Home » Blog » Credit Card Processing » How To Negotiate Credit Card Processing Fees Fees are the bane of every small business owner. Learn how to negotiate lower fees to increase your bottom-line. WRITTEN & RESEARCHED BY Chris Motola Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida. Expert Contributor Last updated on Updated March 13, 2024 WRITTEN & RESEARCHED BY Expert Contributor Last updated on Updated March 13, 2024 REVIEWED BY Shannon Vissers Shannon has been writing for Merchant Maverick about small business software and financing since 2015. She started writing professionally about business topics in 2005. Shannon has been featured in the Washington Post, Reader's Digest, US News, MSN, Yahoo Finance, Business Insider, and other publications. She has a bachelor's degree in English from San Diego State University and currently resides in San Diego, California. Expert Contributor Expert Contributor Know your transaction volume, average transaction size, and the types of cards you process to select the best credit card processing model for your business, saving you money and avoiding unnecessary costs. Interchange-plus pricing is the most transparent and often cost-effective model. Avoid tiered pricing due to its lack of transparency and potential for higher costs, and consider subscription/membership pricing if you have high transaction volumes. Nobody wants to pay a cent more than they have to for credit card processing. Negotiation, as it turns out, is still one of the best ways to lower your credit card processing fees . Negotiating credit card processing fees can be intimidating. Credit card processing often has opaque fee structures, and the industry’s pricing models are not standardized. With that in mind, this article will arm you with some useful tools for negotiating a fair credit card contract during your signup or renewal process. Table of Contents Negotiate Lower Credit Card Processing Fees In 5 Steps 7 Questions To Ask Credit Card Processing Companies Don’t Settle For A Sub-Par Deal Negotiate Lower Credit Card Processing Fees In 5 Steps Negotiation is as much of an art as a process, but anyone who wants to come to the table well-prepared can benefit from taking the following steps when negotiating a merchant agreement . Understand Your Processing Needs The most important thing when coming to the negotiating table is knowing exactly what you need, and what you don’t. Are you a merchant who only occasionally processes credit card transactions? Or do they make up the majority of your sales? How large is your average transaction? Are most of your transactions conducted online or in person? Do you expect to deal with a lot of American Express or corporate cards, or will people mostly be making impulse purchases with their debit cards? Each of the above scenarios points to different ideal processing models. Choosing the right one will save you money. Choosing the wrong one will add costs. Before you start trying to negotiate lower credit card fees, it’s important to understand the different methods for accepting credit cards , which sales channels you need (online, in-person, etc.), and your business’s average processing volumes. Become Familiar With Pricing Models Differences in payment processing models and fee structures can make it hard to make 1:1 comparisons between processors, but understanding which models best align with your business is critical, as is knowing the typical credit card fees for merchants . Common Credit Card Processing Models & Fees Interchange-Plus Pricing: With interchange-plus (sometimes called cost-plus), the salesperson must separate the markup from the wholesale transaction cost and thus provide you with two simple numbers that you can easily compare with quotes from other vendors (interchange + 0.3% + $0.10). The interchange is the portion of the transaction that must be paid to issuing bank and credit card brands. The transaction fee markup is the part that goes to your processor and is the part you’re most likely to be able to negotiate downward. It’s the most transparent of the pricing models and generally correlates with lower rates. Because interchange fees vary by card type, being able to separate it from the markup allows you to understand how much will go to your processor in each scenario. As long as other companies also offer interchange-plus, you can make more accurate comparisons. However, keep in mind the processor will likely charge a few additional monthly account fees. Tiered Pricing: Tiered pricing collapses all of the costs and fees into a transaction rate, obscuring which fees go to which banks and credit card brands and which ones are their own markup. While this may sound simpler, there are typically three different tiers of pricing: qualified (e.g., 2.4% + $0.10), mid-qualified (e.g., 2.7% + $0.15), and non-qualified (e.g., 2.9% + $0.30). You won’t know in advance what tier any particular transaction will fall into, often resulting in higher-than-expected fees. Many companies will offer a pricing quote with the assumption that most transactions will fall into the qualified tier. In reality, most of your transactions will end up as mid- or non-qualified. We don’t recommend tiered pricing at all, though for some high-risk businesses, it might be the only pricing model available. Subscription/Membership Pricing: Subscription or membership pricing replaces the processor’s percentage markup with a monthly subscription fee and a flat per-transaction charge (e.g. $50/month + interchange + $0.8 per transaction). Like the interchange-plus model, it’s transparent and will generally lead to lower fees than tiered pricing. However, this model generally favors high-volume businesses because the monthly fee can be higher than what you encounter with traditional interchange-plus plans. Flat-Rate: Flat-rate pricing is essentially tiered pricing but without the tiers. These pricing plans usually offer a flat percentage (e.g., 2.7%), or sometimes a flat percentage and a per-transaction fee (e.g., 2.6% + $0.10). While it may lead to more predictable rates, you can end up paying more than you would with the other pricing models, especially if you have a