How To Negotiate Lower Credit Card Processing Fees?

 

Ever feel like credit card processing fees are silently eating away at your profits? You are not alone. Credit card transactions are ruling on top in the present era, but their associated fee can significantly impact your bottom line. The good news? Negotiation is your weapon! This blog equips you with the knowledge and strategies to confidently approach your credit card payment solution and secure lower fees. By understanding the fee structure, preparing your arguments, and wielding effective negotiation tactics, you can significantly reduce these costs and keep more money in your pocket. So, get ready to take control of your credit card processing fees! Read on.

Understanding Credit Card Processing Fees

Before we move towards the strategies for negotiation, let's break down the different fees that contribute to your overall credit card processing costs. Think of it as understanding the enemy before you face them! Below is a breakdown of the key players:

1. Interchange fees: These are essentially the tolls levied by the bank that issued the credit card used for the transaction. They are a percentage of each transaction and vary based on the card type (debit, rewards card, etc.) and how the transaction is processed (swiped, keyed-in, etc.). Unfortunately, you have little control over interchange fees, as they are set by the card networks.

2. Assessment fees: These fees are charged by the card networks themselves (Visa, Mastercard, etc.) to cover the cost of operating the payment system. Similar to interchange fees, you have minimal control over these.

3. Markup fees: Here comes the negotiation part! This is the fee charged by your payment processor for their services such as authorizing transactions, providing equipment, and handling customer service. Markup fees can vary significantly between processors, and this is where negotiation can help you secure a more favorable rate.

There are also other potential fees to consider, such as statement fees, PCI compliance fees, and early termination fees (if you break your contract with the processor). While negotiation may not apply to all these fees, understanding the overall structure will help you approach your payment processor with a clear picture of your costs.

Knowing Your Business’s Credit Card Transactions Before Negotiation

Negotiation is like a game of chess – the better prepared you are, the stronger your position. The same holds for negotiating credit card processing fees. Before you approach your payment processor, it's crucial to gather key data about your business's credit card transactions. This information empowers you to present a compelling case and negotiate with confidence. Here's what you need to know:

Monthly Processing Volume: This refers to the total dollar amount of all your credit card transactions in a month. It paints a clear picture of your overall credit card usage.

Average Transaction Size: Knowing your average transaction size helps assess potential fee structures. For businesses with many small transactions, a flat-rate fee might be more favorable than a percentage-based markup.

Breakdown of Interchange & Assessment Fees: These fees are often detailed on your monthly processing statement. Understanding their composition helps you isolate the areas where negotiation can have the most impact (which is the processor's markup fee).

Gathering this data is like having a roadmap for negotiation. It allows you to demonstrate your business value to the processor. High processing volume, low chargeback rates (declined transactions), and consistent on-time payments all make you a desirable customer.

The Negotiation DOs: Strategies For Lowering Fees

Now that you are equipped with knowledge, let's move next to the tips of negotiation! Below are some battle-tested tactics to use when facing your payment processor:

Be Courteous Yet Firm: Start by expressing appreciation for their current service. However, clearly communicate your desire for lower fees due to rising costs or changing business needs.

Highlight Your Value: Do not be shy! Point out the benefits you bring to the table. High monthly processing volume, a history of on-time payments, and low chargeback rates all make you a valuable customer. Processors are more likely to negotiate with customers who are reliable and profitable.

Research Before Processing: Knowledge is power! Research average processing rates in your industry and for your transaction volume. Armed with this information, politely inquire if they can match or beat those competitive offers.

Specificity is Key: Do not just ask for a generic reduction. Focus on specific fee components you'd like to see lowered. This could be the processor's markup rate, interchange pass-through fees, or even monthly statement fees. The more specific you are, the easier it is to reach a mutually beneficial agreement. 

Walk Away with Confidence: Be prepared to walk away if the processor is not willing to budge on fees. This does not have to be a bluff, but a genuine expression that you are willing to explore other options. Remember, there are other processors out there, and some may be more flexible with their pricing structure.

Negotiation is a conversation, so be prepared to listen to the processor's perspective as well. However, by implementing these tactics and maintaining a firm but respectful demeanor, you will be well on your way to securing lower credit card payment solution fees and keeping more of your hard-earned profits.

Conclusion:

Summing it up, negotiating lower credit card payment solution fees is a strategic process that can significantly impact your business's bottom line. By understanding the fee structure, gathering key data about your business's credit card transactions, and employing effective negotiation tactics, you can position yourself for success. Highlighting your business's value and being specific in your requests can help you secure a more favorable rate. Remember, negotiation is a conversation, and being prepared and confident is key to achieving lower fees and maximizing your profits.