Credit card processing fees can significantly impact a business's bottom line, especially for small and medium-sized enterprises. However, understanding and negotiating these fees can help you save money each month. At No Merchant Service Fees, we know the process inside-out, and can help you tackle the complexities.
Here are 8 essential tips to help business owners navigate and negotiate credit card processing fees effectively.
1. Understand the Components of Processing Fees
Processing fees typically comprise interchange fees, assessment fees, and the processor's markup. Interchange fees are set by card networks like Visa and Mastercard and are non-negotiable. However, the processor's markup is negotiable and varies between providers. Familiarize yourself with these components to identify areas where negotiation is possible.
2. Analyze Your Current Processing Statements
Review your monthly processing statements to understand your effective rate—the total fees divided by total sales. This analysis can reveal hidden fees or higher-than-expected rates, providing leverage points for negotiation.
3. Shop Around and Compare Offers
Don't settle for the first offer you receive. Solicit quotes from multiple processors and compare their rates, fee structures, and contract terms. Use these comparisons as leverage when negotiating with your current or prospective processor.
4. Negotiate for Interchange-Plus Pricing
Interchange-plus pricing is more transparent than tiered pricing models. It separates the non-negotiable interchange fees from the processor's markup, making it easier to see exactly what you're paying and where you can negotiate.
5. Leverage Your Transaction Volume
Processors are often willing to offer better rates to businesses with higher transaction volumes. Use your sales data to demonstrate your value as a client and negotiate for lower fees based on your processing volume.
6. Inquire About Fee Waivers or Reductions
Ask your processor about waiving or reducing certain fees, such as monthly minimums, statement fees, or PCI compliance fees. Some processors may be willing to eliminate these fees to retain your business.
7. Consider Collective Bargaining Opportunities
Recent settlements have allowed small businesses to collectively negotiate rates with payment processors, similar to large merchants. Explore opportunities to join merchant associations or groups that can provide collective bargaining power.
8. Regularly Review and Renegotiate Your Contract
Set reminders to review your processing contract annually. Market rates and your business needs can change, and regular reviews ensure you're always getting the best possible terms.
