Negotiating Lower Rates with Your Payment Processor: Tips, Tricks, and Getting the Best Deal
In today’s competitive business landscape, every penny counts. One often overlooked area where businesses can significantly impact their bottom line is payment processing fees. These fees, charged by payment processors for handling credit and debit card transactions, can quickly eat into profits, especially for businesses with high transaction volumes. Fortunately, these rates aren’t set in stone. Negotiating lower rates with your payment processor is possible and can lead to substantial savings.
This article will arm you with the knowledge and strategies to confidently negotiate for better rates, enabling you to keep more money in your pocket and reinvest in your business.
Understanding Your Current Rates and Fees
Before you even think about negotiation, you need a thorough understanding of your current payment processing agreement. This means diving deep into your monthly statements and identifying the specific charges you’re incurring. Here’s what to look for:
- Discount Rate: This is the percentage charged on each transaction. It’s usually the biggest part of your fees.
- Transaction Fee: A fixed fee charged per transaction, regardless of the transaction amount.
- Monthly Fees: These can include statement fees, minimum processing fees, PCI compliance fees, and other miscellaneous charges.
- Equipment Fees: If you lease or rent equipment, factor in those costs.
- Assessment Fees: These fees are passed on by the card networks (Visa, Mastercard, Discover, American Express). While generally non-negotiable, understanding them is crucial for comparing offers.
Know Your Volume and Customer Demographics
Payment processors want to understand your business. They consider your:
- Processing Volume: The higher your monthly processing volume, the more leverage you have. Processors are often willing to offer lower rates to secure the business of high-volume merchants.
- Average Transaction Size: Larger average transactions are generally more profitable for processors, which can influence their willingness to negotiate.
- Industry Risk: Some industries are considered higher risk than others due to factors like chargeback rates or regulatory compliance. High-risk industries may face higher rates.
- Card Types: Understand the breakdown of card types you accept. Premium cards (e.g., reward cards) often carry higher interchange fees, which your processor passes on to you.
- Transaction Method: Card-present transactions (swiped or inserted) generally carry lower rates than card-not-present transactions (online or over the phone).
Arm Yourself with Competitive Offers
The best way to convince your current processor to lower rates is to show them you have other options.
- Shop Around: Contact several different payment processors and request quotes. Be sure to provide them with accurate information about your processing volume, average transaction size, and industry.
- Compare Apples to Apples: Carefully compare the different quotes, paying attention to all fees and charges, not just the headline discount rate.
- Don’t Be Afraid to Walk Away: Let your current processor know that you’re considering switching to a competitor if they can’t match or beat their offer.
Negotiation Tactics
Now that you have the data and competitive offers, it’s time to negotiate. Here are some tactics to employ:
- Be Polite and Professional: Maintaining a positive and respectful attitude will go a long way.
- Highlight Your Loyalty: If you’ve been a long-time customer, remind your processor of your loyalty and the value of your business.
- Leverage Competitive Offers: Present the best offers you’ve received from competitors and ask your processor to match or beat them.
- Focus on Specific Fees: If you can’t get a lower discount rate, try negotiating on other fees, such as monthly fees or transaction fees.
- Inquire About Tiered Pricing: Understand your processor’s pricing model (e.g., tiered, interchange plus, flat rate). Interchange plus pricing is generally the most transparent and often the most cost-effective. Resources like https://paymentcloudinc.com/ can help break down these pricing models.
- Consider a Longer-Term Contract: In some cases, committing to a longer-term contract can give you more leverage to negotiate lower rates. However, be sure to carefully review the contract terms and conditions before signing.
- Review Your Equipment Needs: If you’re renting or leasing equipment, consider purchasing it outright to eliminate those ongoing fees.
- Ask for a Rate Review: Many processors offer periodic rate reviews. Request a review and see if you qualify for a lower rate based on your current processing volume or other factors.
Understanding Interchange Fees
Interchange fees are fees charged by card-issuing banks to merchants for accepting their cards. These fees are typically non-negotiable, but understanding them is crucial for understanding your overall processing costs.
- Visa and Mastercard publish their interchange rates online. Familiarize yourself with these rates to understand what your processor is passing on to you.
- Interchange optimization can lower your costs. This involves ensuring that your transactions meet the requirements for the lowest possible interchange rates.
FAQs
- Q: How often should I negotiate my payment processing rates?
- A: It’s a good idea to review your rates at least once a year, or whenever you experience a significant change in your processing volume.
- Q: What is the best pricing model for my business?
- A: Interchange plus pricing is generally the most transparent and often the most cost-effective, but the best pricing model will depend on your specific business needs.
- Q: What if my processor won’t negotiate?
- A: If your processor is unwilling to negotiate, it may be time to switch to a different provider.
- Q: What if I’m not comfortable negotiating on my own?
- A: There are companies that specialize in helping businesses negotiate lower payment processing rates.
Conclusion
Negotiating lower rates with your payment processor is a worthwhile investment of time and effort that can yield significant savings for your business. By understanding your current rates, shopping around for competitive offers, and employing effective negotiation tactics, you can secure a better deal and improve your bottom line.
If the prospect of navigating the complexities of payment processing feels overwhelming, consider reaching out to the experts. At Payminate.com, we can help you understand your processing options, negotiate with providers on your behalf, and find the best solution for your business. Contact us today for a free consultation and see how we can help you save money on your payment processing fees. Don’t leave money on the table – take control of your payment processing costs!