Expert Tips to Lower Your Payment Processing Fees

paymentmanagements
Oct 23
4 min read

Payment processing fees can quietly eat into your profits if you don’t manage them carefully. For many businesses, these fees represent a significant expense that often goes overlooked. The good news is that there are practical ways to reduce these costs without sacrificing service quality or customer convenience. This post shares expert tips to help you lower your payment processing fees and keep more money in your pocket.

Close-up view of a credit card terminal with transaction receipt

Understand How Payment Processing Fees Work

Before you can reduce your fees, you need to understand what they are and how they are calculated. Payment processing fees typically include:

Interchange fees: Charged by card networks like Visa or Mastercard, usually a percentage of the transaction plus a fixed amount.
Assessment fees: Small fees charged by the card networks on the total processed volume.
Processor markup: The fee your payment processor adds on top of interchange and assessment fees.

These fees vary depending on the type of card used (credit, debit, rewards), the transaction method (in-person, online), and your business category.

Knowing these components helps you identify where you might negotiate or adjust your payment setup.

Choose the Right Payment Processor

Not all payment processors charge the same rates or offer the same services. Some processors offer flat-rate pricing, while others use interchange-plus pricing, which can be more transparent and often cheaper for businesses with higher sales volumes.

Tips for selecting a processor:

Compare fees from multiple providers, including hidden charges like monthly fees, statement fees, or PCI compliance fees.
Look for processors that offer interchange-plus pricing.
Check if the processor supports your preferred payment methods and currencies.
Read reviews and ask for referrals from similar businesses.

Switching processors can save you hundreds or thousands of dollars annually.

Negotiate Your Rates

Many businesses accept the first rate offered without negotiation. Yet, processors often have room to reduce fees, especially if you have a strong sales volume or a good credit history.

How to negotiate:

Gather your current processing statements to understand your fees.
Contact your processor and ask for a rate review.
Highlight your transaction volume and history.
Request lower markup or monthly fees.
Consider bundling services (e.g., payment gateway and processing) for discounts.

Even a small reduction in your percentage fee can add up to significant savings over time.

Optimize Your Transaction Types

Certain transaction types cost more to process. For example, online payments and keyed-in transactions usually have higher fees than swiped or chip card transactions.

Ways to optimize:

Encourage customers to use chip cards or contactless payments in-store.
Use address verification services (AVS) and CVV checks for online transactions to reduce fraud risk and lower fees.
Avoid keyed-in transactions when possible.
Batch your transactions daily to reduce batch fees.

By focusing on lower-cost transaction methods, you can reduce your overall fees.

Reduce Chargebacks and Fraud

Chargebacks not only cost you the transaction amount but also additional fees and potential penalties. Fraud increases your risk and can lead to higher processing rates.

Prevent chargebacks and fraud by:

Clearly stating your refund and return policies.
Providing excellent customer service to resolve disputes quickly.
Using fraud detection tools offered by your processor.
Keeping detailed records of transactions and communications.
Monitoring transactions for unusual activity.

Reducing chargebacks improves your standing with processors and can lead to better rates.

Use Technology to Your Advantage

Modern payment technology can help you lower fees and improve efficiency.

Examples include:

Using integrated point-of-sale (POS) systems that reduce manual entry errors.
Employing payment gateways that offer competitive rates.
Leveraging mobile payment solutions that support contactless payments.
Automating reconciliation to catch errors and discrepancies early.

Investing in the right technology can reduce hidden costs and improve your bottom line.

Consider Alternative Payment Methods

Some alternative payment methods have lower fees than traditional credit cards.

Options to explore:

ACH payments or e-checks, which often have flat fees.
Digital wallets like Apple Pay or Google Pay, which may have lower interchange fees.
Cryptocurrency payments, though adoption and volatility vary.

Offering these options can reduce your average processing cost and appeal to a broader customer base.

Monitor Your Statements Regularly

Regularly reviewing your payment processing statements helps you spot errors, unexpected fees, or changes in rates.

What to look for:

Duplicate fees or charges.
Fees for services you don’t use.
Changes in interchange or markup rates.
Monthly minimum fees or statement fees.

If you find discrepancies, contact your processor immediately to resolve them.

Educate Your Team

Your staff can impact your processing fees through how they handle transactions.

Train your team to:

Use chip readers or contactless payments correctly.
Avoid manual entry unless necessary.
Verify customer information for online orders.
Handle refunds and returns properly.

Well-trained employees reduce errors and chargebacks, lowering your fees.

Lowering payment processing fees requires attention to detail and proactive management. By understanding fees, choosing the right processor, negotiating rates, optimizing transactions, preventing fraud, using technology, exploring alternative payments, monitoring statements, and educating your team, you can significantly reduce your costs.

Start by reviewing your current fees today and take one step toward saving more on payment processing. Your business profits will thank you.