How to Negotiate Your Credit Card Processing Rates

Most business owners never try to negotiate credit card processing rates. They signed whatever the rep put in front of them, the statement got longer every year, and calling to complain felt like a waste of an afternoon. The truth is that part of what you pay is negotiable and part of it isn't, and once you know which is which, the call gets a lot shorter and a lot more productive.

Know what you can't negotiate

The biggest piece of every card transaction is interchange. That is the fee the customer's bank charges, set by Visa and Mastercard in published tables. Your processor doesn't keep it and can't discount it. Nobody can, no matter what the pitch says.

On top of interchange sit the card brand fees, also called assessments. Those are small and set by the networks. Also not negotiable.

Everything else is the processor's markup. That is the only part of your bill anyone actually controls, and it is the part you are negotiating. If a rep promises to beat interchange, walk away.

Find your real number first

You can't negotiate a number you don't know. Before you call anyone, pull your last three statements and do two things.

Add up every fee. Not just the rate on the first page. Monthly fees, statement fees, PCI fees, batch fees, gateway fees, all of it.

Divide by your card volume. That gives you your effective rate, the all-in cost of taking cards. It is the only number that tells you what you really pay, and it is usually higher than the rate you remember being quoted.

Then look at how you are priced. If the statement lumps transactions into buckets like "qualified" and "non-qualified," you are on tiered pricing, which hides the markup and makes it hard to compare anything. If the statement shows interchange as its own line and the processor's markup separately, you are on interchange-plus, and you can see exactly what you are paying above cost.

What to ask for

With your effective rate and pricing model in hand, you know what to push on. In rough order of how much they usually matter:

• Move to interchange-plus pricing. If you are on tiered or a flat rate at real volume, this alone often does more than any rate cut, because it stops the processor from sorting your transactions into the expensive buckets.
• Lower the markup. On interchange-plus, the markup is usually shown as a percentage plus a per-transaction cents amount. Both can move.
• Kill the junk fees. Statement fees, PCI non-compliance fees, annual fees, minimum monthly fees and "regulatory" fees are often added at the processor's discretion. Ask for each one by name to be removed.
• Drop the early termination fee. If you are going to stay, ask for month-to-month terms so you keep your leverage next year.
• Fix the setup. Missing address verification or keyed transactions without the right data can push sales into more expensive interchange categories. A good rep can fix that without changing your rate at all.

How to make the call

Call your current processor's retention department, not your original sales rep. Retention exists to keep accounts from leaving, and it usually has more room to move.

Be specific. "My effective rate is running higher than I expected and I'd like to move to interchange-plus and have the statement fee and PCI fee removed" gets a better answer than "can you lower my rate."

Have a real alternative. The strongest position you can be in is holding a written quote from another processor with the markup spelled out. You don't have to switch, but you do have to be willing to.

Get any change in writing, and check the next statement to make sure it actually happened. Rate changes that never show up on the statement are more common than they should be.

When negotiating isn't enough

Sometimes the processor gives a little on the rate and quietly adds a new fee a few months later. Sometimes the contract is the problem, not the price. If you have negotiated once and the effective rate crept back up, the better move is usually to compare a full interchange-plus quote side by side with what you pay now and decide on the actual numbers.

If you want a fast starting point, run your volume and total fees through our free rate checker. It shows your effective rate in about thirty seconds, so you know what you are negotiating against before you pick up the phone.

This is general information, not legal advice; surcharging rules change and vary by state.