How To Negotiate Credit Card Processing Fees

• Interchange-Plus Pricing: With interchange-plus (sometimes called cost-plus), the salesperson must separate the markup from the wholesale transaction cost and thus provide you with two simple numbers that you can easily compare with quotes from other vendors (interchange + 0.3% + $0.10). The interchange is the portion of the transaction that must be paid to issuing bank and credit card brands. The transaction fee markup is the part that goes to your processor and is the part you’re most likely to be able to negotiate downward. It’s the most transparent of the pricing models and generally correlates with lower rates. Because interchange fees vary by card type, being able to separate it from the markup allows you to understand how much will go to your processor in each scenario. As long as other companies also offer interchange-plus, you can make more accurate comparisons. However, keep in mind the processor will likely charge a few additional monthly account fees.
• Tiered Pricing: Tiered pricing collapses all of the costs and fees into a transaction rate, obscuring which fees go to which banks and credit card brands and which ones are their own markup. While this may sound simpler, there are typically three different tiers of pricing: qualified (e.g., 2.4% + $0.10), mid-qualified (e.g., 2.7% + $0.15), and non-qualified (e.g., 2.9% + $0.30). You won’t know in advance what tier any particular transaction will fall into, often resulting in higher-than-expected fees. Many companies will offer a pricing quote with the assumption that most transactions will fall into the qualified tier. In reality, most of your transactions will end up as mid- or non-qualified. We don’t recommend tiered pricing at all, though for some high-risk businesses, it might be the only pricing model available.
• Subscription/Membership Pricing: Subscription or membership pricing replaces the processor’s percentage markup with a monthly subscription fee and a flat per-transaction charge (e.g. $50/month + interchange + $0.8 per transaction). Like the interchange-plus model, it’s transparent and will generally lead to lower fees than tiered pricing. However, this model generally favors high-volume businesses because the monthly fee can be higher than what you encounter with traditional interchange-plus plans.
• Flat-Rate: Flat-rate pricing is essentially tiered pricing but without the tiers. These pricing plans usually offer a flat percentage (e.g., 2.7%), or sometimes a flat percentage and a per-transaction fee (e.g., 2.6% + $0.10). While it may lead to more predictable rates, you can end up paying more than you would with the other pricing models, especially if you have a relatively high monthly sales volume. That said, there are cases where a flat rate can be ideal for businesses that have a low volume of credit or debit card sales, provided the processor isn’t also charging a monthly fee. Keep in mind, however, that this pricing model often has the least room for negotiation.

If a tree falls in the forest and no one is around to hear, does it make a sound? Not sure, but I can tell you that early termination fees exist whether or not your sales rep discloses them to you upfront.

If your contract doesn’t explicitly say in writing that there’s no termination fee, there’s a very good chance there is a termination fee. Do yourself a favor and ask about these fees during your negotiations. And if your processor says there’s no ETF at all, make sure they attach a waiver to the contract that says precisely that. Verbal agreements mean nothing in payment processing.

Likewise, take a day to review the entire merchant agreement for anything that might have been glossed over in your discussions with the sales reps. This can include stipulations for the return of any “free” hardware or, in the case of some processors, enrollment in “discount” clubs for merchants. The first month is often free, and after that, you’ll be charged anywhere from $10 to $20 per month for a program through which you can order receipt paper and other supplies — but which you probably won’t use because you won’t be aware of it. (Read your contract, please.)

Pressure tactics aren’t the only tricks up the sales teams’ sleeves. You may be offered some kind of short-term benefit in exchange for accepting a sub-par long-term arrangement. It’s not quite a bait and switch (although it could turn out to be if you’re dealing with an unscrupulous salesperson), but it can lead you to make a miscalculation.

Other times, they’ll simply try to catch you off-guard.

Common sales gimmicks include:

• One-day only/limited-time special offers
• Calling and making a pitch during your busiest hours, when you’re distracted
• Offering free hardware
• Offering money if they can’t match or beat your rate
• Promising a no-obligation trial period

But what if the gimmick sounds really good, you ask? First of all, if it’s not in writing, it doesn’t exist. Second, even if the offer is on paper, there might be a few hoops to jump through. You can easily run into a situation where claiming your incentive proves burdensome or even impossible. Remember, gimmicks exist to create sales pressure. Don’t let yourself be pressured.