI compliant. Demonstrating PCI compliance at your company can not only eliminate this fee but also greatly help reduce your fraud risk profile and, by placing you in a lower risk category, avail you of a lower rate and fee structure.

Apply a credit card surcharge (or a cash discount.)

A credit card surcharge is a fee you add to a customer’s total bill to cover the processing fees for their transactions. In this way, you shift the burden of the cost of those fees to the customer. You can then reward cash payments by excluding this surcharge.

Similarly, you can reward customers who pay by cash with a discount on their purchases. Just be aware there are very strict rules in place about how you can and cannot go about charging customers a surcharge for credit card purchases and offering discounts for cash purchases. Be sure you understand these rules and adhere to them when executing the credit card payment surcharge or cash payment discount.

Encourage payments by ACH or debit card.

When considering reducing credit card processing fees, one rather obvious solution is to consider alternative forms of payment to credit cards. For example, Advanced Clearing House, or ACH, payments, direct debit transactions, or electronic bank-to-bank transfers, are quicker and more reliable than paper checks and don’t incur interchange fees.

Encourage in-person credit card payments.

Person paying with credit card in person

Encourage customers to do it in person rather than making credit card payments online or over the phone. Having customers swipe, insert, dip, or tap their cards using an EMV (Europay, Mastercard, Visa) terminal to pay costs less in fees than all or most remote payment methods.

Verify addresses.

An AVS, or address verification service, is a system that allows you to verify a customer’s billing address with the credit card issuer in order to ensure the person paying with that card is the actual cardholder. This can help tremendously reduce the number of costly chargebacks you must deal with when you process a transaction. You send the customer’s address to the AVS, which in turn sends you a code you can use to either reject or approve the transaction. Visa and Mastercard both globally support AVS systems, and Visa even charges a lower interchange rate to U.S. businesses that perform AVS checks.

Reduce credit card fraud risk.

Credit card fraud costs you money. The greater your security risk to your credit card processor, the more they will charge you to account for that risk. A couple of effective ways to improve credit card security are to swipe physical credit cards rather than entering the numbers into a keypad and being sure to include security information. Credit card companies will charge higher fees when you manually enter data rather than swipe the physical card because there are greater risks of undetected fraud and human error. Information to include in your transactions that makes them much more secure includes the customer’s billing zip code and the security code on the back of the card.

When trying to negotiate a better fee structure with your credit card processor, here are some of the anti-fraud methods you’ve employed that you can highlight when making your case:

  1. You comply with PCI standards.
  2. You have a clearly stated return policy and refund policy.
  3. You swipe cards instead of entering their information manually.
  4. You include the security information in the transaction data and request the CVV to include it when the card is not present.
  5. You include the zip code in the billing address.
  6. For delivered orders, you request signatures from the recipients.
  7. You keep receipts and maintain a record of transaction histories.
  8. You use EMV credit card readers.
  9. You use the correct POS terminal equipped with the latest credit card processing technology and have it set up correctly.

Follow best practices for processing credit cards.

Wallet with many credit cards

Set up your credit card account and merchant terminal properly. Select the correct business and transaction type and frequency; set a minimum credit card to avoid high transaction fees for small order values; and add a credit card surcharge.

How you set up your credit card terminals also affects the fees you pay. The greater the number of credit card transactions you process through a given terminal and the greater the waiting time to complete and approve the transaction, the greater your cost in credit card processing fees. To reduce this cost, batch transactions daily and process transactions within 24 hours of their completion.

Negotiate fees with your credit card processor.

Most credit card fees aren’t locked in stone. You can negotiate with your credit card processor for a better, lower fee. Factors that matter most to credit card processors in determining what fees to charge a small business include:

  1. Number of years the business has been in operation
  2. The volume of transactions the business conducts
  3. The business’s fraud risk profile

Therefore, contact your processor and explain that your business is growing and processing more credit cards, perhaps of even greater amounts each cycle, and therefore should entitle you to a lower fee. Point out to the provider how much value you add to their business and in which ways in particular. You can even include sales projections to demonstrate the increase in credit card transactions you foresee processing in the future. And, when all is said and done, if the provider is still reluctant, explain that you don’t want to switch providers but be willing to do so if they cannot work out a more equitable arrangement with you.

Remember, you’re never locked into your current credit card processor. You are always free and well-advised to shop around.

Check your statements for new, irrelevant, or increased fees.

Credit card statement

Credit card companies will often raise fees or charge additional fees of which you would remain unaware without closely reviewing your credit card statements for changes. When you find a change, such as an increased maintenance or minimum processing fee, see if you can negotiate a way to reduce or eliminate those fees with the processor. This is especially vital if you’re being charged fees for tasks unrelated to your business.

Have your POS double as your credit card processor.

Many POS systems also offer credit card processing as an optional add-on service. Assuming that you’re happy with your POS, using it to process your credit card payments instead of a third-party credit card processor can reduce your costs in several ways. You can reduce them directly in areas such as integration fees and indirectly lower them by simplifying your payment processing and making transactions more efficient.

If you’re unhappy with your POS or your POS doesn’t offer credit card processing, it may be worth considering switching to a new POS that offers credit card processing.

Design your website to minimize credit card fees.

How you design your website can also help lower your credit card fees by incorporating many of the strategies above. We offer small business website design that helps businesses maximize their return on credit card payments and reduce the income lost to fees. Call us today to find out how to reduce the credit card processing fees your business pays by letting us help you build or redesign your website to minimize the credit card fees shrinking your profit margins.

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