Wednesday, February 1, 2023

How Can I Avoid Credit Card Processing Fees

Don't Miss

Tip #: Shop Around Before You Choose A Credit Card Processing Company

How To Reduce Credit Card Processing Fees

One small business owner we interviewed in 2015 said she switched from her old credit card processing service to Square, and praised their straightforward fees. One month I looked at my bank account and had taken $2,500 out of my account just for fees, said Coffee Break Cafe owner Jen Ormond. And I was like, Im paying more in credit card fees than I am for rent. So I literally went to Apple that day and I bought the swiper, and its the best thing Ive ever done.

To find a few processing firms for comparisons sake, check with other businesses in your area and ask who they use. A simple search of the Better Business Bureau may also turn up companies in your area while letting you check their credentials along the way. You can check out the Simple Dollars guide to credit card processing services as well.

Before you sign up to use anyones service, make sure you understand their fee structure and how it works. Saving a percentage point or even half a percentage point on credit sales can be huge for your bottom line, but failing to conduct due diligence can be costly.

  • Related: Best Credit Card Processing Service

What About Debit Card Processing Fees

Debit card processing fees are charged by the same major credit card networks.

In actuality, debit card processing is fairly complex. Depending on whether the debit card was issued by a major bank with over $10 billion in assets or a minor bank with less than that , fees can vary quite a bit.

While debit card processing fees are lower than credit card processing fees, 42% of all non-cash payments are made with debit cards. So these fees still make up a big portion of all your payments.

How Fee Recovery Works With Givewp

The GiveWP Fee Recovery add-on makes asking your donors to cover processing fees extremely easy. It presents people with a simple checkbox, asking if they would like to donate an additional amount to pay the credit card fee for their donation.

Once the option to pay processing fees is chosen, the additional amount is automatically added to the donation total.

An important point of clarification is that the Fee Recovery add-on does not remove or change the fees that your payment processor charges at all. Instead, you are asking the donor to give an additional amount so that if their intention is to give you $100, theyll give $103.20. That way, you still get $100 instead of $96.80.

If every donor used this option, your total funding for the year would increase by roughly 3% just by adding a simple checkbox.

You May Like: First Premier Credit Card $95 Fee

Use An Address Verification System

An address verification system verifies that the billing address entered matches the address on file on the cardholder account. If they don’t match, then the transaction is declined.

Adding this tool to your checkout is one of the best ways to help detect fraud due to stolen credit cards.

There’s another benefit too. If somehow a customer disputes the charge, proving that you had a full AVS match will be strong evidence in your favor.

Interchange Plus Pricing Model

Heres how you can avoid paying annual fees for your ...

In this model, the payment processor charges you a fixed fee, usually made up of a percentage of the sale plus a dollar amount, on top of the interchange fee. Interchange fee refers to the sum of the interchange and the assessment fee, as in 2% + $0.20 + 1.8% interchange fee.

While this model may be more transparent in terms of the markups applied, it is also more difficult to follow. The level of detail will be harder to follow in bank statements and the diversity of interchange fees over 60 interchange fees in the European Union a few years back may prove overwhelming.

Read Also: Td Bank Prepaid Visa

The Best Payment System For Small Business

Every companys payment processing demands are unique. But if theres one thing small health, medical, and wellness businesses have in common, its the need for a customized system thats built around their budget.

Healthcare payment processing companies like Beacon specialize in tailored, EMV-compatible solutions that offer next-day funding and full integration with QuickBooks.

And thats important. Because the more efficient and secure your payment processing system:

  • The faster your patient payments will clear,
  • The safer your transactions will be, and
  • The easier it will become to manage your financial records

All of which adds up to more profitable cash flow, less time and money spent keeping your books, and fewer credit card processing fees overall.

If you are looking for a merchant account partner for your business, contact one of our representatives or take our 2 minute assessment to learn how we can improve on your current provider.

Other Merchant Fees Associated With Online Payment Processing

On top of the credit card processing fees detailed above, your business may be subject to other flat or variable fees that are in place for those accepting payments online.

An example of a scheduled payments you may be subjected to includes the Fixed Acquirer Network Fee. Effective as of 2012, the FANF is Visa card networks card association fee. Its rate depends on factors such as number of business locations for card present transactions and on gross Visa processing volume in eCommerce. The payment processor usually decides how this cost is passed on to the merchant and usually ensures that the rate is re-assessed quarterly. This rate is non-negotiable as it remits to Visa.

Examples of incidental markup fees you may incur when processing online payments include:

  • Account setup fees. While most professional payment processors will not charge setup fees, some high-risk account providers may apply the charge as part of their sign-up process.
  • Address Verification Services. Depending on how your contract is negotiated, you may incur an AVS cost each time a transaction is checked. While this system is integral in your fraud fighting arsenal, be sure to keep a good grip on how its billed.
  • Chargeback fees. Every time your chargebacks are processed in favor of your customers, you will incur an additional chargeback fee. Ensure you have the right approach to deal with chargebacks to avoid these unexpected hefty costs.