relatively high monthly sales volume. That said, there are cases where a flat rate can be ideal for businesses that have a low volume of credit or debit card sales, provided the processor isn’t also charging a monthly fee. Keep in mind, however, that this pricing model often has the least room for negotiation. Interchange-Plus Pricing: With interchange-plus (sometimes called cost-plus), the salesperson must separate the markup from the wholesale transaction cost and thus provide you with two simple numbers that you can easily compare with quotes from other vendors (interchange + 0.3% + $0.10). The interchange is the portion of the transaction that must be paid to issuing bank and credit card brands. The transaction fee markup is the part that goes to your processor and is the part you’re most likely to be able to negotiate downward. It’s the most transparent of the pricing models and generally correlates with lower rates. Because interchange fees vary by card type, being able to separate it from the markup allows you to understand how much will go to your processor in each scenario. As long as other companies also offer interchange-plus, you can make more accurate comparisons. However, keep in mind the processor will likely charge a few additional monthly account fees. Tiered Pricing: Tiered pricing collapses all of the costs and fees into a transaction rate, obscuring which fees go to which banks and credit card brands and which ones are their own markup. While this may sound simpler, there are typically three different tiers of pricing: qualified (e.g., 2.4% + $0.10), mid-qualified (e.g., 2.7% + $0.15), and non-qualified (e.g., 2.9% + $0.30). You won’t know in advance what tier any particular transaction will fall into, often resulting in higher-than-expected fees. Many companies will offer a pricing quote with the assumption that most transactions will fall into the qualified tier. In reality, most of your transactions will end up as mid- or non-qualified. We don’t recommend tiered pricing at all, though for some high-risk businesses, it might be the only pricing model available. Subscription/Membership Pricing: Subscription or membership pricing replaces the processor’s percentage markup with a monthly subscription fee and a flat per-transaction charge (e.g. $50/month + interchange + $0.8 per transaction). Like the interchange-plus model, it’s transparent and will generally lead to lower fees than tiered pricing. However, this model generally favors high-volume businesses because the monthly fee can be higher than what you encounter with traditional interchange-plus plans. Flat-Rate: Flat-rate pricing is essentially tiered pricing but without the tiers. These pricing plans usually offer a flat percentage (e.g., 2.7%), or sometimes a flat percentage and a per-transaction fee (e.g., 2.6% + $0.10). While it may lead to more predictable rates, you can end up paying more than you would with the other pricing models, especially if you have a relatively high monthly sales volume. That said, there are cases where a flat rate can be ideal for businesses that have a low volume of credit or debit card sales, provided the processor isn’t also charging a monthly fee. Keep in mind, however, that this pricing model often has the least room for negotiation. Calculate Your Effective Rate How do you compare different pricing models, and what fees will they translate to for your business? One way to do so is to calculate your effective rate . Your effective rate distills your processing costs into a single number. The downside is that it can be difficult to get detailed fee information from processors. Use that as rule-out criteria. You don’t want to deal with a non-transparent payment processor if you can help it. The exception comes when you’re looking for the best high-risk merchant services , as these can’t effectively disclose rates most of the time. Aim for an effective rate of around 3.4% (or less, if possible). Don’t Tolerate Early Termination Fees Unless you’re in a high-risk industry, there’s little reason in this day and age to sign up for service with an (ETF) early termination fee . The payment processor you choose should offer month-to-month billing, with no long-term contracts. Beware Sneaky Contract Clauses If a tree falls in the forest and no one is around to hear, does it make a sound? Not sure, but I can tell you that early termination fees exist whether or not your sales rep discloses them to you upfront. If your contract doesn’t explicitly say in writing that there’s no termination fee, there’s a very good chance there is a termination fee. Do yourself a favor and ask about these fees during your negotiations. And if your processor says there’s no ETF at all, make sure they attach a waiver to the contract that says precisely that. Verbal agreements mean nothing in payment processing . Likewise, take a day to review the entire merchant agreement for anything that might have been glossed over in your discussions with the sales reps. This can include stipulations for the return of any “free” hardware or, in the case of some processors, enrollment in “discount” clubs for merchants. The first month is often free, and after that, you’ll be charged anywhere from $10 to $20 per month for a program through which you can order receipt paper and other supplies — but which you probably won’t use because you won’t be aware of it. (Read your contract, please .) If a tree falls in the forest and no one is around to hear, does it make a sound? Not sure, but I can tell you that early termination fees exist whether or not your sales rep discloses them to you upfront. If your contract doesn’t explicitly say in writing that there’s no termination fee, there’s a very good chance there is a termination fee. Do yourself a favor and ask about these fees during your negotiations. And if your processor says there’s no ETF at all, make sure they attach a waiver to the contract that says precisely that. Verbal agreements mean nothing in payment processing . Likewise, take a day to review the entire merchant agreement for anything that might have been glossed over in your discussions with the sales reps. This can include