How To Minimize Credit Card Machine Fees For Your Small Business

In this article, we discuss:

according to a Recent reports from the Federal Reserve83% of US adults have a credit card, 94% of US adults with incomes over $50,000 have a credit card, and 98% of US adults with incomes over $100,000 have a credit card. With credit cards becoming ubiquitous among American consumers, small businesses need to accept credit card payments. However, there are fees associated with processing credit cards and small businesses need to understand how to navigate them in order to minimize credit card machine fees. This article has two main sections that focus on reducing credit card transaction fees and using alternative payment methods (merchant account infrastructure already in place) to reduce fees and give customers more options to pay. focus on implementation.

Ways to Reduce Credit Card Processing Fees

There are myriad factors when it comes to reducing credit card processing fees and there is no one-size-fits-all solution for every small business. However, we will break down a series of strategies for reducing credit card machine fees and it is up to each small business to decide whether the strategies discussed apply to their specific situation:

  • Overload: A surcharge is a percentage-based markup that a business requires a customer to pay for using their credit card. The fee is intended to offset the cost of credit card processing fees and is not intended to be a revenue driver for businesses. Not to be confused with convenience fees—which are always a flat dollar amount—surcharges are generally legal business practice with a few exceptions. These 10 states and one US territory have made the surcharge illegal: California, Florida, Kansas, Maine, New York, Oklahoma, Texas, Utah, Connecticut, Massachusetts, and Puerto Rico. While a surcharge is a legitimate way to offset a credit card fee (except in the states/territories we just discussed), small businesses need to be mindful of the potential impact on their customers’ experience and the impact it may have on their competitors. should be considered.
  • Switch to interchange-plus pricingInterchange-plus pricing is an adjustable-rate pricing structure where the processing fee depends on the card brand (i.e., Visa, MasterCard, Discover, American Express) used by the cardholder. This pricing model may have lower rates on average than flat rate pricing, but it depends on your business and requires a firm understanding of the types of cards your customers use. For example, if you are a high-volume credit card processor and your customers often use Visa, Discover, or MasterCard, interchange-plus pricing can be a great way to reduce your credit card machine fees. . Helcim, one of many vendors in this area, charges an average of 1.86% + $.08 for face-to-face transactions and 2.40% + $.25 for key/online transactions. Requires in-depth analysis of your specific transaction, but on the surface, it’s a lot better than typical flat fee pricing.
  • Switch to flat-rate pricing: For some businesses, flat-rate pricing may be preferable to interchange-plus pricing. Interchange-plus pricing is an adjustable-rate pricing model where the processing fee depends on the type of card used. Businesses need to research interchange fees for each card, while flat-rate pricing is more straightforward to plan for. In some cases, the interchange rate for American Express transactions may be near, or higher, at 3% (typically around travel and hotels), meaning interchange-plus pricing is higher than flat-rate pricing for those transactions. Will be expensive. It comes down to knowing your data and the services you sell.
  • Personal vs Online vs Manual Entry: In-person swipe, tap, or chip credit card transactions at a point-of-sale card reader are cheaper than both online credit card and manual-entry transactions. The risk of credit card fraud is low for personal transactions. If it’s appropriate for your business to encourage face-to-face transactions, this is one way to reduce your processing fees. Unfortunately for some eCommerce businesses with no physical footprint, this savings strategy may not be possible as you can only accept online payments. For example, Square, one of several credit card processing companies, charges 2.6% + 10¢ per transaction when the card is present, 2.9% + 30¢ per transaction when the customer makes an online purchase, and 3.5% + 15¢ for the card. Is. -Not-current transactions such as when you manually enter your customer’s card details into the pos system or use a card on file.
  • shop around: There are a lot of sellers in this space and competition among them means better pricing and lower fees for your business. You may be paying higher fees and not realizing that the savings are possible just by switching vendors. Many websites offer comparisons and calculators to help you determine which payment processing service is the best fit for your small business. Some sellers charge a monthly fee, while others don’t, etc. For additional information and a breakdown of popular sellers, please read our article titled Best Credit Card Vendors to Consider for Your Small Business in 2022,
  • bargain: You can ask too! Especially for businesses that need a custom solution and their vendors have an account manager they can talk to. Businesses with low volume, infrequent sales may not have the negotiating power to lower their rates. Keep in mind that businesses cannot negotiate rates with credit card issuers for interchange-plus pricing. For example, if Visa’s interchange rate for a particular card is 1.65% + 10¢ per transaction, you are unable to contact Visa to try and lower that number. However, you can try to negotiate with your merchant account.
  • Minimum purchase amount required: For small business owners who sell low-cost inventory — think a convenience store around the corner — requiring a minimum purchase amount can result in savings on credit card processing fees and potentially losing money. If a customer wanted to buy something for $1 or less, the store could lose money on the transaction simply because of the fee. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 allows businesses to impose a minimum purchase amount of up to $10 for credit card use. The $10 minimum will help offset credit card processing fees or encourage the customer to use cash or buy more. Do note that there may not be a minimum purchase amount applied to transactions processed with debit cards. Similar to surcharges, small businesses should consider the potential impact on their customers’ experience and actions taken by their competitors.
  • PCI Compliant: PCI compliance is a set of data security guidelines and practices around handling your customer’s sensitive credit card information; Billing address is an example. A merchant account may charge a compliance fee, a non-compliance fee, or no fee. Non-compliance fees are usually higher than compliance fees. The fee reduced to PCI compliance is handling, storing and protecting the customer’s data. It could be a small business or it could be a merchant service provider. Although not part of PCI compliance, another way to maintain a strong data security posture is to allow your customers to process payments using credit cards that have EMV chips. Chip-based security is common on credit cards today and EMV cards store payment information on a secure chip rather than a magnetic stripe.
  • Reduce chargeback fees: Most merchant accounts and credit card processing companies have a service fee surrounding chargebacks. The most common chargeback scenario is when a customer calls their credit card company or card-issuing bank and claims that they do not recognize the charge made to their card. If your business receives a high percentage of chargebacks (anything closer to or above 1% would be considered high), you need to audit your operations. In addition to chargeback fees, companies with high transaction volume will also pay in the form of time, effort, and energy of the employee who has to deal with chargebacks.

