In today’s competitive marketplace, small business owners must manage every cost to stay profitable. One area where businesses frequently overpay without realizing it is merchant processing fees. These fees—taken as a percentage of every credit card transaction—can quickly add up and significantly impact your bottom line.

Many business owners don’t know that these fees are negotiable. If you’ve never thought about renegotiating your merchant processing fees, now is the time to start. In this guide, we’ll walk you through the process step by step so you can start saving money and keep more of your hard-earned profits.


1. Understand Your Current Merchant Processing Fees

To begin negotiating, you first need to understand what you’re being charged. Merchant processing fees aren’t always transparent, but they generally fall into three categories:

  • Interchange fees: These are set by credit card networks like Visa and MasterCard and are paid to the bank that issued the customer’s card.
  • Assessment fees: These are also set by the credit card networks and represent a smaller percentage of each transaction.
  • Processor markups: This is where your payment processor adds its fee, and this is the part of your merchant fees you can negotiate.

Breakdown Example: Let’s say you run a retail store, and you process $10,000 worth of credit card transactions in a month. Your processor charges you an average of 2.9% on each transaction. That’s $290 out of your revenue that goes directly to your payment processor.

If you could negotiate just a 0.5% reduction in fees, that’s $50 a month back in your pocket—or $600 per year. For businesses with higher transaction volumes, these savings can be even more substantial.

Tip: Review your monthly statements carefully. Some processors itemize these fees, while others bundle them together, making it harder to see exactly what you’re paying. If your fees aren’t clearly broken down, ask your processor for a detailed explanation.


2. Compare Your Fees to Industry Standards

Once you know what you’re paying, compare those rates to industry averages. Different industries often pay different fees due to varying risk levels. For example, eCommerce businesses generally pay higher fees because there’s more risk of fraud, while brick-and-mortar retail stores may pay lower rates.

Here are some average ranges to help you benchmark your fees:

  • Retail: 1.95% to 2.5%
  • Restaurants and Bars: 2.1% to 2.8%
  • Beauty Salons and Spas: 2% to 2.6%
  • eCommerce: 2.3% to 3.5%

If your rates are significantly higher than the industry average, you have a strong case for negotiation. Use this data as leverage when speaking to your payment processor.

Pro Tip: Look beyond just percentage fees. Some processors charge flat fees per transaction, which can also add up. For example, if your processor charges a $0.30 fee per transaction and you have hundreds of small transactions, this could cost you more than a higher percentage rate with no flat fee.


3. Research Alternative Payment Processors

Even if you’re happy with your current processor, it’s always a good idea to shop around. The payment processing industry is competitive, and many companies are willing to lower their rates to win your business. By researching and getting quotes from other providers, you’ll not only learn more about competitive rates, but you’ll also gain leverage when negotiating with your current provider.

Here are a few popular processors to consider:

  • Square: Known for its simplicity and ease of use, especially for small businesses and startups.
  • PayPal: Popular for eCommerce and online transactions.
  • Stripe: Ideal for businesses that need a developer-friendly payment gateway.
  • Clover: Offers a range of hardware options alongside its payment processing services.

Action Step: Get quotes from at least three different processors. When comparing offers, make sure you’re looking at the same types of fees—some providers might offer low transaction fees but compensate with higher monthly fees.


4. Contact Your Payment Processor

Now that you’ve done your research, it’s time to reach out to your current processor. Negotiating doesn’t have to be intimidating—remember, they want to keep your business. Here’s how you can approach the conversation:

  1. Start by asking for a review: Contact your account manager and mention that you’ve been reviewing your merchant statements. You’ve noticed your fees are higher than industry averages and that you’ve received competitive quotes from other providers.
  2. Present your research: Be clear and specific. Mention that you’re comparing quotes and that you’d prefer to stay with your current provider if they can offer you more competitive rates.
  3. Negotiate multiple points: Don’t just ask for a lower percentage rate. Negotiate across the board—ask about reducing flat transaction fees, monthly service charges, and any PCI compliance fees they may be adding on.

Example Conversation:

“Hi, I’ve been reviewing my merchant statements and I noticed that our processing fees are significantly higher than industry standards for businesses in my sector. I’ve been shopping around, and several competitors have offered me lower rates. Before I make any decisions, I wanted to see if you can offer me a more competitive rate. I’d prefer to stay with your service, but this is becoming a significant cost for my business.”

Pro Tip: Timing your negotiations at the end of a contract term, or when your business is growing and processing higher volumes, can give you even more negotiating power. Payment processors are more likely to reduce fees when they see your business growing and potentially generating more revenue for them.


5. Ask for Specific Reductions

When negotiating, it’s important to know exactly what you’re asking for. Here are a few areas where you can typically negotiate lower fees:

  • Interchange Markup: While interchange fees themselves are non-negotiable, the processor’s markup on those fees is where you have room to negotiate.
  • Monthly Fees: Some processors charge flat fees for things like PCI compliance or gateway access. These fees can often be reduced or eliminated.
  • Transaction Fees: If you process a lot of small transactions, ask for lower per-transaction fees. Even a few cents off can add up to significant savings over time.

6. Bundle Services for Lower Merchant Processing Fees

Another powerful way to negotiate lower fees is by bundling services. Many payment processors offer other products, such as point-of-sale systems, payment gateways, or even business loans. By purchasing multiple services from the same provider, you can often negotiate a better overall rate.

Example: If your payment processor also provides POS software, you might be able to negotiate a discount on both services by bundling them together. This not only reduces your fees but can also simplify your operations by consolidating multiple services with one provider.

Promotional Tip: This is an excellent place to introduce your own POS solutions and discuss how integrating software and hardware can help streamline payment processing while potentially lowering costs.


7. Consider Hiring a Payment Consultant

For larger businesses or those processing a high volume of transactions, hiring a payment consultant might be worth the investment. These consultants specialize in negotiating merchant fees on behalf of businesses, often securing better rates than business owners could on their own.

Pros: Consultants have inside knowledge of the payment processing industry and can often identify hidden fees or opportunities for savings that the average business owner might miss.

Cons: Consultants typically charge a percentage of the savings they secure, so if your transaction volume is low, this might not be cost-effective.


8. Monitor Your Fees Regularly

Even after you’ve successfully negotiated lower fees, it’s important to continue monitoring them. Payment processors sometimes introduce new fees or slowly increase rates over time without notifying their clients.

Make it a habit to review your statements regularly—at least every quarter. If you notice any changes in your rates, contact your processor immediately to address the issue.


Conclusion: Take Control of Your Merchant Processing Fees

Negotiating merchant processing fees might seem intimidating at first, but it’s a critical step in reducing costs and improving profitability. By understanding your current fees, researching alternatives, and approaching your processor with confidence, you can negotiate better rates and put more money back into your business.

Even small reductions in fees can add up to substantial savings over time, especially for businesses with high transaction volumes. So don’t hesitate—start negotiating today and take control of your merchant processing costs.