Credit card processing fees are (unfortunately) a part of life when it comes to running a small business, especially if you run a brick-and-mortar store. Easy swiping (or contactless) payments makes life easier when you’re open, and customers like to shop places where their preferred method of payment is accepted.
That said, fees have been getting out of hand for a while now. The major vendors keep increasing rates, and you may be paying more than you should be.
So, are you paying too much? How can you put cash back in your pocket? Here’s everything you need to know about credit card fees for small businesses.
How Much Are Credit Card Processing Fees?
Credit card processing fees, on average, range from 1.3 to 3.5%, according to NerdWallet. Not included is the flat rate tack on of $.05 to $.10 (for retail) that is added to each transaction. Online transactions often have a higher fat rate fee attached—sometimes as high as $.50, depending on the industry you’re in.
So for every $100 your business earns, you pay roughly $1.30 to $3.50 (plus the transaction fee) to a merchant like Visa, Mastercard, or American Express.
Why Credit Card Fees Matter
A few dollars here, a couple cents there. It’s the cost of doing business, right? Maybe, but if your business is in retail or your customers do a lot of in-person credit card swiping, those fees add up. According to a Nilson report, $9.4 trillion was exchanged through credit cards last year!
Not only that, rates have been increasing drastically in recent years. In 2022, a group of retailers campaigned against credit card companies like Visa and Mastercard for hiking up rates right after the Fed increased interest rates. It’s getting to a point where staying competitive against big-box retailers is impossible with these additional fees.
While credit card fees may be nothing new, they can bleed your business of profits and the increased rates with no end in sight or eyes toward regulation are a cause for concern.
Are You Paying Too Much In Credit Card Processing Fees?
Here are some things to look for to decide if you’re paying too much in processing fees:
- Qualified/Non-Qualified Rates: If your statement shows “Non-Qualified” fees or price increases, you’re likely on a tiered pricing plan that’s costing you money.
- Recent (Unexplained) Rate Increases: Annual or biannual rate increases are common. Keep an eye out for additional increases or big spikes from one to the next. It might be possible to negotiate a lower rate simply by calling or disputing the increase.
- Processor’s Markup: If you outsource your payment processing data, make sure your merchant processing service is looking for ways to save you the most money. Additional expenses by your processor can really make it hard to stay profitable.
- Non-Compliance Fees: PCI non-compliance can tack double to triple digit fees onto your bill each year, and you may not even know why you’re paying them. Make sure your business is compliant—just be prepared to do a lot of reading on the subject.
How to Lower Credit Card Processing Fees
Here are three additional quick tips to help you reduce fees.
- Shop Around for Better Rates
Your rate is negotiable and likely based on the amount of business you have—so if you’ve grown recently or have plans to expand, you may be able to get a lower rate by switching companies or sharing new data. It can’t hurt to call land ask.
- Consider Removing a Vendor/Merchant
This won’t work for all situations, but if you support a type of payment that doesn’t get used much by your customer base—and has insanely high credit card fees per swipe—it might be worth simply getting rid of. Ultimately, credit card companies are businesses and aim to stay competitive. You may be able to lock in a lower card swiping rate simply by calling and letting them know you intend to end your agreement.
- Make Sure Your Processor Isn’t Charging Additional Fees, Too
Your merchant processing service should be looking out for you, not the other way around. Look for a service that completely eliminates hidden fees and offers full transparency for all transactions.
Contact us to learn about your credit card processing fees today.
