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April 27, 2022

One of the most important things to look at when your business accepts credit cards is how to reduce your business expense by Lowering Your Credit Card Processing Fees.

One option is to switch processors, however switching processors isn’t always easy. There can be hardware changes and new forms that need to fill out. There can also be costly cancellation fees. How do you find the one that is the best option for you?

Things to Look at When Evaluating Options


  • The issuing bank is the financial institution that issued your customer’s credit card. The issuing bank sends the money, and then the customer repays the issuing bank.
  • An acquiring bank can accept the funds and deposit them into your business bank account.
  • The payment processor, such as Vantiv or First Data®, helps work out the details for (or as part of) the acquiring bank, including verifying cardholder information, creating secure connections and handling disputes.
  • payments network or association — such as Mastercard®, Visa® or Discover® — helps connect these parties (the issuing bank, the acquiring bank and the payment processor) and facilitates the processing of the payment.

What Happens After a Customer Pays With a Card?

When a customer makes a purchase with a debit or credit card:

  1. Your terminal sends the card’s information to the acquiring bank.
  2. Your terminal sends the card’s information to the acquiring bank.
  3. The acquiring bank asks the credit card network to authorize the transaction with the customer’s issuing bank.
  4. The issuing bank sends the authorization or denial response back to your terminal.
  5. If the authorization is approved, the customer’s issuing bank sends the money to your acquiring bank.

Each of these steps involve a cost, and some of the costs get passed on to the merchant. So, what are the different fees and how can they be minimized?

Non-negotiable Interchange and Assessment Fees

The largest portion of your credit card processing fees often depends on the interchange rate. The interchange rate is a fee that the acquiring bank pays to the issuing bank each time a cardholder makes a purchase. Interchange rates get passed on to merchants, and they’re often a percentage of the sale amount or a percentage plus a fixed rate. They can vary depending on:

  • A card’s brand: Visa®, Mastercard®, Discover®, American Express®, etc.
  • The type of card: Debit card, credit card, rewards card, etc.
  • The merchant: Different merchants have varying levels of risk, and your fees may depend on your industry and the products you sell.
  • How you process payment: Swiping, inserting, typing in the number, etc.

You will also pay an assessment fee, which is how the card networks make money.

Negotiable Payment Process fees

Additionally, you will have Payment Processor fees you will pay to your payment processor for its services. Interchange and assessment fees are not negotiable. However, you can compare payment processors and pricing plans to lower the fees you pay to the processor.

What to Look for to Save Money on Processing Fees

Use an address verification service (AVS) – see our Article titled AVS Credit Card Match

Reduce the risk of credit card fraud — See our Article titled Friendly Fraud.

How you set up your Merchant Account and terminals and how you process your batches will affect the cost. The type of business and type of transactions and the frequency of transactions can affect your fee structure. You may find processing your batch everyday will lower your rates vs. sending larger batches every few days.

Negotiate with credit card processors — If your processor doesn’t negotiate the best rate, it might make sense to change processors.

Negotiate a low flat rate: Take your last three credit card statements and find your average processing fee. Use this number when looking for a lower fee. You are looking for a rate that is lower than your statement average. Doing this will save you money each month. A flat rate is really the only way you can secure guaranteed savings.

Consult with a credit card processing expert.

Pick a reputable processor who has few, if any, additional fees in addition to processing costs

Not only does it make it easier to understand what you’re paying for each month, you won’t be caught off guard in the future by fees.

Remember, as a merchant you do have negotiating power. You can request waivers or ask for interchange-plus pricing instead of tiered pricing. Do research, know what you are looking for and ask.