DISCLAIMER: This article was written in 2018 and has not been updated. For more up to date information about small business funding products and options, please browse our recent articles.

Avoiding Credit Card Processing fees – It’s an art

As a business owner, you know how expensive it can be to accept credit card payments. Although it’s important to be able to accept credit and debit cards to stay competitive in today’s modern market, it’s also important to make sure your dollars to being used in the most effective way possible for your business. That’s why understanding the credit card transaction fees that are often associated with credit card processing, what they mean, and what you do and don’t have to pay can have a big impact on your business.

There are some fees that every merchant must pay, but there are hundreds more that they don’t have to pay! Take a look at our breakdown below to learn more about these fees, what they’re for, and how to pick the right payment provider for your business.

The Unavoidable Fees

Before we get into how to avoid fees, let’s discuss the fees that are required to accept credit cards. Each credit card that you accept at your business has a cost associated with it that is set by the credit card providers themselves. This cost is called interchange and is required by all merchants that accept credit cards. Again, interchange is a non-negotiable fee that every merchant must pay, and the cost is based on the individual cards.

The only other unavoidable fee is whatever method your credit card processing provider chooses to use to bill for their services. Individual business owners cannot deal directly with credit card companies. Instead, they need to set up a merchant account with a merchant services provider to accept any payment other than cash. These merchant services providers have a variety of ways they charge for their services, such and markups on top of interchange or flat monthly subscriptions. Either way, paying for the services of a third-party facilitator is the only other unavoidable fee associated with credit card processing.

The Avoidable Fees

When it comes to additional fees, hundreds could be covered here. A lot of traditional merchant services providers rely on the fact that the average merchant isn’t going to understand or take the time to read their monthly statements. This leads to countless fees being added and thousands of dollars wasted each year!

Here are 5 of the most common, with simple ways to avoid them for your business:

1. Early Termination Fee: Many of you are probably all too familiar with this type of fee. If your current payment provider required a contract when you signed up, there’s a good chance an expensive cancellation fee came along with it. How to avoid: Try to find a payment provider that offers month-to-month billing and no contract. This way, you have the flexibility to change and grow as a business without being locked into a specific provider.
2. Setup Fee: This is a common one and is usually charged upon the implementation of a new account. Traditional providers will often charge a setup fee for the merchant account itself and also for the implementation of any technology solution needed – like a terminal or online shopping cart. How to Avoid: Partner with a payment provider that shares your values! Digging for the lowest rate may sound like the best approach, but often those companies who promise to “beat your lowest offer” are charging these kinds of fees and more! Ask specific questions about setup fees when speaking with potential providers to get answers as to the true cost of doing business.
3. Batch Fee: If you have a brick-and-mortar location, you understand how important it is to batch your terminal every day. Simply put, batching a terminal means sending all of the transaction information gathered that day to the bank so that your money can be deposited. Some providers charge merchants for every batch, which can very quickly add up! How to Avoid: Avoiding this fee again comes down to having an open and honest conversation with your provider. Asking direct questions about fees will force your provider to be honest with you about exactly what they’re charging, instead of hiding it in your monthly statement.
4. Reprogramming Fee: Technology is constantly being improved, and your business deserves the latest and greatest to take payments. If your terminal or POS system needs an upgrade, that could be a big expense! How to Avoid: While evaluating your options for a payment processing provider, take a closer look at the customer service departments. Does your provider value the customer experience? Ask direct questions on the nature of the support experience – from phone wait times to online knowledge base access, and technology upgrades.
5. Statement Fee: One of the most basic functions of having a merchant account is receiving a monthly statement. These statements are often several pages long and very difficult to understand. The worst part? Most merchants get charged just to receive them! How to Avoid: Again, asking pointed questions about the nature of the fees associated with your merchant account is the first step to finding a processor that doesn’t require them. Another way to avoid this fee, however, is to ask your provider if it’s possible to enroll in a paperless statement system.

Many small business owners view credit card processing as an expensive, annoying, yet necessary evil – but it doesn’t have to be that way! Armed with the knowledge of what is required and what isn’t, you can now have more productive conversations with your payment processor to ensure you’re getting the best pricing possible. If you find that you aren’t satisfied with their fee policy, consider taking the leap and evaluating some new options. It could pay off big in the long run for your business!

Interested in learning more about credit cards and the different impacts they can have on you and your business? Head over to the Biz2Credit blog to read about credit card debt, credit card rewards, and credit card receivables.

Have you ever noticed a ridiculous fee on your monthly statement? Tell us about it in the comments!