For small businesses, payment processing for credit cards is a must, but a huge question at hand is how can merchants lower credit card processing fees? The fees you pay to accept plastic transactions can be discouraging. But what if we told you we have powerful tips to help business owners like yourself find the most affordable credit card processing opportunities?

Merchants have no other choice other than to accept debit and credit cards at checkout. Why? Well because cash is no longer king. It’s not convenient. It’s not sanitary. And it doesn’t provide the benefits and rewards that credit card companies do.

Checks are the same story. Though, if we are honest with ourselves, we know checks have been considered dinosaurs in the retail point-of-sale territory for quite a while now. So, with the vast majority of consumers making their purchases via credit card, merchants must find a way to make it worthwhile. Optimizing their credit card processing solutions is key to running a profitable business and growing in sales and clientele with convenient checkout…without worrying about this month’s processing fees to do so.

Let’s take a peek at these 14 helpful tips to help you get the cheapest credit card processing to reduce your credit card processing fees for your small business.

1. Do Your Research

First things first. You need to research not only credit card processing in general, but you also need to do your research on your business. This means you should have a really good idea of how much you are processing, your average ticket sizes, monthly volume, the type of cards your customers use, chargeback ratios, and if you need any other digital payment solutions.

Why do you need to know these things? Because different credit card processing companies will charge different rates based on these factors, as well as your risk status. So because of the varying processing fees out there, it is also best to understand payment processing terminologies and basics.

We recommend you familiarize yourself with the different pricing structures, merchant fees, and processing company competitors and their rates. This information can be extremely beneficial in determining the best small business credit card processing company for you.

2. Understand the Difference Between a Payment Service Provider vs a Dedicated Merchant Services Company

There is a difference between a payment service provider and a merchant services company. And you will need to determine if your business would benefit more from one versus the other.

Payment Service Provider

It’s a common error that small business owners go with the “easy option” of processing their payments through a payment service provider such as Paypal, Stripe, or Square. Why is this a mistake? Because these companies are payment aggregators.

Payment aggregators are companies that have a singular merchant account with an acquiring bank. They then group multiple merchants under this merchant ID, rather than assigning unique merchant IDs to each business.

Though this model may not seem like a deterrent, yet, it is important to know that payment aggregators price all their merchants at a flat-rate fee structure. This seems great right? Wrong! In most cases, though flat-rate pricing is favorable because it is the easiest way to know how much will be charged to process every transaction at your place of business, it is not the most economical. Flat-rate pricing is generally way more costly to merchants than, say, interchange pass-through. More on that later.

Oh, and I’d hate to forget to mention, these companies are known for having extremely difficult customer service. Not only are the customer service reps not very helpful in many cases, but they also are simply difficult to get in contact with.

Not being able to solve a problem with your payment provider is a non-option for merchants who want to avoid a hassle-free payment processing experience for all their customer transactions.

Merchant Service Provider

Now on to dedicated merchant service providers. A merchant service provider will assign your own dedicated merchant account and merchant ID to use for your acquiring bank.

Additionally, most merchant service providers have the flexibility to offer different pricing structures. This means that if you understand the different pricing structures and know if you prefer convenience over cost or vice-versa, a merchant service provider can help you get there.

Moreover, there are a few merchant service companies that offer all-inclusive payment solutions including credit and debit, ACH, online, mobile, and in-person processing. ECS is one of these few merchant service providers that prides itself on being a one-stop shop.

Merchants can select any payment solution(s) their business needs and either integrate these terminals into their system or website or include new equipment in their new payment processing contract.

$100 dollar bills & a money bag hanging from a rope

3. Understand the Different Fees You May Encounter With Credit Card Processing

Merchant fees for credit card processing are numerous fees that can be bundled by your payment processor. Before you secure a small business payment processor, it’s imperative to familiarize yourself with all the fees you may encounter and what your singular monthly cost will come from.

Transaction Fees

Transaction fees or authorization fees are charged for every card transaction, whether it was accepted or declined. This fee is for the facilitation of the transaction to and from different financial institutions.