Alternative payment methods that can reduce credit card processing fees

Part of providing good customer service is giving your customers the option of how they want to pay you. In addition to credit cards, small businesses can accept other forms of payment that will reduce credit card machine fees. Payment processors still charge fees for other forms of payment, but they can be very small relative to credit card fees. We’ll break down a range of alternative payment methods and the strategy behind them to encourage customers to use them. Ultimately, it is up to each small business to determine whether the methods discussed apply to their specific situation:

  • debit cardsA very common alternative to credit cards is debit cards. When a consumer uses a debit card, money is withdrawn directly from the consumer’s bank account, whereas in a credit card transaction, money is lent to the consumer. Because transactions are systematic, there is less risk in transactions, resulting in lower debit card processing costs, which means more money stays in the business. However, businesses only realize these savings when using interchange+ pricing because flat-rate credit card processors typically charge the same fees for both credit cards and debit cards. For example, PayPal’s standard rate for receiving domestic transactions on standard credit and debit card payments is 2.99% + a fixed fee per transaction. The base exchange rate for debit cards is 0.800% + 15¢ per transaction. There are other charges on top of that, but they don’t exceed PayPal’s posted merchant fee payment processing rates,
  • ACH Direct Debit: For some businesses, it may make sense to offer direct debit payments. Maybe not for your local coffee shop, but for some small businesses where you make monthly, quarterly or annual payments that usually cover more than daily expenses. For example, insurance agencies offering ACH direct debit may make sense. ACH is when your customer pays you directly on their behalf bank account, The fees associated with ACH can be much less than credit card processing fees, depending on the size of the payment and the frequency of the payment. With merchant service providers like Stripe, businesses can securely accept payments or recurring fees with ACH debits and pay a 0.8% fee capped at $5.00 for standard settlements.
  • cash: Gas stations often post the cash price and the credit card price for gas. Due to the nature of their business, both high-volume and high-ticket transactions, credit card machine fees can add up. Cash is promoted as a way for businesses to save money because there is no fee when a customer pays in cash.


With so many factors at play, every business needs to understand its payment data to determine what strategies it can implement to reduce its credit card machine fees. With credit cards being so ubiquitous among American consumers, it’s worth it to take the time and make the right decision. For additional information about merchant accounts and credit card processors, visit our article titled Best Credit Card Vendors to Consider for Your Small Business in 2022,

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