Managing Merchant Card Processing Costs for Small Businesses 

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Small business owner making perfume, she has low card processing fees

For small business owners, every dollar counts. The fees associated with accepting credit and debit card payments can quickly add up and eat into slim profit margins. However, customers increasingly expect the ability to pay with plastic. With some diligence and negotiation, small businesses can manage merchant card processing costs and keep more revenue. 

Research Competitive Processing Options 

Today’s market offers many alternatives for small business card processing. Some online merchants offer flat rate structures instead of confusing tiered models. Shop around with major processors like First Card Payments, which also offer Direct Merchant Affiliate Programs so you can earn money for referring high-risk merchant accounts, which will help to offset your costs.  

Compare pricing models – interchange-plus plans can offer transparency and competitive markups. Consider independent sales organizations (ISOs) which lease equipment and handle transactions. ISOs are focused on SMBs and can undercut larger processors. Weigh your choices based on rates, contract terms, hardware needs and customer service. 

Understand Your Current Rates and Fees 

The first step is gaining a clear picture of your current merchant services charges. Processing statements are notoriously complicated, but take the time to understand: 

  • Interchange fees – these are set by card companies and charged per transaction. 
  • Assessment fees – charged per transaction by card networks. 
  • Markup – added by your payment processor, usually a percentage above interchange. 
  • Monthly fees – charged for equipment rental, PCI compliance, monthly minimums. 

Look out for expensive practices like tiered pricing, where rates rise sharply for rewards cards or smaller transactions. Know exactly what you are paying now before negotiating. 

Negotiate Better Rates for Card Processing Fees

Most providers are willing to negotiate, particularly for larger monthly volumes. Calculate your average monthly processing volume and use it as leverage when contacting merchant services sales reps. Push for lower markups, waived fees and month-to-month contracts. Consider presenting competing offers to strengthen your position.  

Many providers offer temporary teaser rates – try to lock these in long-term. If your business has strong credit, inquire about interchange-plus pricing. The higher your volume, the more bargaining power you wield. 

Control Operational Costs 

Beyond base rates, you can manage costs operationally: 

  • Review statements monthly – Don’t just file statements away unread. Set time each month to review charges thoroughly. 
  • Understand each fee – Processing statements contain many different fees. Know what each one is for and whether it seems reasonable. Watch for unnecessary fees. 
  • Check for hidden costs – Look for fees that seem low monthly but add up over time, like statement fees or PCI compliance costs. 
  • Scrutinize outlier transactions – Investigate any exceptionally high transaction fees to determine the cause. It could signal an error or problem. 
  • Reconcile against business records – Match statement charges and totals against your internal sales records. Reporting discrepancies can indicate issues.  
  • Watch out for duplicate charges – Processing errors can occasionally cause double-billing for certain transactions. Monitoring statements helps catch these. 
  • Follow up on vague fees – Don’t ignore confusing, vague or unfamiliar fees. Contact the processor for clarification or to dispute unrecognized charges. 
  • Track rates and fees over time – Keep notes on key rates and totals each month. Notice when they creep up unexpectedly. 

Summary

Closely monitoring statements each billing cycle can help identify erroneous, unnecessary or fraudulent charges and ensure you aren’t overpaying for payment processing services. 

With some savvy navigation of pricing models and fees, small businesses can keep merchant card processing costs in check and maintain healthy margins on payments. 

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