Credit card processing fees are the fees that businesses are charged for the privilege of accepting credit and debit cards. For example, when a customer swipes their credit card, the merchant doesn’t always get all of the money from the purchase. Sometimes the merchant has to pay a fee for allowing the customer to use their plastic. This fee is a percentage of the total transaction, and it goes to the processor that handles the transaction.
There’s no question that these credit card fees for business can add up and become a huge cost for merchants. While there isn’t a way to exactly eliminate credit card processing fees completely, did you know that there are ways to reduce them? Below you can check out six tips for getting the lowest credit card rates possible so you can start saving yourself some money, but first, let’s look at what different types of fees merchants get charged for accepting credit cards.
What are the different types of fees for processing credit cards?
One of the first fees you should know about is an interchange fee. This is the model that we use here at PayHawk. We offer secure payment processing solutions for small to large businesses. In exchange, we charge a fee to merchants for each credit card transaction that goes through their business. There are thousands of interchange categories but if you Google “Visa interchange rates” you can see the different numbers. Basically, the interchange fee is a percentage of the amount of the purchase and is used to cover the costs of processing credit card transactions, such as fraud protection and customer service. It also helps to offset the risk involved in lending money to consumers.
Some credit card processing companies, like Stripe and Square, charge a set, unchanging dollar amount called a flat fee. With a flat fee, the merchant pays a fixed amount. For example, if a customer is paying with a debit card, the merchant will still pay around 2.95% whereas the interchange rate is only .5%. This flat rate percentage quickly adds up.
One thing to keep in mind is that when you go with a flat rate company you’re actually stuck paying that % regardless of the card type. The bottom line is, you’re always going to end up paying less with an interchange fee model like PayHawk than you would with a company that follows a flat rate fee model. Every time.
Do you think you might be paying too much for your credit card processor fees? Ask us for a FREE Statement analysis!
If you are questioning the amount of credit card processor fees your business is paying, let us take a look. Our FREE Statement Analysis gives you peace-of-mind and confidence that this important expense line item is being managed efficiently.
Here are the 6 ways you can reduce your card processing fees
If you feel you are being overcharged by your current merchant services provider or you simply want to be aware of how to keep your costs low, fortunately, there are a few options available to help you secure cheap credit card processing at any given time.
1. Pass on the cost of the credit card processing fees to your customers
Not every merchant service provides this option but here at PayHawk, if you opt for it, we would just add a surcharge to your customers’ purchases and you wouldn’t have to pay them yourself.
There are four rules merchants must follow when passing on the fees:
- The surcharge cannot be higher than the payment processing fee or 4% of the transaction amount. The surcharge will be the lower of the two figures.
- The merchant’s POS station or checkout page must clearly display the surcharge.
- The transaction receipt must clearly show the surcharge.
- The merchant must tell Visa and Mastercard about the surcharging plan.
2. Negotiate with your service provider
One of the easiest places to start saving on credit card fees for business is by negotiating with your merchant services provider on them. Here are a few tips for doing so:
- Do your research. Know what the going rate is for processing fees before you start negotiating. This will give you a good starting point for negotiations.
- Be prepared to switch providers. If your current provider isn’t willing to negotiate, be prepared to switch to one that is. This will give you more leverage in negotiations. At the end of the day, you want a merchant services provider that will work with you. At PayHawk, we are here to support you. We like to ensure that our customers have the lowest credit card rates and are always open to re-negotiating rates down the road.
- Know what you’re willing to sacrifice. Are you willing to sacrifice features or customer service in order to lower your processing fees? Knowing your bottom line will help you stay focused during negotiations.
- Be persistent. Don’t take no for an answer. If your first offer is rejected, make another one. And another one after that, if necessary. Eventually, you’ll find a provider that’s willing to meet your needs. Be sure and start with PayHawk!
3. Opt for Level 2 and Level 3 Interchange Processing!
If you do a lot of B2B transactions you can save a lot of money on processing fees by going with a merchant service that offers level 2 or 3 processing like PayHawk does. We like to sign our customers up for this so that any B2B transactions of theirs automatically fall into this bucket. This reduces their interchange rates significantly.
4. Prioritize Card-Present Transactions
Card-present transactions are those where the customer’s credit card is present at the time of purchase, such as in a retail setting. Swiping cards will always be cheaper than keying in cards, which is done when the customer’s credit card is not present, such as online or over the phone. By prioritizing card-present transactions, you can save money on fees and keep more of your hard-earned revenue. So next time you’re processing a transaction, think about whether it’s better to go card-present or card-not-present – your bottom line will thank you!
5. Decrease credit card chargebacks
Credit card companies often charge merchants fees for chargebacks – that is, when a customer requests a refund for a purchase they made on their credit card. These credit card fees for business can add up, and they can be a major drag on your business. But there’s good news: by taking steps to reduce chargebacks, you can lower your credit card processing fees and keep more of your hard-earned money. Here are a few tips to help you decrease chargebacks:
- Make it easy for customers to reach you. Provide multiple methods of contact (phone, email, live chat) and make sure someone is available to answer questions during business hours.
- Be clear about your policies. Make sure your return/exchange policy is prominently displayed on your website and in your store, and make sure employees are familiar with the policy so they can explain it to customers if needed.
- Use strong fraud prevention measures. Implement measures like AVS and CVV verification to help reduce the risk of fraudulent chargebacks.
6. Compare pricing with other merchant service providers.
Use a processor that is competitive and offers low rates – We’re extremely competitive at PayHawk, offering the interchange plus pricing model, which is a big saver on merchant fees. We do have monthly fees, but they are minimal – even with the monthly fees we’re able to save 99% for merchants on their processing costs!
Want to see what REAL savings look like? Ask us about our pricing model!
Next time you’re sitting there staring at that long list of fees on your statement, don’t despair. Just remember that there are ways to lower credit card fees and keep more of your hard-earned money in your pocket. Contact us here at PayHawk so we can show you what real savings look like! We look forward to speaking with you.
