How to Save Money on Credit Card Processing

This is a guest post by Stella Fayman of

Accepting credit cards is critical for most businesses.
For many, it is the most important financial service.

Unfortunately, most business owners pay much more than they should for the service. According The Merchant-Acquiring Side of the Payment Card Industry: Structure, Operations and Challenges (a Federal Reserve publication), businesses with less than $1M in credit card receipts per year pay between 0.69% and 1.82% more than the wholesale (interchange) price that Visa and Mastercard pay for transactions. Here are some tips to make sure your business gets the best deal:

1) Know what you’re talking about

Do some research early on to get a handle on industry language. Know exactly what your business needs are. This will help screen out salespeople incapable of dealing your situation–who would end up costing you more anyway. For example, if you plan to use a certain POS system or need a certain internet gateway, be sure to mention that in the beginning of the process.

2) No cancellation fees allowed

Make sure to read the fine print from your credit card processing contract. You may be surprised to find a cancellation fee from at least $250 to several thousand dollars. This fee is a way of guaranteeing your loyalty to the processor, regardless of your satisfaction with their service. The good news is that getting rid of this fee should not be a problem–most salespeople have the authority to waive it. To avoid this problem, talk to your salesperson. Make sure the fee is waived in writing either in the contract or as an amendment.

3) Only use interchange-plus pricing

The bulk of a credit card’s processing fee goes to Visa and Mastercard. This fee is called “interchange” and is set in stone. Interchange-plus pricing is the fairest form of pricing structure for your business, meaning that you pay the interchange fee plus a constant markup which goes to the processor as a service charge. Having this structure ensures there are no tricky fees or hidden costs, unlike tiered pricing structures.

4) Comparison shop

Research shows that the best deal can be found by comparison shopping between at least five processors. However, make sure to compare on an apples-to-apples basis, and be sure each processor knows that you are actively shopping. You can easily make your bids more competitive by leveraging the power of comparison.

Stella Fayman blogs for the comparison shopping site for credit card processors. Much like plane ticket prices are compared on Expedia, TransFS lets business owners compare processors on an apples-to-apples basis. TransFS only includes processors without cancellation or hidden fees, and only interchange-plus pricing. Learn more about credit card processing on the TransFS blog: Financially Speaking.

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  • It’s always good to compare but the industry is very devious. Most companies offer seemingly good rates but bait and switch with hidden fees and surcharges and then lock you in to a contract you can’t get out of. It’s not even good enough to get a rate quote since once you get the actual contract at times it can be loaded with fine print. Best move: find a company that has no contracts, no termination fees or hidden surcharges.

  • If you are a small business owner that does less than $50,000 per month in credit card sales, the advice in this article is excellent and is a great source to compare apples to apples quotes.
    If you are part of a larger organization that utilizes multiple Interchange categories and has high volumes on a monthly basis, I would encourage you to utilize an independent consulting company that is truly processor neutral similar to our company, Financial Mitigation Services. There is so many variables and factors that drive pricing besides the negotiated rate that it is critical for mid to large size businesses to manage this cost category on a monthly basis.

  • Jeff, That is certainly some sound advice many times it’s the various downgrades and other fees that can be just as costly as the discount rate itself. Large organizations would be smart to look into how to minimize rates based on the transaction type etc.

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