Minimizing the Cost of Credit & Debit Payment Processing
June 16, 2021
Paying too much on credit and debit payment processing isn’t just a bad idea — it can run you out of business. After all, those small charges can really add up over time, leaving you with a substantial expense that you didn’t see coming when you signed up to process payments with your own merchant account. But when it comes to the fees that you have to pay for each transaction, it’s true that you can get away with paying less.
The good news is that credit and debit payment processing is negotiable. Just because you’re paying a high rate today doesn’t mean that you need to keep paying that exorbitant rate until the end of time. You may also just be due for a proper setup, optimizing your account to reduce the fees that you’re on the hook for. Some processing fees, while mandatory, may also be negotiable, and you can always seek out a new processing partner if the existing one isn’t quite working out for you.
For the most part, credit and debit payment processing fees are standardized. Some are set by the credit card networks themselves, while others are defined by the card issuer. The former is known as an interchange fee, and it’s basically a mandatory fee that must be paid to process a payment on the network. In general, this fee is passed on to you from the processor.
The next type of processing fee is known as an assessment fee. Assessment fees typically come from the card provider, and they’re also non-negotiable, just like interchange fees.
The last type of processing fee is from the payment processor itself. It’s a fee on top of the existing fees for the processing service, and it’s basically the payment processor’s margin, though it is often negotiable.
The first order of business when you’re looking to cut those processing fees is to approach your current merchant account provider. If you have a high volume or you’ve been a long-standing customer, you may be able to request a reduction in fees or some other concession. If your provider is interested in keeping your business, they should be able to work with you to reduce those fees to an acceptable level.
If you’re not getting anywhere with your current credit and debit payment processing partner, it may be best to let them know that you will be looking for an alternative provider if they can’t work with you on those expensive fees. They may not always give in to your request, but it doesn’t hurt to ask, and, based on their response, you’ll learn more about your trusted provider and the degree to which they value your business.
It’s an unfortunate reality that some sellers are seen as high risk. In addition to greater difficulty in finding processing partners and reducing those credit and debit payment processing fees, a high risk designation often means higher scrutiny and more issues processing payments. But if you can reduce those recurring payments, large-sum payments and any other red-flag transactions that could be contributing to your high risk designation, you could save a substantial amount on processing fees.
That said, it’s not like most businesses can change their customer base or the focus of what they do overnight. But you might be able to do things that can help, such as swiping more credit and debit cards for payment processing than you key-in manually. Another way to help reduce your fraud risk is to provide security information that validates the purchase, such as requiring a zip or security code during the checkout process. All things being equal, a merchant account provider should be able to reduce your fees if you’re taking proactive steps on your end to reduce the prevalence of fraud.
Some high risk businesses may leave it up to the processor or issuer to deal with fraud and chargebacks. But if you can implement screening such as address verification along with your payments, you may be able to reduce those chargebacks and other instances of fraud by stopping them before a charge ever goes through.
Also known as AVS, address verification works by verifying an address during the checkout process against a known, good database, checking the card and the address to ensure that everything matches. After the comparison, you’ll receive a code to approve or reject the transaction, thereby providing a security layer on top of the existing protocols that your provider may already have in place.
Both Visa and MasterCard support AVS globally, and Visa actually gives a lower interchange rate when utilizing AVS during a transaction, though if that reduced rate isn’t hitting your account, you’ll have to check with your payment processor.
Most terminals and payment processing gateways are likely setup once and then promptly forgotten about. But if in your haste something was misconfigured or entered errantly, you could be dealing with the effects of that ever since — and some time to come if you don’t get it fixed. By auditing your existing account, as well as all your in-house terminals, you’ll ensure that you’re not paying a dime more than you have to.
That’s because most credit and debit payment processing partners work on a tiered fee system that takes into account the type of business, the transactions you commonly process and how frequently they occur. If you’re in the wrong bracket for your business or your transaction volume, you could inadvertently be spending more money than you would be required to otherwise.
It can also help to do your processing in a daily batch than every few days or a week at a time. The longer you wait, the more you could be paying in fees, so it pays to process those payments in a reasonable manner as they come in.
High risk businesses need a high risk merchant account to avoid issues with delays and steep fees when processing payments. With the right credit and debit payment processing partner, you’ll be able to process more payments and pay less in fees while doing it. It can also help with ACH payments, reducing high reserve requirements and steep escrow fees that are typical with most merchant account providers.
With TranscendPay, you’ll get an all-in-one payment gateway to help you run your business. Contact us today to see how the TranscendPay platform can save you money starting today!