The base of a transaction fee comes from interchange rates. Interchange rates are a percentage of the sale total (usually between 1%-4%). Interchange rates are determined by the card brands and paid out to the banks. These rates fluctuate depending on the following factors:

  • The card brand (Visa, Mastercard, Discover, American Express)
  • The card network type (credit or debit card)
  • The card level (standard, rewards, privilege, gold, platinum, business, etc)
  • The location of the transaction (card-present or card-not-present)
  • The merchant’s industry (retail, healthcare, government, etc)

Interchange rates do fluctuate every so often. Luckily, merchants have access to view the current rates at any time online at Visa, Mastercard, American Express, and Discover’s websites. This is helpful because understanding what qualifies as the cheapest credit card transaction fees can significantly help merchants navigate the transaction territory.

On top of the interchange rate, the transaction fee also typically consists of “per transaction cost” which can be anywhere from 10¢ to 45¢, or thereabout. So for example,If you had a card-present transaction with a standard Visa credit card at a clothing store, you may see a transaction for $150 with an interchange rate of 2% plus a 20¢ transaction fee.

So a merchant would pay a fee of $3.20 to their payment processor for the $150 transaction. If the transaction was run with a Platinum American Express card online, you may be looking at a more costly interchange rate and thus a higher transaction fee.

Chargeback & Retrieval Fees

With every transaction, comes the possibility of a chargeback. The Fair Credit Billing Act allows cardholders the right to legally dispute any transaction on their statement that they do not recognize or that they may disagree with.

Once the bank reviews the cardholder’s concern, it can determine if it is valid or not. If their issuing bank does find validity in their cardholder’s claim, they will proceed with an automatic debit or chargeback to the merchant’s account.

Once the debit to the merchant account has been completed, the merchant will receive a notification of the dispute and its details from their payment processor via email, fax, or US postal.

The merchant then has the opportunity to review the dispute claim and decide if they want to pursue fighting the chargeback with a rebuttal. A merchant’s rebuttal requires verification of the authenticity of the transaction. This can be with a signed contract, signed receipt, and/or a written response.

Whether or not a merchant decides to fight against a dispute, the financial institutions involved in the facilitation of the transaction and chargeback still have to charge a fee for their services within the processes. Chargeback fees can be between $15 – $25 per dispute.

So not only would the merchant lose out on the transaction amount and the processing fees even after being debited for the dispute, but they would also be out the fee for the chargeback. Even if the merchant wins. The fees are still due.

Pre-arbitration Fees

Now, let’s say a merchant wins a dispute case. Sometimes cardholders are unable to accept this outcome. They may then file a second chargeback with their bank. If the bank were to push it through to the payment processor, the dispute would be escalated to a pre-arbitration.

Pre-arbitrations can be tricky for merchants. Some processors allow merchants to attempt a second rebuttal. However, other processors (depending on determining factors) will decline a second rebuttal and issue an automatic loss for the merchant.

Either way, pre-arbitration fees can range between $50 to $150. This means, if a transaction was only $45, the pre-arbitration may cost more than the actual transaction itself.

Voice Authorization Fee

This fee, though rare, can still apply. A voice authorization fee occurs when a merchant’s terminal is down (due to internet connectivity issues, physical damage, etc) and they would still like to run a credit card transaction.

Rather than swiping, dipping, or tapping the credit card, the merchant would call the processor and provide the card details over the phone. The processor would then send the authorization to the bank and receive an authorization accordingly.

In these circumstances, an additional fee would apply on top of the standard authorization/transaction fee. This fee can range between 65¢ – 95¢.

Debit Fees

The good news about debit card transactions for merchants is that authorization fees run lower on the debit network. The bad news, the debit network charges an extra 20¢ for each debit authorization per PIN-based transaction. Additionally, the debit network also charges a monthly access fee to the network which ranges between $5 – $10.

Wireless Fees

Wireless terminals, though convenient and in many cases, necessary, can pose a financial burden. They allow merchants to accept payment on the go and throughout their brick-and-mortar locations. But wireless requires Wi-Fi internet connectivity or a cellular network connection.

The setup for these types of terminals could incur a cost between $40 – $60. Additionally, the internet access fees can range between $10 – $25 a month…or more. And lastly, each transaction that occurs on a wireless connection may have an additional 5¢ – 15¢ per transaction fee on top of the merchant’s base transaction fee.

Equipment Lease Fees

If a merchant does not already have their own terminal equipment to process payments, their processor may offer them. Many processors work closely with specific hardware brands and thus, can get you a better bundle–such as ECS with DeJavoo and First Data with Clover.

