by Marketing Department October 23, 2013

Last Updated: November 5, 2020

If you’re in the market for a new credit card processor, then you probably want to know how to get the best deal. But in this industry, nothing is ever simple, and trying to wade through the different fees and charges can feel overwhelming.

Here are a few tips on how to negotiate lower credit card processing fees.

What goes into processing rates

Before we dive into negotiating, let’s pause and take a look at the big picture.

Processors are notorious for being secretive about processing rates. Most people don’t know why their rates are set at certain levels or what goes into processing rates.

Basically, there are a number of real costs in credit card processing:

  • Assessment fees: Fixed percentage paid to Visa/MasterCard
  • Authorization costs: Cost per transaction to authorize/charge a card
  • Fixed monthly network fees: Paid to the network each month
  • Discount rates: The margin the processor charges above cost
  • Interchange rates: The base cost for each type of card merchants accept

These five different categories determine how much it costs to process credit cards—and therefore directly impact your business’s processing rate.

Out of all these costs, only discount and interchange rates are variable. All the rest are essentially fixed costs, which means that if you want to negotiate better fees, you must focus on discount and interchange rates.

When looking at processing proposals, you should pull out the discount and interchange rates and choose the best pricing structure for your business.

You’ll benefit the most from lowering your interchange rates because interchange rates make up the bulk of credit card processing fees. If you can slash your interchange rates, you’ll save a significant amount of money each month.

Now that we’ve covered the basics of processing fees, let’s look at the three main pricing structures, their pros and cons, and how to negotiate the best fees for each.

Tiered pricing

The tiered pricing system buckets interchange rates into predetermined percentage categories. That is, each card has a preset price based on its category.

Is tiered pricing right for your business?

Tiered pricing is the most expensive and least flexible option for merchants. If you’re looking to negotiate a better deal for your company, we recommend sticking with an interchange plus or flat rate structure.

How to negotiate

Unfortunately, there’s not much you can do to negotiate within this system because the pricing is already determined. In fact, it’s the processor that typically decides which cards go into each pricing category, and the processor doesn’t always have the merchant’s best interests in mind.

Interchange plus pricing

With interchange plus, you pay a flexible percentage based on two factors:

  • The type of card processed
  • How it was processed

For example, corporate, international, and reward cards are more expensive to process, so these types of cards will raise your interchange rates.

The way your business processes cards also matters. For example, if you follow bad processing practices—leaving out addresses, preauthorizing cards and then capturing them for more than the original amount, etc.—you’ll drive your interchange rates up.

Is interchange plus pricing right for your business?

Interchange is the cheapest route, and you can be certain that you aren’t being overcharged for processing. However, interchange is also more risky. There are a number of variables that your business can’t control—like changes in the industry, a new card that costs more to process, or regularly rising interchange rates—that may be too tumultuous for you.

How to negotiate

If you decide to go with interchange plus pricing, focus your negotiating efforts on the factors you can control. To negotiate a low interchange plus rate, you’ll want to get a good discount rate and ensure that your cards are qualifying at a low rate by following good practices for processing cards.

Flat rate pricing

With flat rate pricing, you pay a fixed percentage on your overall processing volume.

Is flat rate pricing right for your business?

Flat rate pricing has the advantage of being guaranteed and stable. Unlike interchange plus pricing, there are no variables—you pay the same rate, no matter what. However, the flat rate means it’s not the cheapest option, and there may be instances when you’re not getting the lowest rate.

Flat rate pricing may be best for businesses that process over $5,000 per month.

How to negotiate

To negotiate a low flat rate, take a look at your last three credit card statements. Find your average processing fee and then use this number to angle for a lower fee. If you can get a rate that’s lower than your historical average, then you know that you’ll be saving money each month. A flat rate is really the only way you can secure guaranteed savings.


Credit card processing is a necessary evil for most merchants. Oftentimes, merchants simply choose the lowest rate and hope that the processor isn’t pulling the wool over their eyes. But it doesn’t have to be that way. With the right knowledge and tools, you can choose the pricing structure that’s right for you, negotiate a lower credit card processing rate, and save money each month.

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