How To Negotiate Credit Card Transaction Fees?

In recent years, more and more merchants are counting on a credit card payment solution to accept credit card payments. This is not just because credit cards allow merchants to tap into a broader customer base as they facilitate international trade, but also because they act as a secure, fast, and convenient payment option for customers. However, credit card transaction fees can eat into merchant profits. Therefore, merchants need to know how to negotiate credit card transaction fees effectively.

Negotiable and Non-Negotiable Credit Card Transaction Fees

Credit card transaction fees affect both consumers and merchants. These fees can be categorized into:

1.       Negotiable credit card transaction fees

2.       Non-negotiable credit card transaction fees

Let us explore the different negotiable and non-negotiable credit card transaction fees.

Interchange Fees

ü  Nature: These fees are charged by card networks such as Visa and Mastercard.

ü  Negotiability: Usually non-negotiable, as the card networks define them.

ü  Impact: Merchants may indirectly negotiate these fees by selecting a card processor that offers lower overall fees.

Processor Markup Fees

ü  Nature: Payment processors add these fees for their rendered services.

ü  Negotiability: These fees are usually negotiable, as merchants can shop around for processors providing competitive rates.

ü  Impact: Negotiations related to processor markup fees can result in cost savings for merchants.

Gateway Fees

ü  Nature: These fees are charged by payment gateways that facilitate seamless online transactions.

ü  Negotiability: Gateway fees are usually negotiable based on the volume of transactions and services provided.

ü  Impact: Merchants with a significant volume of online transactions can benefit greatly by negotiating gateway fees.

Batch Fees

ü  Nature: The fee is charged to settle batches of transactions.

ü  Negotiability: It may be negotiable depending on the processor.

ü  Impact: Merchants may decide to negotiate batch fees to streamline their accounting processes.

Assessment Fees

ü  Nature: Assessment fees are levied by card networks.

ü  Negotiability: Non-negotiable.

ü  Impact: These fees are standardized and contribute to the overall cost of processing transactions.

Card Brand Fees

ü  Nature: These fees are set by card brands (e.g., Visa, Mastercard).

ü  Negotiability: Non-negotiable.

ü  Impact: Merchants are unable to negotiate these fees, as they are predetermined by the card networks.

Cross-Border Fees

ü  Nature: These fees are applied to international transactions.

ü  Negotiability: Non-negotiable.

ü  Impact: Businesses dealing with cross-border transactions must account for these fees.

Compliance Fees

ü  Nature: Compliance fees are levied for adherence to security standards like PCI DSS.

ü  Negotiability: Limited negotiation, as adherence to standards is non-negotiable.

ü  Impact: Merchants can minimize compliance fees by maintaining robust security practices.

Now that we have gained a complete understanding of negotiable credit card transaction fees and non-negotiable credit card transaction fees, let us move our focus to how to negotiate credit card transaction fees.

Negotiating credit card transaction fees can be a crucial skill for business owners and managers who want to embrace a world-class credit card payment solution that helps them accept credit card payments without eating on the profits.

Ø  Firstly, you need to fully familiarize yourself with different types of credit card transaction fees. By gaining about these fees, you can get empowered to take a stand for your business during negotiations.

Ø  You should ideally review your existing merchant services agreement to gain invaluable insights about how to best negotiate terms from the "new" credit card payment solution provider.

Ø  You should research prevailing industry standards for credit card processing fees.

Ø  Cultivating a positive and mutually beneficial relationship with your payment processor fosters goodwill, which makes it more likely for processors to consider your request for fee adjustments.

Ø  High transaction volumes consistently may act as leverage during negotiations because of the increased revenue generated for the payment processor.

Ø  You should request quotes from multiple credit card processors that will arm you with alternative options and negotiate more effectively with your current provider.

Ø  A positive track record of on-time payments may encourage the processor to offer you a credit card payment solution plan to accept credit card payments at more favorable terms.

Ø  You can even explore the possibility of a long-term commitment in exchange for a lower fee as that may incentivize the processor to offer more favorable terms.

Ø  You may consider hiring a consultant or expert in credit card processing if negotiations become complex or not going your way.

Conclusion

Undoubtedly, credit card processing fees aren't small expenses. Therefore, you should select a merchant processor that offers competitive pricing to suit the specific requirements and budget of your business. Ideally, seasonal and small businesses should opt for the flat rate pricing model without a long-term commitment. Medium businesses that handle a high monthly transaction volume should ideally opt for an interchange-plus pricing model and large businesses may prefer the membership/subscription model.

Contact us now at WebPays for a credit card payment solution that helps your business accept credit card payments without eating up your profits.