Businesses need to accept credit cards to stay competitive, especially in today’s economy, but the fees can kill your bottom line. Getting the best merchant services at the lowest prices should be the goal of any business owner, but especially small or new businesses.

You shouldn’t have to sacrifice great customer service to save money, though. Check out the top ways to save on processing fees, hardware costs, and penalties.

Consider the Fee Structure

Most payment processors offer one of three pricing structures:

  • Flat-rate – The flat rate structure combines all processing fees into one percentage. Most processors include the issuing bank fee, card provider’s assessment fee, and the payment processor’s fee. You can’t differentiate between the fees, as you pay the same percentage (say 2.75%) of each transaction.
  • Interchange plus pricing– The interchange-plus pricing combines the card provider’s assessment fee and interchange rate into one percentage. It also adds a dollar amount per transaction, which covers the processor’s markup. For example, you may see a pricing of 2.65% plus $0.30 per transaction.
  • Tiered pricing – This is similar to interchange plus pricing, but breaks the transactions into categories (qualified, mid-qualified, and non-qualified). The rates increase as you move away from qualified.


Price out your most sold products, or average transactions to see which works best for your business. Flat-rate pricing works best for business with small transaction amounts and interchange plus pricing works best for large transactions.

Avoid Keyed-In Transactions

Easier said than done, we know, but try limiting the ‘risky’ transactions. Most credit card processors charge higher rates for keyed-in transactions because the risk of fraud is high. When you accept a card in-person, you can check the validity of the card and the person using it.

Keyed-in transactions, especially those over the phone, run a much higher risk of fraud. Even if you sell items off-site, most processors offer mobile readers that attach to your smartphone, reducing the need for keyed-in transactions.

Use the Address Verification System

Even in-person, swiped transactions have fraudulent risk. Using the Address Verification System (AVS) helps minimize the risk. It adds just a few seconds to the process but gives you extra protection from processing fraudulent transactions.

Most merchant service providers offer lower interchange rates for merchants using the AVS system. Even if it only saves you a few cents per transaction, the savings add up.

Ask for Lower Rates

There’s no shame in negotiating your rates. Most merchant services providers expect it. If you’re a brand new company, it may be a little more difficult, but once you’re established and processing a decent amount of credit card transactions, ask for lower rates.

Most payment processors would rather lower your rates than lose your business. It costs them a lot more money to find new business than it does to provide slightly lower rates and keep your business.

Know the One-Time and Fixed Fees

Don’t fall for a payment processor’s claim of just interchange plus pricing or just flat-rate pricing. Read the fine print to avoid unpleasant surprises.

Find out what other fees they charge, whether one-time or for each transaction. Look at the hardware costs, account maintenance fees, and minimum processing fee. If you can’t meet the requirements to waive the fees, or the hardware lease or maintenance fee is too high, either negotiate or look elsewhere.

Encourage Secure Transactions

You can’t tell your customers what type of payment to use, but accepting EMV (chip card) transactions may lower your processing fees because they have the lowest fraud risk. Purchase EMV equipment and make sure all customers with a chip card use this feature.

After chip cards, swiped transactions have the next lowest processing fees. As we discussed above, keyed-in transactions have the highest cost.

Settle your Transactions Daily

On days you don’t have a lot of transactions or you just had a long day, you may consider putting off transaction settlement. Don’t do this. It increases your overall processing fees. When you settle your charges within 24-hours, most processors offer the best interchange-plus pricing.

Shop Around

Shopping for credit card processing companies is overwhelming, there’s no doubt about it, but don’t settle for the first provider you find. Get quotes from at least three processors and compare them. Look at:


  • The pricing structure – Is it interchange-plus pricing, flat rate, or tiered? If it’s tiered, look closely at the tiers. Find out which cards fall into which categories. You know your customers the best. Think of the credit card types they use most often as that will give you a good idea of the processing costs.


  • Other fees – Many merchant service providers have ‘other fees.’ Ask about them and specifically ask about any hidden fees or one-time fees. Make sure you know the whole truth so you can make a solid decision.


  • Contract terms – Some processors have contract terms and if you violate the terms, you pay a penalty. Try to avoid locking yourself into a term just in case the processor doesn’t work out as you hoped. You want the ability to switch providers should you need it.

Bottom Line

You’ll pay fees to process credit cards no matter which company you use. Knowing what and how you’ll be charged is the key. Ask as many questions as you need to figure out the bottom line and choose the right merchant services provider. What works for one business may not be what’s right for you. Find out the specifics of each provider and how they meet your needs.


Never be afraid to ask for lower rates, though. Whether you’re a new customer or you have used the same provider for a while. Many companies negotiate rates, or at least the ‘other fees’ they charge in the hopes of earning new business.