Do you dread opening your credit card processing statement each month, only to see how much you’re paying in fees? You’re not alone. Some merchants pay hundreds, even thousands of dollars monthly in processing costs. But what if a portion of that could go back into your pocket?
Processing fees are a natural part of doing business, but they don’t have to feel like a financial burden. With the right strategies and tools, you can take control of these expenses, optimize your costs, and redirect those savings into growing your business. Here’s what you need to know about managing processing fees and actionable steps to make a real impact on your bottom line.
What Are Processing Fees?
Processing fees are charges imposed by payment processors and credit card companies to handle customer transactions. These fees typically include:
Interchange Fees: Set by the card networks (Visa, Mastercard, Discover, American Express), these fees can vary slightly. Factors like the type of card, transaction method, merchant category code (MCC), size of the transaction and the processing details all are influencers.
Assessment Fees: Occasionally referred to as “card brand fees” or “association fees” these are in place to cover the costs of running transactions through the card networks.
Processor Fees: The small percentage that a processor charges a business to facilitate a payment transaction.
Together, these fees often range between 1.5% and 3.5% of each transaction amount, according to a report by the National Retail Federation. For small businesses, these fees can add up to be hundreds, if not thousands of dollars.
How Processing Fees Affect Your Business
A 2023 study by PYMNTS found that 62% of small business owners feel that processing fees significantly impact their profitability. Even small percentages can add up quickly, especially for businesses with high transaction volumes. Over time, these fees can reduce your margins and limit opportunities for reinvestment if left unmanaged.
What Can You Do About Processing Fees?
Consult an Experienced Payment Processor
Many payment processors offer customizable fee structures, especially for businesses with high sales volumes. Be sure to do your research when working with a payment processor in order to set up customized payment programs that help avoid costly fees.
Explore Flat-Rate Pricing
Flat-rate processing is a pricing model where businesses pay a consistent percentage for each transaction, regardless of card type. This reduces unpredictable charges, and offers one of the most simplistic payment programs.
This approach is ideal for businesses with steady transaction sizes, providing predictable costs and easier budgeting. Its clarity and convenience make it a popular choice for small to medium-sized businesses.
Use a Cash Discount Program
Cash discount programs pass processing fees to customers who choose to pay with cards. This can significantly reduce your out-of-pocket fees while remaining compliant with state laws.
Wondering how much you might be able to save by using a Cash Discount program? Working with trusted payments partners can show you how much you might be able to save!
Review Your Statements Regularly
Hidden or unnecessary charges can creep into your processing fees. Regularly auditing your processor statements can help identify areas for cost savings. To do so, speak to your trusted payments partner on a semiannual or annual basis to align business goals and ensure the best program is being utilized.
Processing fees are a part of modern commerce, but they don’t have to be a burden. By staying informed and proactive, you can minimize these expenses and keep more of your hard-earned revenue. Speak with your trusted payment partner to determine the best path for your business.
Merchant Maverick. (n.d.). How to negotiate credit card processing fees. https://merchantmaverick.com
National Retail Federation. (n.d.). Understanding credit card processing fees and costs. https://nrf.com
PYMNTS. (2023). The state of SMB payments in 2023. https://pymnts.com