Are you а merchant doubting about the transparency of the payment processing costs because they seem to be high? Interested to understand the fees you’re paying and learn what options you have available to reduce your credit card payment processing fees? Below are 3 intuitive steps to help you get a grasp of your processing costs and lower them if needed.
Step 1: What is your real cost?
You need to know your exact costs. Here is a general rule to apply: if your cost is over 3% of the transaction processing fee, your processing terms are not good. The industry “standard” is around 2.9%, but this amount could be reduced even further.
Furthermore, if your costs are less, say 2%, it is possible to negotiate even better terms. This will depend on the kind of cards your business accepts along with your processing volumes.
Step 2: Why are your costs that high?
If your costs are over the average fees, there is probably a good reason.
3 reasons why credit card processing fees are high
1) Payment types. What types of payments and cards is your business accepting? Perhaps, your customers pay only using rewards cards, which come with high costs. Therefore, if you feel that 3.5% is too high, it might be simply the case for your business.
2) High risk. Your high costs could be a result of your business being high-risk. Therefore, your processor charges more for processing payments considered high-risk. There will be increased premiums via extra fees to minimize the risks.
3) Low volume. A comparatively low merchant credit card processing volume might be another reason for your high fees. The general rule is that the processor makes about a 1% margin. Therefore, if your monthly processing is $10,000, this means the company is profiting $100 by providing you with that service. Some believe that the cost is too high, but there are indirect infrastructure-related costs, PCI, security, etc.
Step 3: If your costs are too high, do something about it!
Suppose your reason isn’t on the list above. As a merchant, you aren’t high-risk and you take the usual card types, similar to your competition.
Furthermore, what if your processing volume has been significant recently, but your credit card payment processing fees are still high? It seems like the perfect time to renegotiate your processing terms. You have the option to request better processing terms from your current processor or find a new processor.