4 Tips For Reducing Credit Card Processing Fees

Whether you operate an offline retail business or sell products exclusively online, processing your customers' credit cards has a major influence on your sales volume. If you don't provide your customers with the option to use their credit cards, they'll go elsewhere to buy products. The problem is that fees associated with processing those transactions can range from reasonable to exorbitant; many merchants struggle to survive despite enjoying healthy sales. Below, we'll provide 4 tips for lowering your credit card processing fees.

#1 - Ask Your Provider To Lower The Monthly Minimum

Merchant account providers often include a contractual clause that stipulates a monthly minimum charge. If your sales fail to generate the minimum, you're contractually obligated to pay the difference. If your company is generating a high enough volume of sales to meet the minimum, this isn't an issue. However, if you find that you're forced to pay the difference each month, contact your merchant account provider. Ask them to waive the fee. If they refuse, there are plenty of other providers that will be happy to negotiate.

#2 - Consider Two Separate Merchant Accounts

At first, this may seem counterintuitive; maintaining two merchant accounts seems like an unnecessary expense. But consider this: when you process transactions in which your customer's credit card is not present, your merchant account provider assumes more risk is involved. After all, the purchase can be disputed later resulting in a potential loss for the provider. To protect themselves, many of them will downgrade the transaction (charging a higher rate in the process) and apply an additional fee to your account.

By maintaining two merchant accounts, you can keep such transactions separate. That is, you can process payments in which your customer presents a credit card with one account while handling "not present" transactions with the other account. In doing so, you'll be able to limit the effect of being charged a higher processing rate to the merchant account that has been downgraded.

This strategy will not be appropriate for everyone, of course. But, review the types of transactions you're processing to determine whether it's worthwhile for your circumstances.

#3 - Shop Around

If you have been using the same provider for awhile, they'll likely have raised their rates at some point. A lot of small retail business owners simply pay the higher rates without knowing whether they're competitive. Shop around a few times a year to keep track of the industry. You might stumble upon a provider who can offer a much more flexible plan with a lower cost.

#4 - Investigate Transaction Downgrades

Ideally, each of the credit card transactions you're processing will be charged the most favorable rate (known as the "Qualified rate"). However, when a transaction is downgraded - which can happen for a variety of reasons - your merchant account provider applies a higher rate. Review each of the statements that you receive from your provider. If you notice a high number of downgraded (referred to as "Mid-Qualified" or "Non-Qualified") transactions, find out the reasons.

Many small retailers fail to notice it's happening, much less investigate why. Often, small changes in the way you process your customers' credit card payments can have an enormous impact on the extra fees you're paying for downgraded transactions. But, you need to investigate the reasons first.

There are several ways to potentially lower the payment processing fees you're paying each month. The first step to take is to call your merchant account provider. They can review your account to determine whether changes can be made to better accommodate your business. If they're unable to do so, it may be time to consider alternatives.