How to Reduce Payment Processing Fees For Your Business

Payment processing fee is the cost a business must bear to accept credit card and digital payment solutions. This typically includes interchange fees, assessment fees, and the markup by any payment processor.

While those percentages may seem small, they add up rather quickly, especially if your business has to deal with a high volume of transactions. Your first step towards reducing your payment processing costs is to understand how the fees work and how these are calculated.

Shop Around for the Best Rates

Not all payment processors are created equal, reputable payment processor companies offer competitive pricing models, but it all begins with your business type and how that fits into the pricing scheme of each. You've got to shop around for the best rates on transaction fees, monthly fees, and other hidden costs that may pop up.

Some provide flat-rate pricing. Others use tiered or interchange-plus pricing. This allows you to seek out a provider that best fits your business needs and will keep you from overpaying for services you do not need or use.

Negotiate with Your Payment Processor

The truth is, most business owners are completely unaware that these fees are generally negotiable. Large or enterprise businesses with high transaction throughput often can negotiate better rates due to the sheer volume handled with their payment processor.

Leveraging your history and quantity of transactions is where it usually yields a concession since volume on this scale is what truly drives interest from payment processors. Sometimes just actively account for periodic reviews to guarantee the time is right.

Optimize Your Forms of Payment

Another variable that can affect the processing fee are the types of payments your business accepts. For example, interchange fees on debit card transactions are lower compared to credit cards. By incentivizing customers to use the less-costly type of payment, the amount of the fee that will be charged is decreased.

This can be achieved by providing your customers with ACH payments that mostly come at much cheaper processing fees compared to card payments. By optimizing forms of payment you accept, money will be saved without impacting the customer's convenience too much.

Impose a Minimum Purchase Requirement

When payment processing fees are based on a percentage of the sale, small-ticket items become expensive to process. Set a minimum purchase requirement when credit card payments are made.

Example: If your average sale is $5, it's going to cut into your profit pretty fast with all the processing fees. A minimum purchase of $10 or $15 for card payments means that the fees are less percentage-wise of each sale and thus help preserve your margins.

Maintain PCI Compliance

Non-compliance with PCI DSS will result in extra charges from your payment processor. Staying PCI-compliant reduces these penalties, but more importantly, it protects your business from data breaches, which can be costly and damaging to your reputation.

Many payment processors, such as Stripe and Square, offer tools to help businesses maintain compliance. Make sure to utilize these resources to avoid unnecessary costs.

Review Your Statements Regularly

Apart from what you know the payment processor is charging, there could be many other hidden fees. These would take some regular statements to catch: monthly service charges, batch fees, and features not used.

These are all items found when the statements are thoroughly analyzed month over month. Of course, if discrepancies or unknown charges were found, do not fail to call the payment processor to settle it immediately.

Invest in a Payment Gateway to Suit Your Needs

Another big factor in your processing costs is your payment gateway. Some gateways come in packages with processors, while other systems operate independently. If your business is super e-commerce-heavy, choosing a gateway that is online-transaction-friendly-PayPal or Shopify Payments-can help cut through the red tape for you and may even save some money.

Make sure to find one compatible with your current systems to eliminate added costs in setup and/or maintenance.

This means that with a strategic approach to processing, the fees can be so much lower, which will lead to increased profitability. Conjoin this practice with regular cost monitoring to maintain an effective yet least costly system of your company's payments.

Read full guide to know more about payment management software.