Merchant savings are waiting for you, but there is an “if”…
If you are ready and willing to negotiate credit card processing fees with your current provider. Consider this.
What if you came up with a new idea to create extra revenue and could start generating that extra income this week. You would take action on it today, right?
Well, that’s the benefit of merchant fees reduction. Saving money is equal to making money.
This article will make you as prepared as you’ll ever be to lower your processing costs by giving you deep insights on how to successfully negotiate fees.
We are even going to reveal how your current provider plans to derail your negotiation efforts. Look for bonus negotiation strategies at the end of this post, too (one is a great business resource beyond negotiations).
Understanding Your Current Fee Structure
The two things that help merchants successfully negotiate credit card processing fees are:
- Leverage
- Great organization
Keep that in mind as we give you details on achieving both.
The first step is understanding the breakdown of interchange fees versus your processor’s markup. Interchange fees are standard fees imposed by credit card networks such as Visa and Mastercard. Your payment processor has no control over those fees but can increase or decrease their own fees.
Next, is the ability to comprehend each detail of your merchant statement. You need to be able to spot fees associated with monthly service charges, gateway fees, and compliance fees. If all these expenses run together (they can be confusing), then it’s harder to negotiate credit card processing fees.
In addition to knowing your payment processor’s numbers, knowing your own numbers is as vital. Key metrics you should look for and gather in one location for easy access are:
- Total processing volume
- Average transaction size
- Card-type mix (credit vs. debit)
- Card-present vs. card-not-present ratios
- Chargeback frequency
Some businesses use a spreadsheet or specific software to track these figures. Others even use old-school techniques like journals and physical calendars.
The key is to use a system that fits your preferences or you’re unlikely to stick with the system.
Preparing For Negotiations
Now, we’re going deeper on getting organized. Most merchants who do get lower rates when they negotiate credit card processing fees were prepared with quotes from competing processors.
It’s wise to get these quotes before you approach your current provider about lowering your fees.
Having quotes from other providers shows your current provider you are serious about getting a better deal. This gives you the all-important leverage we mentioned. Still, you have to plan ahead to actually get the quotes and organize them for when it’s time to negotiate with your current credit card processor.
It is smart to gather current processing rates for your industry, too.
This matters more than most business owners realize. Why should you pay a higher fee than a similar business just six miles away? Sometimes there are reasons, but you should find out those reasons.
One note: when you get those quotes, be sure to note the pricing structures used by your potential new providers and any special promotions they are running. Why? Unless you compare apples to apples when you negotiate credit card processing fees, your position is weakened.
Specific knowledge is power. So be sure to also come ready with the following data on your business:
- Last 12 months of processing statements
- Growth projections
- Seasonal patterns
- Chargeback history
- Payment type breakdown
- Fee breakdown by category
- Annual total cost
- Customer loyalty metrics
- Business stability indicators
Negotiation Strategies And Tactics
Now that you’ve got an overview, you’re ready for specific tactics to use in credit card fee negotiations, right?
One of the strongest leverage points you have as a merchant is your transaction volume. Like bulk discounts in other industries, payment processors want to partner with businesses with the highest sales.
That desire means they give discounted rates once your sales reach certain levels.
What if your business only opened a few months ago? If that’s the case, you won’t reach the highest sales volumes right away. However, if you can show faster than normal growth rates, that is a great leverage point for getting lower fees.
The key is collecting this data and keeping it organized and ready to wield it in negotiations.
Use various angles when negotiating credit card processing fees.
Depending on your situation, you may not get any monetary reductions. However, you may be able to persuade your provider to give you more favorable contract terms. Another possibility is negotiating equipment upgrades at no cost.
Those tactics give you better odds at saving money or being in a better position with your payment processor. Just keep this larger strategy in mind — focus on your total processing expenses, not just individual fees.
These calculations can be complicated. Yet, not doing them prevents you from being in a position of strength in negotiations. National Processing’s free calculator is a huge help for this issue.
Be ready to rebut common talking points from credit card processors like:
- “These rates are standard.”
- “Your sales are not high enough.”
- “We can’t match that rate.”
Those competitor quotes you gathered will help you rebut many objections. As for number three, if you’re not serious about leaving for another provider, you might be stuck with your current processor. They have leverage if you are not willing to actually switch providers.
Implementation And Verification
Ok, let’s say you have negotiated credit card processing fees down successfully. Great! Just don’t fail to close the deal.
We suggest you get the following in writing:
- Confirmation of new rates
- Detailed fee schedule
- Contract amendments
- Implementation timeline
- Contact information from person authorizing the changes
While these steps can seem like extra work, you want to ensure you receive the discounted rates you worked hard for in the negotiations.
A great way to check that everything gets implemented and verified is to use a simple checklist. You’d be surprised how many large organizations (like Walmart) use basic checklists to ensure accuracy in their systems.
- Businesses utilizing checklists have reported a 5% increase in sales compared to those that neglect this practice.
- When checklists have been implemented by surgical teams, deaths dropped 40 percent.
Long-term Management And Optimization
It’s a great feeling when you start seeing merchant savings due to your decision to negotiate credit card processing fees. The good news is there are more savings ahead if you keep up the momentum.
Diligence is a must, though. It’s wise to do monthly statement reviews and quarterly fee audits. This ensures you are saving the amounts you negotiated.
Plus, these reviews may help you spot ways to save even more money on processing fees (look for sales and item return patterns, for instance).
Another way to be diligent is to stay updated on changes to the payment processing industry.
New payment methods and technologies arise constantly. Don’t be left behind. You may miss updates that would help you use leverage and organization even more to your advantage with new processing tools.
One seemingly trivial savings tactic is to optimize the timing of your transactions and settlements.
Some merchants use timing to hit necessary monthly sales volume by planning their invoices on specific dates. An example is be a heating and air company sending invoices on May 1st, instead of April 30th if they know May is typically a lower revenue month than April.
As for settlements, batching them all at once can often reduce processing fees (depending on your provider and plan).
Time for a quick summary and a couple common questions about payment processing negotiation.
Negotiate Credit Card Processing Fees Summary
You’re in a great position to get a better deal from your payment processor now. We broke down how vital it is to understand your current fee structure, as well as prepping for negotiations.
The tactics we listed will get you ready for the actual bargaining with your current processing company. Want more ways to stack the odds in your favor?
Please read the book Influence or get fast tips from Tim Ferris’s video on negotiations as bonus insights.
We hope your payment processing negotiation goes in your favor. Even more, we hope you verify each fee reduction in writing and make sure the savings actually arrive on your statement. Don’t forget to use a checklist to manage those details.
Always be looking for ways to save more money on processing costs going forward.
Add National Processing to your list when gathering those quotes to get leverage with your current provider.
We have the lowest rates. Bar none. We back that Promise up with a $500 Guarantee to you.
Sign up with National Processing. You will save money from day one!
FAQ
How often should you review and negotiate credit card processing fees?
Check your fees for potential savings at least every six months. Merchants who review their statements every three months and negotiate yearly are more likely to get a fee reduction due to consistent effort. And your provider will see you’re serious about dropping them for a new provider.
What is the best way to get your processor to lower their rates?
Be super-prepared. Bring three competitive quotes, document processing history in detail, and know the current rates for your industry. It is also smart to invest time learning negotiation tactics outside of payment processing (i.e., business deal making, hostage negotiations, salary increase requests).
What is one thing that hurts any negotiation?
Talking too much, listening too little. When negotiators focus on pushing their own agenda without actively listening to the other party’s concerns, it creates an adversarial vibe and hinders positive outcomes.