Merchants may have the option to either buy the hardware upfront or lease to equipment. Leasing equipment will add additional fees to your monthly processing statement. And if you’re not careful, a processor may add interest to these payments as well.

App Subscription Fees

Now, if you do end up purchasing or leasing a POS system such as Clover, you will have the option of adding business tools right at your fingertips on these sleek devices. But it’s important to keep in mind that most of these built-in applications are not free of charge. Many of these apps offer monthly or yearly subscription pricing to gain access.

Monthly Fee

Whether or not a merchant is processing, a payment processor may still charge a monthly fee between $10-$15. Though the merchant may not be requiring the facilitation of digital transactions for a certain period of time, the merchant account is still active and thus, the payment provider is maintaining their access to the payment gateway and merchant account. Securing credit card processing for small businesses with no monthly fees attached is a great way to save.

Monthly Minimum

In some cases, a merchant contract may require a minimum processing amount. This ensures their payment processor will make a profit from their account should the merchant process or not for the month. If a merchant does not meet their required minimum quota, the processor will charge them the remaining cost.

So, as an example, if a merchant’s monthly minimum fee is $100 and they only process enough for the processor to charge $25, the merchant account would be charged an additional $75 monthly minimum fee.

ACH Batch Fee

Though rare, it might occur, so you should definitely check this fee out before selecting a payment processor. An ACH batch fee is charged when a deposit (via ACH) is made into a merchant’s bank account. The cost of this may range between 5¢ – 25¢.

Network Association and Card Brand Fees

Last but not least, we have network association and card brand fees. If you are accepting credit and debit cards, there is no way you can avoid the fees from the card brands. They are unavoidable and required annually by participating merchants to remain eligible. Each specific network will have varying fees, but they will pop up from time to time on merchants’ month-end statements.

Rolled Dollar bills on top of one another

4. Determine the Best Pricing Structure for Your Small Business

As mentioned above, there are 3 different pricing structures that a payment processor can put you on when you sign on to use their credit card processing services. Every merchant has differing priorities and different processing statistics, so one pricing structure may work better for one merchant vs another.

Learning more about the various pricing structures will better help you to understand how to best take advantage of your rates and ultimately discover the cheapest credit card processing for small businesses.

Flat Rate

Flat-rate pricing is known as being the most convenient for merchants as far as understanding what their fees will be for each transaction. However, it may not always be the best solution for inexpensive credit card processing. Although this model may be suggested to merchants with lower monthly transactions, this shoe usually does not fit most merchants.

Why? Well, flat rate pricing means the merchant will be charged the same fee for every transaction, even if the interchange is less. Interchange is the rate the card brands charge per transaction based on a multitude of factors (as discussed above).

So, if a merchant’s flat rate pricing is set at 2.8% per transaction + 25¢, and the interchange was only 1.5%, the merchant will lose out on the low credit card processing fees with a lower interchange rate for that specific card sale. However, if the interchange happens to be higher, say 3%, the merchant would in return, benefit.

In most cases, merchants typically overpay for credit card processing with a flat rate pricing structure. So though it is the most convenient, it may not come with the cheapest payment processing fees.

Interchange Plus

Interchange plus or otherwise known as interchange passthrough is the most transparent pricing structure. The payment processor will charge the merchant the exact interchange rate from the card brands plus an additional processing markup. This markup is a per transaction fee or authorization fee such as 20¢.

Because interchange rates vary so vastly for every transaction, (based on the card, merchant, location, etc), merchants can never truly know what their payment processing fees will be. But in hindsight, what’s better? Knowing what you’ll pay? Or receiving the most transparent and possibly lowest merchant account fees?

In general, this is the cheapest way to accept credit cards for businesses that have high monthly transaction volumes—over $5,000.

Tiered Pricing

Our third pricing structure is the tiered pricing structure. This is the best pricing structure if you take a lot of payments that fall under the “qualified” category. However, in most cases, this usually isn’t the case, in general, most credit card transactions would fall under rewards, mid-qualified, and non-qualified. Which as I am sure you can guess, means the fees are higher.
Tiered pricing offers a variable rate per transaction based on criteria outlined in four different tiers:

  • Qualified (lowest credit card processing fees)
  • Rewards (cards with benefits like retail discounts, cashback, and travel- next lowest)
  • Mid-Qualified (middle cost for card processing fees)
  • Non-Qualified (highest credit card processing fees)

Tier status is generally based on risk or processing costs to the payment processing company. And therefore, it can be hard for merchants to know what tier certain transactions will fall into, and thus predicting credit card processing costs becomes nearly impossible.

