Strategies to reduce credit card processing expenses?

by bkdlays. Posted on Sep 14, 2020    1    7

Trying to assist a friend's business that is mostly credit card sales with a pretty high average ticket price. On a $1000 sale it could cost the store $30 in fees. I'd love to find a way to process the payment in a cheaper way and share / rebate part of the savings back to the customer as an incentive.


Anyone have any strategies, tips, ideas etc? Electronic checks? Debit? Cashless ATM?


Mike_From_GO 1

As others have said, this sort of depends on where the transactions are happening, online or in person. Additionally, the country matters, as does frequency of transactions. Lastly, any charge-backs (or total number), disputed charges and refunds will play a role in this.

In either online or in person, there is no strategy other than a processors willingness to bend based on volume. The variance will be:

In-person transactions have the ability to offer ATM services (needing a PIN to process the transaction) will generally cost nill, virtually nothing. The processor will likely offer a tiered processing charge whereas ATM cards will take the least amount per transaction while premium cards like Discover, AMEX, Chase Sapphire Reserve, etc., will have a significantly higher transnational charge. The goal would be to have customers use the less attractive plastic, like ATM cards and not so much premium cards. Given the average ticket sale is $1,000, I'm guessing that's not as likely to be the case.

Online is purely a numbers game. The volume of transactions over a period of time, the average sale price and a breakdown (on the back end of the processor) to see what the split is between debit cards used as credit cards vs. low-impact credit cards vs. high value credit cards will start the negotiation.

Generally speaking, the higher each sale is and the more sales there are, the more room you can negotiate for pricing.

Taking the most popular consumer / entry level processor like Square (data link), they charge:

>2.65% per card present transaction, 2.9% + 30 cents per paid Square Invoice and Online Store sale, 3.4% + 15 cents per manually entered transaction and $0.10 for Interac chip & PIN or tap sales.

That means that a $1,000 in person swipe, chip dip or contactless payment (including mobile phones) would be $2.65 + $0.10 but the same for an online store would be $2.90 + $0.30.

Most credit card processing companies will start to negotiate with you on pricing at or around the $250k annual sales mark.

What you have working in your favor is the high ticket price per sale. The unknown is the volume (not asking you to disclose that) and the variable will be charge-backs and type of card used for processing.

I'd say you're in a pretty good position if you have $250k+ in annual sales to be in the hunt for the 2.3 - 2.5% transaction range. From people I've spoken to regarding this, payment processors are more likely to negotiate someone who does large ticket sales less frequently than say, a taco vendor who makes 120 sales a day with an average ticket price of $14.

Where to look? Square, Stripe, Clover are the big online players, YMMV but if you have a relationship with a local bank or a local branch of a national bank like Chase, then that too is a good place to start having a conversation.

Lastly, the processing method matters if this is in-person. Is it really going to be worth saving $0.15 per transaction if you need to buy a $800 terminal or lease a $45 / month terminal? Even getting into square in-person will require an iPad, so a refurb / used one will still set you back $200 + some more for a decent stand for it. If you need a cash drawer too, receipt printer, that's all got to be factored into the total, overall cost of doing business with a payment processor.

bigbamboo44 1

Chase is outrageously expensive. Look for a broker. They’re all over the country. We left Chase Paymentech and saved 1.2%

Mike_From_GO 1

Thanks for this, I don't use them just wanted to use a nationally known bank as an example, BoA would be another.

seasonel 1

Is it retail store? Talk to banks directly and get a credit card merchant account.

Is it online store? Similar talk to banks, or e-commerce payment solutions.

It depends where you live but 1.5-2% is the average fees I sense


It depends on the type of card, the issuing bank, the merchant bank you use as a processing gateway, the type of transaction (card present/keyed/online), and the risk of chargebacks for your type of business. And the fees include a percentage of the transaction, plus a "swipe" fee, and depending on your business & gateway you may have monthly and/or annual fees.

All considered, costs range from about 1.55% to 3.5%, and the average is probably right around 2.7%.

HayesDNConfused 1

I hear 'push payments' are the next thing. I used to give discounts to people who would do ATM pin transactions.

looking4euterpe 2

What I did: I raised my prices by about 3% to cover the transaction costs, and then offered a cash discount.