Don’t Miss: Valero Gift Card

Other Strategies For Recouping Credit Processing Costs

Some states that dont allow surcharges to be assessed do allow businesses to run programs that encourage customers to use other payment methods. For example, your store could offer a cash discount. Whenever someone pays with cash, they get a 5% discount on any product in your store.

We werent able to find any instances where these kinds of discounts were expressly illegal, but you should still get legal counsel on any credit card fee or discount program.

There are also ways to mitigate costs that dont have any legal ramifications. If you sell some of your wares online, for example, you get to control the price of your goods, so you can just make your online products a little more expensive.

How Much Is A Transaction Fee

How to Reduce Credit Card Processing Fees

What Are Per-Transaction Fees? A per-transaction fee is an expense a business must pay each time it processes an electronic payment for a customer transaction. Per-transaction fees vary across service providers, typically costing merchants from 0.5% to 5% of the transaction amount plus certain fixed fees.

You May Like: Cabela’s Gift Card Balance Online

Avoiding Credit Card Processing Fees Its An Art

As a business owner, you know how expensive it can be to accept credit card payments. Although its important to be able to accept credit and debit cards to stay competitive in todays modern market, its also important to make sure your dollars to being used in the most effective way possible for your business. Thats why understanding the credit card transaction fees that are often associated with credit card processing, what they mean, and what you do and dont have to pay can have a big impact on your business.

There are some fees that every merchant must pay, but there are hundreds more that they dont have to pay! Take a look at our breakdown below to learn more about these fees, what theyre for, and how to pick the right payment provider for your business.

The Unavoidable Fees

Before we get into how to avoid fees, lets discuss the fees that are required to accept credit cards. Each credit card that you accept at your business has a cost associated with it that is set by the credit card providers themselves. This cost is called interchange and is required by all merchants that accept credit cards. Again, interchange is a non-negotiable fee that every merchant must pay, and the cost is based on the individual cards.

The Avoidable Fees

Here are 5 of the most common, with simple ways to avoid them for your business:

Negotiate With Credit Card Processors

The best way to negotiate with payment processors is to be seen as a merchant that adds value, thus making the vendor want your business, said Rey Pasinli, executive director at Total Apps, a merchant service provider.

You can negotiate with credit card processors by leveraging your transaction volume. This is because the more you sell, the more transactions you perform, and the more value it adds to the processor, Pasinli said.

“Processors, just like any other business, can negotiate with their suppliers off of the volume of processing their clients complete,” he said. “The more you give them, the more negotiating power they have upstream to lower their overhead in different areas. In turn, they can lower your rates if it is worthwhile to them.

Also Check: Ulta Credi Card

Cut Down On Credit Card Fraud

Whenever a customer disputes a charge, you’re slapped with a chargeback fee that can range from $15 – $50 . One fraud dispute can easily cost your business twice the sales amount.

Plus, if you have a lot of fraud, you can be labelled a “high risk” merchant. Which means higher processing rates.

It’s best to prevent fraud before it happens. Here are some things you can do:

  • Verify your customer’s identity with photo ID
  • Use an address verification service
  • Ask for the CVV security code
  • Encourage smartphone payments
  • Maintain PCI compliance

There’s another good reason to cut down on fraud. If you have fewer chargebacks, that gives you more leverage to negotiate lower fees. We’ll talk more about that later.

Examples Of Card Processing Fees For Ecommerce Platforms

How Can I Reduce My Credit Card Processing Fees ...

Using an ecommerce platform like Shopify will bring many benefits but cheap card processing fees is not one of them.

If you use Shopify Pay to process process debit and credit card transactions as these rates are at a fairly uncompetitive at 1.9% + 20p. You can use another payment processor, but this will add 1% to your transaction fees.

The monthly cost is high at around £60 a month but this provides access to the Shopify platform where you run your store, and not just to the payment processing platform.

Recommended Reading: Cabelas Visa Pay Bill Online

What Is A Good Effective Rate For Credit Card Processing

What Is A Good Effective Rate For Credit Card Processing? Generally speaking, a good effective rate for credit card processing is around 3-4% I share that figure to give you a starting range for the red-flag area. Now that being said, there also may be some legitimate reasons your rate inches beyond that.

Are You Paying Too Much For Credit Card Processing Here Are Five Things You Can Do To Lower Your Rates

  • Accepting card payments in person and making sure your account and terminal are properly set up can save you money.
  • Account fees can add to your overall processing costs and some of these are also negotiable.
  • This article is for small business owners who want to know what they can do to lower their credit card processing fees.

With everything small business owners have to think about, credit card processing fees may not be something that automatically comes to mind. The fees may not seem like a lot by themselves, but those small percentages processors take for every transaction can quickly add up. And when you combine transaction fees with assessment fees, authorization costs and monthly fees, your monthly credit card processing bill can balloon to an astronomical amount.

