9 tips on how to save money on payment processing fees

Now that you know what payment processing fees are, let’s look at nine ways merchants can start lowering their processing fees today. 

#1 Know the pricing models 

It’s crucial for business owners to understand the rates and fees they’re quoted for processing and why. That starts with understanding the different pricing models providers offer. The most common models are: 

• Interchange-plus- Highly detailed statements that show transaction fees from the card-issuing bank plus the markup from the payment processer (usually, a percentage of the transaction plus a small authorization fee). This transparent model typically results in lower costs for merchants. However, monthly statements can seem complex to read.  
• Flat rate– Applies a fixed percentage on the dollar value of each transaction (often around 2.75%-3%), plus a flat fee (like $0.05 per transaction). Although this model is easy to understand, vendors are likelier to pay more since interchange rates vary widely with different types of cards. 
• Tiered– With a tiered pricing model, transactions are categorized into “tiers” (qualified, mid-qualified, or non-qualified) by the processor. Rates vary based on the tier (qualified is lowest, non-qualified is highest). While this model is straightforward, the pre-established tiers and assigned rates can easily hide the real cost of the transaction. 

#2 Set a minimum for card transactions 

A minimum (around $5-$10) passes along the processing fee from the seller to the customer if they choose to use a card for smaller purchases. It’s especially useful for businesses that sell a high volume of low-cost goods.  

#3 Apply a surcharge on credit cards

Encourage customers to use their debit cards because the risk of the payment falling through is lower. Along with asking for a PIN, include additional information like the customer’s address to doubly ensure the purchase. If credit cards are your only option, consider applying a fee to offset your costs. 

#4 Avoid manually entering card information

Manually entering card information usually comes with higher interchange fees because it has a higher probability of error.

For online card payments, try to make sure your payments are automatically processed on your ecommerce website and avoid collecting credit card information over the phone as much as practical. 

For point-of-sale card payments, encourage customers to tap first, then dip their card when making a purchase. If those don’t work, try swiping. If all three methods fail, only then should the merchant consider manually entering card information since it incurs higher interchange fees due to the higher risk of error. 

If you must enter a customer’s card information manually, enter as much information as possible, including their billing address, zip code, and the CVV number to reduce the risk of the transaction failing or being flagged as potentially fraudulent.

#5 Offer ACH payments 

While ACH payments aren’t viable for all ecommerce models, they can significantly reduce payment processing fees for merchants. ACH payments are bank-to-bank transfers, which are faster and less risky than physical checks. They also do not accrue interchange fees (unlike debit and credit cards). 

#6 Stay compliant! 

The Payment Card Industry Data Security Standard (PCI DSS) is designed to protect sensitive card data. Merchants that are not PCI DSS compliant risk significant fees and penalties, so you should consider PCI DSS a must if you’re processing card payments. 

#7 Check your monthly statements

As a merchant, it is crucial that you consistently review your monthly statements. That way, you’ll be the first to notice if a processor has increased its fee. If you notice an unexpected change, address it with your provider. 

If appropriate, use the opportunity to negotiate your terms or find another payment provider that is more aligned with your business needs. 

#8 Reduce the risk of chargebacks 

Too many chargebacks increase the cost of payment processing and put your merchant account at risk of being shut down. Generally, once a merchant account has a chargeback ratio of ~0.9%, it is at risk of being terminated. As a result, one of the best ways to reduce payment processing risk is to invest in chargeback mitigation. 

#9 Partner with a reputable provider 

Your choice of a payment processor can greatly impact the cost of payment processing fees. Some providers advertise a low rate but may tack on various unexpected fees. As with most services, it’s essential to shop around to ensure you’re selecting a payment processor with transparent pricing and a good reputation. 

Additionally, if you operate in a high-risk industry, it may be challenging to get approved for a merchant account at all. If you are approved, banks will often charge high-risk businesses significantly higher rates than traditional businesses. In those cases, partnering with a provider specializing in high-risk merchant accounts can help you get approved without overpaying on fees.