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5 Expert Tips to Minimize Payment Processing Fees

Today’s consumers are increasingly moving away from cash as their primary form of payment. This shift has a significant impact on merchants, who must establish payment gateway systems to process these payments and navigate the challenges of payment processing fees.


Understanding Processing Fees

Processing fees are service charges paid to cover the overhead costs and risks involved with credit card transactions. When a customer presents a card for payment, the merchant’s gateway system submits the payment information to a payment processor, which then forwards it to the card association (like Visa or MasterCard) and ultimately to the bank that issued the card. The bank approves or declines the transaction, and the decision flows back to the merchant within seconds.


Interchange Rates vs. Processing Fees

For most businesses, payment processing fees consist of two main components: the interchange rate and the processing fee.

Interchange Rates: These are non-negotiable fees paid to the credit card issuer to cover network infrastructure and credit risk.

Processing Fees: Sometimes called processor markups, these fees are paid to the merchant account provider or payment processor for connecting the merchant to the credit card network. Unlike interchange rates, processing fees are typically negotiable and can vary from provider to provider.


How Payment Processing Fees Affect Your Business

Since interchange rates are non-negotiable, your choice of payment processor significantly impacts your overall costs. A reputable processor should be transparent about their fees, but some may obscure costs through tiered or bundled pricing models. Understanding how your processor charges fees is crucial for maximizing your revenue.


5 Tips for Minimizing Payment Processing Fees

Given the impact fees can have on your business, here are some practical tips to help you minimize them:


1.Accept Cards in Person When Possible

In-person transactions generally carry lower processing fees because they are less susceptible to fraud. For online businesses, encouraging in-person payments may not be feasible, but it’s beneficial to minimize phone credit card payments whenever possible.


2.Require a Minimum Amount for Credit Card Sales

Each transaction incurs processing fees, so numerous low-volume transactions can quickly add up. Setting a minimum purchase amount for credit card sales can help mitigate these fees. Federal law permits merchants to require up to a $10 minimum for credit card payments, but you must treat all card types equally.


3.Minimize Chargebacks with a Credit Card Authorization Form

A chargeback occurs when a customer disputes a charge and asks their card issuer to reverse it. High-risk businesses often experience more chargebacks. Using a credit card authorization form, a document signed by the customer permitting you to charge their card, can reduce chargebacks and help keep processing fees low.


4.Use an Address Verification Service (AVS)

AVS is an effective tool for combating credit card fraud. It requires customers to enter their address during checkout, which is then verified against the address on file with the issuing bank. Implementing AVS can qualify your business for lower interchange rates from credit card issuers.


5.Find a Better Payment Processor

Some processors engage in predatory practices, imposing high reserve requirements and unnecessary fees. High-risk merchants often face additional hurdles when setting up credit card processing. Ensure you understand a processor’s fee structure and any reserve requirements before committing.


Reduce Your Payment Processing Fees with AppTech

At AppTech, transparency is a core value. We offer versatile credit card processing for high-risk merchants with no reserve requirements or hidden fees. Our merchant payment gateway, robust FinZeo platform and API provide flexible payment solutions to help you manage your payments and grow your business. To learn more about our payment processing services or to get a free quote, contact a member of our team today!

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