Card processing is one of the few costs that grows automatically as your business grows. Every new sale carries a fee, and most owners only look closely when a statement seems unusually high. The good news is that a meaningful part of what you pay is within your control. Some savings come from your agreement with your processor, and some come from how your team takes payments every day. Here are twelve practical steps, roughly in the order we would tackle them.

Start with what you are paying now

You cannot lower a number you have not measured. Before you call anyone or change anything, get a clear baseline.

  • Step 1. Calculate your effective rate. Divide last month's total processing fees by last month's total card volume. Repeat for two or three months so one unusual month does not mislead you.
  • Step 2. Find out which pricing model you are on. Your statement will show whether you are on interchange-plus, tiered or flat-rate pricing. If you see words like qualified, mid-qualified and non-qualified, you are on tiered pricing, which is often the most expensive and hardest to audit.
  • Step 3. List every fixed fee. Monthly account fees, statement fees, gateway fees, batch fees, PCI fees, annual fees and equipment charges all add up. Some are legitimate costs of service; others are padding. You should be able to say what each one is for.

While you are gathering this information, notice your card mix. A business whose customers mostly tap debit cards in person has a very different cost floor from one that keys in rewards and business cards over the phone. Knowing which describes you helps you judge whether a quote is realistic, and it tells you which of the steps below will matter most.

Fix the agreement

  • Step 4. Ask for interchange-plus pricing. When interchange and network fees are passed through at cost and the processor's markup is stated separately, you can see exactly what you pay for service. It also means you automatically benefit when your customers use lower-cost cards, such as basic debit.
  • Step 5. Eliminate fees that do not belong. Ask your processor to remove or justify each fixed fee you listed. Duplicate gateway fees, statement fees for paperless statements and annual fees that were never discussed are common candidates.
  • Step 6. Review equipment costs. Long equipment leases can cost far more than the terminal is worth, and they often continue even after you change processors. Read the lease, note the end date and compare the total cost with buying equipment outright.

Take payments the lower-cost way

How a card is accepted affects which interchange category a transaction falls into. Small habits at the counter and in the back office can move a lot of transactions into lower-cost categories.

  • Step 7. Tap or dip whenever the card is present. Card-present transactions where the chip or a contactless tap is used generally carry lower interchange and lower fraud risk than keyed-in transactions. Train staff not to type in card numbers when the customer is standing at the counter.
  • Step 8. Send the right data on card-not-present sales. For phone, online and invoice payments, use address verification and the card security code. Missing or mismatched data can push transactions into more expensive categories and increase fraud exposure.
  • Step 9. Close your batch every day. Transactions that are settled late can lose the rate they would otherwise qualify for. Set your terminal or software to batch out automatically at the end of each business day.
  • Step 10. Pass enhanced data on business cards. If you sell to other businesses or government agencies, Level 2 and Level 3 data, such as tax amount, customer code and line-item detail, can qualify eligible commercial card transactions for lower interchange. Ask whether your software and gateway can send it.

Protect the revenue you already have

  • Step 11. Prevent chargebacks. Every dispute brings a fee, lost staff time and often the loss of the sale itself. A clear billing descriptor, written refund policies, signed delivery confirmation and quick responses to customer complaints prevent most of them.
  • Step 12. Use the right payment method for the job. For large invoices or recurring business-to-business payments, ACH bank transfers usually cost less than cards. Offering ACH alongside cards gives customers a choice and can lower your average cost per dollar collected.

Consider cost-recovery programs carefully

Some businesses choose to recover part of their card acceptance cost through a cash discount program or by surcharging credit cards. These can work, but the rules come from card brands and state law, they change, and they apply differently to credit and debit cards. Customers also notice. Treat this as a final step after you have lowered the underlying cost, not a substitute for it, and confirm the current rules for your location before you start.

Read the contract before you change anything

Before acting on any of these steps, read your current processing agreement. Look for the contract term, the renewal date, whether the agreement renews automatically, and whether there is an early termination fee or a liquidated damages clause. Check the equipment lease separately, since it may be a different contract with its own terms. None of this should stop you from improving your costs, but knowing the terms lets you plan the timing and avoid surprises.

Make it a habit, not a project

Fees tend to creep. A new line appears on a statement, a rate adjusts after an introductory period, or your mix of cards shifts. Put a reminder on your calendar to recalculate your effective rate every quarter and to read your statement in full at least twice a year. If the effective rate rises while your sales mix stays about the same, something changed, and it is worth a phone call.

  • Keep your last twelve statements in one folder.
  • Note the date of any rate change notice you receive.
  • Ask for any pricing promise in writing, and keep a copy.
  • Review equipment and software subscriptions once a year.

Let us run the numbers with you

If you would rather not do the analysis yourself, send BrightStar a recent statement. We will break out your effective rate and every fee, and show you side by side what you would have paid under our pricing. We match or beat your current rate, guaranteed in writing. And through the BrightStar Impact Network, a share of our profit on your account goes every month to a ministry, school or community organization you choose, at no extra cost to you. If we cannot improve on what you have, we will tell you that too.

Published · BrightStar Merchant Services