Editor’s note: Looking for a credit card processing solution for your business? Fill out the below questionnaire to be connected with vendors that can help.

Don’t Miss: How Does Fingerhut Monthly Payments Work

Why Do Processing Fees Matter To Small Businesses

Starting a small business is no small task. Doing so can mean razor-thin margins, minimal room for error, and a low likelihood of success.

According to the Small Business Administration , 20% of small business owners fail in their first year, 30% fail in the second year, 50% fail after five years, and 70% of all small business owners fail by their 10th year in business. With odds like that stacked against business owners, it pays to know how to stop the bleeding.

Additionally, a CBInsights analysis of 101 startups found that small businesses fail for the following reasons:

Two of the top 9 reasons for small business failure are expense related

With findings like that, it pays to pay attention to your expenses and keep them as low as possible. HIgher rates and hidden fees may not seem like much at the time, but they can cut into your bottom line, especially if you face periods of low sales volume. Fees play a significant role in whether your business is successful in the long run.

How Are Merchant Fees Calculated

How Do Credit Card Processing Fees Work?

First, you’ll need to pull out your credit card statement. Next, you’ll need to take the total amount deducted for processing and divide it by the amount of your total monthly sales that paid using credit cards. The result is your effective rate, the total amount your credit card company is charging you.

Don’t Miss: Bank Of America Card Foreign Transaction Fee

Ban Against Excessive Surcharges

On 25 February 2016 the Competition and Consumer Amendment Act 2016 became law. It inserted a new part into the CCA banning excessive payment surcharges and provided new powers for the ACCC.

The ban is found in the CCA, and operates in conjunction with a Reserve Bank of Australia standard.

The purpose of the ban is to stop businesses from charging payment surcharges that are excessive. That is, from charging a customer more than what it costs the business to process the payment.

A business is not required to impose a payment surcharge, but if it chooses to then it is only allowed to pass on to the customer the costs that the business was charged for accepting payment of that payment type.

The ban applies to all businesses, regardless of their size.


Jenny purchases an airfare through an airlines online booking system. She wants to pay for the ticket with her Visa credit card.

As part of its agreements with its bank and other payment providers, the airline is charged a total of 1 per cent of the cost of each transaction for accepting payments using Visa credit cards.

The airline is not required to impose a surcharge. If it does it will usually be a percentage figure, although in some cases it might impose a flat fee however the surcharge must not be excessive for any given transaction.

The airline decides to pass on this cost to Jenny as a payment surcharge on Visa credit card transactions.

What Are Baclaycards Card Processing Fees

Barclays is well known for providing excellent support to merchant account holders. But a word of warning for SME owners: the arduous application process, and steep fees, makes Barclays unsuitable for small companies. For credit card processing, you could pay 2.6% per transaction a higher rate than most other payment processors in this guide.

Whats more, because it mostly deals with larger companies, Barclays imposes lengthy contracts, high service fees and high termination fees.

Recommended Reading: What Are Google Services Charges

Tip #: Buy Your Own Credit Card Terminal Instead Of Leasing One

When you sign up with a credit card processing company, youll find some firms also rent the equipment as well. While that might sound convenient, you should know that renting a POS system is much like renting anything else as in, youll pay a lot more over time than if you had just bought the equipment outright.

A quick search of an office supply store shows that credit card terminals run anywhere from $100 to $600. Depending on how much youre asked to pay to rent one, purchasing your own processor could easily pay for itself in a short amount of time.

What Options Do Businesses Have For Credit Card Processing

Credit Card Processing Fees and Rates

There are thousands of different merchant service solutions out there. Largely, they perform the same tasks at similar rates. The most important thing for businesses to have when it comes to processing is choice. When you are stuck with only one or two options, processors will likely have higher rates due to the lack of competition. Look for POS systems that dont come with a locked in processing agreement so you can shop around for the best solution for your store. For instance, businesses with a high volume of low average transaction values will require a far different solution than those with few transactions but a much higher average value.

Also Check: Cabelas Giftcard Balance

Enforce Minimum Credit/debit Transaction Amounts

You see this across many retail stores for a reason. Especially businesses that sell a high volume of low-cost goods. Heres why.

Typically, your credit card processing fees come as a percent of each total sale. And typically, retailers who sell low-cost items are making only a slight profit on each sale. Markups are almost always lower on cheaper products. Therefore, even a slight decrease in profit can mean a sale went from making a profit to resulting in a loss. If your business thrives off of small purchases, consider not accepting credit cards for any transaction under a certain amount . And for the transactions in which you do accept credit cards, follow the other steps in this blog to minimize your total percent going to processing fees. Youll see the difference at the end of the year.

Some retail SMBs are now making up for lost profits through their processing fees with . Laws have loosened, allowing the burden or the processing costs to be passed on to the consumer. This can, however, mean a reduction in business, so its usually a less than ideal solution.

More articles

Popular Articles