You’ve probably seen them; you’ve probably paid them. These days, credit card processing fees are an unavoidable part of doing any business, but that doesn't mean you can't control them. If you’re not paying attention, these small charges will quietly chip away at your profits every month.
The good news is that you have options! With a little bit of research, a few smart strategies, and ongoing management, you can significantly lower your credit card fees and keep more money in your pocket. Here’s how to get started!
Types of credit card processing fees
Before we dive into the strategies for cutting credit card processing fees, it helps to understand where your money is going. There are four main types of credit card processing fees:
1. Interchange fees
These are fees that are paid to the bank that issued the credit card. They’re usually the largest part of the total fee and are often a percentage + a minimum amount. If a customer uses a premium rewards card, the interchange fee could be as high as 2-3% + $0.10 per transaction.
2. Assessment fees
Assessment fees go to the card network behind the credit card (Visa, Mastercard, etc.) and are usually a smaller percentage. This is to facilitate the transaction over their network. Depending on the agreement, for Visa and Mastercard, the fees usually range around 0.09% to 0.13%, but could be higher or lower depending on the specific network and merchant.
3. Payment processor fees
These are what your payment provider (could be your POS system provider) charges for facilitating the transaction. Some charge a flat monthly fee; others take a percentage. Keep in mind, these fees are higher; however, they usually include the interchange and assessment fees within them and thus can be around 2.7% to 3.5% + a flat $0.10 to $0.30 per transaction, depending on the processor.
4. Chargeback fees
If a customer disputes a transaction and it is refunded, you could be hit with a chargeback fee. These are often very steep and can range from $15-25 (or more) per incident. If you’d like to learn more about what are chargebacks and how you can dispute them, we’ve got you covered.
These give an overview of the main types of charges you’ll see as you’re facilitating payments, whether in a store or online. You can also learn more about the different kinds of credit card processing fees here.
Let’s dive further into strategies on how you can save on these processing fees!
10 things you can do to lower credit card processing fees
Ready to start saving? If you accept credit card payments, here are nine ways to reduce your costs.
1. Choose the cheapest payment processor for your needs
Of course, the easiest option. But there’s more to just choosing the cheapest payment processor. Every payment processor is different. Some may offer lower transaction fees but have monthly subscription fees, while others may have a minimum transaction threshold in exchange for lower fees.
Compare providers carefully, looking at all costs, contract terms, and your own business and customer base. For example, if average transactions are higher, you could have a minimum threshold for accepting cards. Also, do not be afraid to negotiate for a better rate with your existing processor if you find a better deal elsewhere.
If you’re just starting your business online or in-person, or looking for a better and cheaper payment processor, GoDaddy Payments has one of the lowest transaction fees compared to other leading providers, and is easy to set up in minutes, bringing both your setup and costs down.
2. Pass credit card surcharges onto the customer
To minimize credit card fees, merchants may pass the cost onto customers. Merchants can do this in one of two ways. Merchants can factor the extra fee into the cost of their products or services. Customers will not see the fee, but pricing will reflect the added expense for the vendor.
Another option for merchants is to include a credit card surcharge that is visible to customers who choose to use a credit card. Local and national regulations govern surcharge fees and how businesses must communicate fees with customers, so merchants must ensure that they are following legal guidelines if they choose this option.
3. Switch to a different pricing model
Many payment processors have different pricing models, from a percentage per transaction to a flat rate per transaction, or a mix of those. Evaluate your payment processor’s (and others’) pricing models and your average transactions to determine which model makes the most sense for your business. If you’re not sure where to begin, ask your provider about switching models and they should be able to help guide you.
4. Use AVS (Address Verification Service)
Address Verification Service (AVS) matches a customer’s billing address with their information from the card issuer. This check helps minimize the risk of fraud and many payment processors reward this with lower interchange fees. Make sure your checkout process collects and verifies this information so you can save on cost.
5. Recommend other payment methods
Every time a customer pays with a credit card, you pay a fee. Credit cards have the highest fees among the types of payments, above debit cards, bank and ACH transfers, and cash. Encourage alternatives, like debit cards or ACH transfers, where possible, that have lower transaction fees. You can also offer a small discount to customers who pay in cash, helping you avoid processing fees altogether.
6. Set a minimum transaction
Small purchases can cost you disproportionately in fees, because of the structure of most fees (a percentage + a small amount). These can be a big percentage of your overall costs. Therefore, setting a minimum threshold (e.g., $5 or $10) for credit cards can help ensure that processing fees don’t eat up too much of the profit from small sales. Make sure the minimum amount complies with your card network’s rules and terms.
7. Set up your payment gateway correctly
Incorrect payment gateway settings can cause transactions to be flagged as riskier, which will result in higher fees. Make sure your business details, the Merchant Category Code (MCC), and transaction types are set up correctly. Businesses in lower-risk categories can qualify for lower fees, and thus, it is important to use the correct MCC to be able to secure the best possible rates.
8. Optimize for fraud prevention
Chargebacks can be very costly. Use fraud prevention tools and mechanisms like CVV (security code) matching, 3D Secure authentication, and other plugins and tools that help flag suspicious transactions early. Reducing fraud risk helps lower your fees and protects you from potential disputes and chargeback fees.
9. Use multiple payment processors
Relying on one payment processor can limit your options. For example, one may have preferred rates for using a specific card network like Visa or Mastercard, others may give preferential rates for larger amounts or specific regions and currencies. Using multiple payment processors can let you route transactions based on the lowest rates available for different card types, regions, or amounts. It is a more complex setup but could lead to significant savings over time.
10. Review your statement regularly
Payment processor fees are usually deducted at purchase from every transaction, and it can be hard to keep track of how much you’ve paid over time or in a month. Make sure to review your statement regularly and carefully to catch possible billing errors, fee hikes, or any unnecessary charges. Spotting these irregularities early will help you dispute them and also find opportunities to negotiate for better rates.
Choose a reliable payment processor
Ultimately, the best way to lower your fees is to work with a transparent, affordable, and designed payment processor that will support you and your business as it grows. Finding the right partner can simplify your payment operations and help you save money over time.
That’s why many businesses trust GoDaddy Payments for simple, competitive rates with no hidden fees. In addition to a payment processor for online transactions, you’ll also get access to easy-to-use payment tools like Pay Links, which enable tap-to-pay, and, if you have in-store presence, you can also get a POS system for in-person sales with seamless integrations to your online store.
Compare the top payment processing companies.
The bottom line
Though credit card fees are unavoidable, reducing them is possible with a few smart strategies. By following the steps above and understanding the different types of fees, minimizing risks, optimizing your setup, and regularly reviewing your statements, you can help bring those costs down and strengthen your bottom line. Even small adjustments, like choosing a different pricing plan or encouraging other types of payments, can create big savings over time.
In addition, choosing the right payment processor is key to helping make it easier to implement these strategies. Partnering with a trusted solution like GoDaddy Payments simplifies the process with low, easy-to-understand rates, cost-effective payment plans, and powerful tools to help your business grow. In addition, learn how to introduce credit card surcharging and save on fees with GoDaddy’s Rate Saver program.
Smart savings today will help set your business up for success tomorrow.