stipulations for the return of any “free” hardware or, in the case of some processors, enrollment in “discount” clubs for merchants. The first month is often free, and after that, you’ll be charged anywhere from $10 to $20 per month for a program through which you can order receipt paper and other supplies — but which you probably won’t use because you won’t be aware of it. (Read your contract, please .) Walk Away From High-Pressure Sales Tactics In marketing, a popular tactic is to try to get a potential customer to “think past the sale.” Getting you to talk about what you’d do after you purchased the product establishes, at least temporarily, the assumption that you’re going to buy it. If you’re feeling pressure (or guilt) to buy, you’re probably being worked by a sales rep. This is particularly true of independent sales reps in the credit card processing industry, as they’re less likely to have useful information about the service and are less likely to be able to deliver on their promises. Sales Gimmicks To Avoid Pressure tactics aren’t the only tricks up the sales teams’ sleeves. You may be offered some kind of short-term benefit in exchange for accepting a sub-par long-term arrangement. It’s not quite a bait and switch (although it could turn out to be if you’re dealing with an unscrupulous salesperson), but it can lead you to make a miscalculation. Other times, they’ll simply try to catch you off-guard. Common sales gimmicks include: One-day only/limited-time special offers Calling and making a pitch during your busiest hours, when you’re distracted Offering free hardware Offering money if they can’t match or beat your rate Promising a no-obligation trial period But what if the gimmick sounds really good, you ask? First of all, if it’s not in writing, it doesn’t exist. Second, even if the offer is on paper, there might be a few hoops to jump through. You can easily run into a situation where claiming your incentive proves burdensome or even impossible. Remember, gimmicks exist to create sales pressure. Don’t let yourself be pressured. Pressure tactics aren’t the only tricks up the sales teams’ sleeves. You may be offered some kind of short-term benefit in exchange for accepting a sub-par long-term arrangement. It’s not quite a bait and switch (although it could turn out to be if you’re dealing with an unscrupulous salesperson), but it can lead you to make a miscalculation. Other times, they’ll simply try to catch you off-guard. Common sales gimmicks include: One-day only/limited-time special offers

Calling and making a pitch during your busiest hours, when you’re distracted Offering free hardware Offering money if they can’t match or beat your rate Promising a no-obligation trial period But what if the gimmick sounds really good, you ask? First of all, if it’s not in writing, it doesn’t exist. Second, even if the offer is on paper, there might be a few hoops to jump through. You can easily run into a situation where claiming your incentive proves burdensome or even impossible. Remember, gimmicks exist to create sales pressure. Don’t let yourself be pressured. 7 Questions To Ask Credit Card Processing Companies When negotiating a credit card processing deal, asking smart questions shows that you are an informed buyer who isn’t falling for typical sales tactics. The company’s answers will also help you determine if that processor can meet your needs and provide a good deal. Here are some good questions to ask when evaluating or negotiating with a credit card processor: Can I receive interchange-plus pricing? Can I get a month-to-month contract? Can you waive the early termination fee? What are your funding times? What are your batch times? Are their processing limits? What are your hardware replacement times? Again, remember that verbal promises mean nothing in the world of credit card processing; you also need to ensure that any promises the sales agent makes during negotiations are also reflected in the written merchant agreement. Learn more about what to ask before signing a merchant agreement . Don’t Settle For A Sub-Par Deal While it may not be possible to find a perfect credit card processing deal, it is possible to find a good one that meets most of your needs, and at a reasonable cost. While you should absolutely advocate for your best interests, remember to also be realistic–low-volume businesses aren’t going to be able to get enterprise-scale discounts, for example. That said, aim for the best rates you can get within your business class. Not sure where to start? We’ll help you narrow your search with our list of best credit card processing companies . Latest posts by Chris Motola ( see all ) Credit Card Company Market Share - March 19, 2024 Largest Credit Card Networks - March 19, 2024 The Biggest Credit Card Issuers - March 19, 2024 Largest Payment Processors - January 17, 2024 The Complete Guide To ACH Processing Fees - November 30, 2023 Know Your Fair Rate Before You Negotiate The best negotiation starts with data. Maverick Match calculates your effective rate and benchmarks it against 1,112+ real interchange rates — so you know exactly what to ask for. Free, takes 2 minutes. Get My Rate Benchmark — Free Know Your Fair Rate Before You Negotiate The best negotiation starts with data. Maverick Match calculates your effective rate and benchmarks it against 1,112+ real interchange rates — so you know exactly what to ask for. Free, takes 2 minutes. Get My Rate Benchmark — Free Best Credit Card Processing Companies The Best Corporate Cards For Businesses Best POS Systems For Small Business The Complete Guide To Getting A Free Square Card Reader For Your Business " * " indicates required fields Questions, Comments, Feedback ? " * " indicates required fields Questions, Comments, Feedback ? " * " indicates required fields Help Us & Earn $30 Want to help shape the future of the Merchant Maverick website? Join our testing and survey community! By providing feedback on how we can improve, you can earn gift cards and get early access to new features. Want to help shape the future of the Merchant Maverick website? Join our testing and survey community! 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