When it comes to the world of credit card payments and getting the best processing agreement for your business, it can get cluttered with lots of noise and confusion. So how do you know if you’re getting a good deal and what can you do to get the lowest credit card processing fees?
A small portion of a percent may not seem like a lot but on a contract with a merchant service provider, those small fractions quickly add up to be a lot, especially for those with higher volume. Therefore, it’s important to know what to look for to find the best processing agreement with the lowest credit card processing fees. In this article, we’ll delve into some tips that will help you lower your rates.
There are a lot of factors that determine credit card fees and rates for processing. For more, a more detailed look, check out our blog on how a credit card network works.
The average processing fee that a business pays on average is 1.5% to 3.5% per transaction. Therefore, just saving .5% on fees can mean thousands of dollars saved in the long run. This money could go a long way if used for marketing to grow the business instead of it being wasted on fees. We’ve summarized some of the major factors below:
Your interchange fee is what makes up most of the total transaction fees that need to be paid when processing cards. Some of the factors that determine the interchange rates are if the card is present or not, high rewards cards, business or corporate cards, and keyed/swiped/inserted cards.
These are the fees that the merchant service provider sets to be compensated. This rate varies between companies and can be negotiated with transaction volume, the higher the volume the better deal you could get.
The assessment fees are set by the credit card companies and include a fixed monthly network rate.
Lowest Credit Card Processing Fees
Interchange-plus
Interchange pricing is what the credit card companies along with credit card issuing banks charge merchant account providers to process credit and debit card transactions.
Merchant Account providers then charge a markup on interchange known as interchange-plus pricing to process the transaction and provide customer service to the merchant accepting the credit or debit card payment.
Interchange Plus pricing is known as the most transparent pricing for merchants.
Flat Rate
This type of processing plan has a flat fee assigned before transactions take place. The rates stay the same for every transaction and work better for businesses with a smaller volume of transactions.
Tiered
Tiered is the costliest way to process, but also the most difficult to negotiate. The tiers syndicate interchange rates for every type of card with a transaction type for one fee. The lone fee makes it extremely difficult to know what contributed to the total and makes it easy for processors to raise rates in certain circumstances.
Don’t let the simplicity fool you, these tiered plans don’t offer the transparency many businesses desire. To lower your total credit card processing rate, it’s important to understand each piece and the factors that make up the fees.
If you’re a company that processes high volume, you’re in luck to be able to use that as leverage to negotiate lower rates. Generally, the higher volume will mean lower rates since the processing company will make more money, therefore, you’ll want to add value to the merchant service provider to reduce processing costs.
With all the increased fraud in recent years, it’s important to take necessary measures to protect against retail fraud. Staying up to date with the right point-of-sale technology and trends can help you lower your risk. Since part of your processing fees are used as a type of insurance, showing sufficient evidence to prove you’re at lower risk of fraud should help lower costs.
Part of this evidence could be showing you’re following all PCI compliance rules, requiring a CVV with every card that’s not present at the time of purchase, keeping purchase histories with saved receipts, requiring signatures for delivered orders, asking for the billing zip code, avoiding keyed transactions, and using emv card readers while eliminating all swiped transactions.
No too long ago, VISA started to encourage the use of AVS by lowering interchange rates for those that use it. AVS reduces your risk of credit card fraud and chargebacks by having a process that verifies the cardholder’s billing address with the issuing bank tied to the card.
The address entered has to match the address that the customer’s bank has on file. This AVS system reduces your risk of credit card fraud and chargebacks.
While this is normally used for CNP transactions over an ecommerce channel, brick and mortar retailers sometimes also require it for in-store purchases.
Often customers are only required to enter a billing zip code, which makes the process pretty fast and give you another reason for credit card processors to lower your rates.
It’s important to differentiate the merchant services provider and the POS company and have a clear understanding of what they charge and how their rates are broken down.
Find out if the POS company can integrate with a processor of your choice for more freedom in your operations and the ability to negotiate a better rate for processing.
You’ll want to set up each terminal with all the hardware needed. Get credit card machines that accept EMV cards and mobile payments with customization so you can be better protected against fraud and get a better rate.
The use of these tips should reduce your credit card fees and add up to make a big difference in the long run. To find out more, give us a call and we’ll guide you every step to setting up your point of sale and getting you lower processing rates than most other merchant providers. Call Rebel Payments today for a free consultation.