How to Get the Lowest Credit Card Processing Fees

Shop cash register, card payment terminal

Whether you own and operate a food truck, small retail business, or online e-commerce store, one thing is for certain: You need to accept debit and credit card payments to attract customers. Processing these types of payments is not free. Your business will require a merchant services account and must pay various transaction fees.

This is why small business owners are constantly shopping around for the lowest credit card processing fees. If you already have a merchant account, you know that fee structures can and do vary from one credit card processing company to another.

If you haven’t set up a merchant account yet, or you are getting ready to open your business in 2021, you need to spend some time researching credit card processors to get the best processing rates. For existing business owners, you also need to shop around but, first, you need to know what you are currently paying in monthly fees to accept credit cards and debit cards.

Types of Credit Card Processing Fees and Costs

There are several different processing fees and costs you need to review, as follows:

Interchange Rates

Interchange rates are one fee and cost that you cannot negotiate on. These rates are established by the card issuer and will vary depending on the type of transaction, such as tap-and-go, chip-based, swiped, etc.

The interchange rates also vary depending on what industry your business is in. Certain businesses can be considered “high risk,” so their fees will be higher compared to another business in a different industry that is not.

The interchange rate is charged per transaction. So, you will have a fee for every debit or credit transaction you accept.

Card Brand Rates

man holding american express credit card

Visa, MasterCard, American Express, and Discover all charge a card brand rate. This is another fee that is not negotiable. It is established by the credit card brand and must be paid. It is another per-transaction fee.

However, it is worth noting that MasterCard transactions have the lowest card brand rate fee compared to other cards. Visa has the second-lowest card brand rate.

So, it is worthwhile to encourage your customers to use MasterCard whenever possible. For example, you could offer a small discount or other incentives to get your customers to pay using a card with the MasterCard logo on it.

Payment Processing Rate

The payment processing rate is another fee you pay the payment processor for each credit and debit card transaction. The fee is typically a percentage of the sales amount. This fee is one you can negotiate on with your merchant account provider to see if you can get it reduced.

Equipment Leasing Fees

Many small business owners cannot afford to purchase a POS system and credit card processor equipment initially. As such, they will lease their equipment from their merchant services account provider. The leasing fee is normally fixed even though you cannot negotiate to get it lower.

Other Merchant Account Fees

There can be other types of fees you need to be aware of by reviewing the contract details and fine print. Some of the more common fees you could encounter include:

  • PCI Fees
  • Statement Fees
  • Setup Fees
  • Administrative Fees
  • Early Termination Fees
  • Monthly Account Fees
  • Monthly Minimum Fees
  • Non-PCI Compliance Fees
  • International Processing Fees
  • Contract Cancellation Fees
  • Chargeback/NSF Fees
  • Account Changes Fees
  • Authorization Operator Fees
  • Application Fees
  • Equipment Exchange Fees

Depending on your service provider, you may or may not have these fees. Many of these fees are ones you can negotiate on before signing a contract.

What Are the Cheapest Credit Card Processing Rates for Small Businesses?

Credit card processing companies offer different merchant services pricing plans and options. It is worth your time to familiarize yourself with the different options and what each one means. Some of the different pricing plans you could encounter include:

Tiered Plans

With this plan, you get a lower processing fee for certain types of transactions from your standard processing fees. This plan can be ideal for small businesses that primarily have a large number of debit and credit card transactions at the lower rate.

Interchange Plus Plans

Under this plan structure, you pay a fixed-rate fee to the merchant services provider for their fees. The interchange fee and card brand fee will still vary, but you may be able to negotiate a lower rate with the service provider on their fixed-rate fee.

Flat-Rate Plans

This type of fee structure is where you pay a flat-rate per transaction. It has bundled together all the fees. The drawback of this fee structure comes when your small business does not have a large volume of debit and credit card transactions. You could end paying more than if you have a different pricing plan. Yet, if you have large volumes of transactions, you could come out ahead and save money on processing fees.

Selecting the Right Pricing Structure for Your Small Business

To ensure you get the right pricing structure and payment plan for your small business, you need to consider the following:

How many transactions do you process daily, weekly, and monthly?

Some processors offer different tiers of payment plans based on the volume of transactions you perform. Selecting a payment plan that is in line with the number of transactions could help save you money.

What type of business do you own and operate?

Certain businesses will pay more in transaction fees. For example, e-commerce businesses with online payments through a payment gateway tend to pay higher fees than a brick and mortar business that uses tap-and-go or chip-based processing.

How transparent is your pricing plan from your merchant account provider?

It should be easy to determine what your fees will be for each type of transaction. If you cannot figure this out, then you need to shop around for a better provider.

Can you easily switch from one pricing plan to another as your needs change?

One trick some processors utilize is to charge a fee for account changes when you need to switch pricing plans. Make sure your provider allows you to switch without charging you additional fees.

Tips for Getting the Lowest Credit Card Processing Fees

Credit card payment

Now that you have a better understanding of credit card processing fees, there are some things you can do that could help you lower your fees.

  • Encourage your customers to use mobile payments from their smartphones. These types of transactions are more secure than using a physical card.
  • Verify the ID and signature on the card. Make sure you ask for the ID of the person using the card, that the card is signed, and that it matches what is on the card.
  • Use an address verification system for online transactions. An address verification system will verify the credit card billing address matches the shipping address for the customer.
  • Offer perks for customers using a preferred payment method. For example, you could offer a small discount for customers that pay using MasterCard or for using debit cards since these have lower transaction fees.
  • Ask for lower rates from your credit card processor. Even if you are under a long-term contract, it never hurts to ask for better rates on the fees you can negotiate on.
  • Take steps to reduce fraudulent chargebacks and NSF fees. If you have numerous chargebacks and NSF items, these fees can quickly add up. Take the time to develop better security protocols to help identify potentially fraudulent transactions. Never accept a card payment you cannot obtain an authorization on.
  • Choose a credit card processing company with clear pricing structures. The best way to get the lowest card processing fees is by choosing a provider that has clear pricing structures with no hidden fees or complicated formulas used to determine per-transaction fees.

In the end, you will want to focus on those fees that are negotiable to get the lowest rates. You also want to shop around for pricing plans that provide you with flexibility and some control over transaction fees. Three of the better credit card processing payment plans you should consider include:

  • Flat-Rate Pricing – You will know how much each transaction is going to cost. For example, you could be charged 2.75% plus 10 cents per transaction, regardless of the card brand.
  • Interchange Plus Pricing – The markup on the service provider fee is clear and does not change, even though the interchange fees do vary.
  • Subscription-Based Tiered Pricing – Some merchant providers refer to this plan as a “membership plan.” You pay a flat rate each month to process credit card transactions, regardless of the card brand, plus the interchange fee per transaction.

Each of these plans has its pros and cons. Flat-rate pricing is well-suited to businesses that have large volumes of transactions every month but is not the best option for smaller businesses which do not process that many transactions.

Interchange plus pricing offers a little more flexibility for small businesses because you know your service provider fees. Yet, as your business grows, this may not be the best plan because you could end up paying more in interchange fees than with flat-rate pricing.

Last, subscription-based tiered pricing is often the best choice for small businesses and new businesses because you can choose a plan that best reflects your average monthly debit and credit card processing needs. Each plan will concisely show how much your fees are and whether they are flat-rate or fixed-rate, plus the interchange fee.

Switch to Adept Payments

To find out how much you could save by switching to Adept Payments on your monthly fees, please feel to contact us at 888-732-3838 today! We have developed a simplified approach to credit card processing fees, with personalized support and plans that best reflect your needs and objectives to help save your business money.

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