Tier categories would be determined based on factors like:

  • Card-present vs card-not-present
  • Card status (standard, rewards, business, etc)
  • Debit card vs. credit card
  • Captured cardholder information (name, address, etc)
  • Authorization and settlement time difference

5. Price Shop

Now that we have gone over the different fees you can be charged as a merchant who accepts credit cards such as:

  • Transaction Fees
  • Chargeback & Retrieval Fees
  • Pre-arbitration Fees
  • Voice Authorization Fee
  • Debit Fees
  • Wireless Fees
  • Equipment Lease Fees
  • App Subscription Fees
  • Monthly Fee
  • Monthly Minimum
  • ACH Batch Fee
  • Network Association and Card Brand Fees

And we’ve also gone over the three different pricing structures you may be faced with from different merchant service companies such as:

  • Flat Rate
  • Interchange Plus
  • Tiered Pricing

You can now use this knowledge to facilitate your search for the cheapest payment processing merchant account you can find. But yet, still, one that meets your needs. Because processors determine their own markups and fees you can determine who will be the cheapest way to accept credit cards, after all the non-negotiable network and bank fees.

As you shop around for the best deal in the payment processing industry, you can ask questions like:

  • “Do you charge monthly minimums?”
  • “If so, what are they?”
  • “Do you offer different pricing structures?”
  • “Am I able to adapt my contract with you to a different pricing structure should my business start processing higher volumes?”

All these questions can be helpful in determining who is being transparent, who knows what they are talking about, and who can offer you the best account option for the most affordable price. Because your bottom line is important to maintain. Paying unnecessary fees for accepting consumer payment is never the way to the best profitable outcome.

6. Find a Contract with No Early Termination Fee

Whether month-to-month or no early termination fee, (ETF) you want to be sure you will be able to get out of your contract when it is best for you. If you have a new or growing business, you want to be prepared to shift with the direction of your expansion. Because, with growth, typically comes a difference in transaction averages and thus, a change in transaction fees.

So, if you start processing more, you may decide you need a different pricing structure. The worst place to find yourself is stuck in a contract that no longer meets your business needs. Finding a flexible contract is your best bet.

If you are already in a contract with your current merchant service provider and you do have an early termination fee, but you found a new payment processor that you want to switch over to, you may find yourself in a bit of a pickle. But do not be dismayed. You may have a few options.

You could either 1) talk to your current provider and try to get out of the agreed-upon early termination fee. In some cases, merchant service providers don’t want a bad review or bad reputation in the industry, so they may waive this fee to appease you and avoid future complications.

2) Tell your current merchant service provider that you found cheaper rates elsewhere that better meet your needs and hope they will fight to keep your business, so they then also lower their fees to match the competitors. This can be a double advantage because not only would you not have to pay an ETF when switching over, you won’t have to switch at all which means avoiding the hassle of a new merchant application and the entire setup and data transfer process.

Or 3) you could tell your prospective merchant service provider that you would like to give them your business, but you can only afford to if they can compensate you for the early termination fee you will incur for switching over to them.

7. Utilize Level 2 or Level 3 Processing If You Qualify

If your company does business with other businesses or government entities, you can qualify for level 2 and level 3 processing. Standard business-to-consumer processing is level 1. But transactions with other businesses and government enterprises can offer merchants low-cost card processing fees. That is IF a merchant follows the set guidelines

The main thing a merchant must do to qualify for these lower fees is to collect the most information from the transaction as possible. The more information the card networks receive, the better.

Ultimately, it will be more work on the merchant’s part, but if you’re looking for the cheapest way to run credit cards, the trade-off might be worth it.

Customer paying with a credit card at a flower shop

8. Incentivize Customers to Use Low Interchange Rate Credit Cards

Most customers who have rewards or business cards are more apt to use them, rather than any other plastic they may carry in their wallets. Why? Well because they may receive incentives from their credit card companies for each transaction.

But these cards have higher interchange rates and if you are on an interchange pass-through or a tiered pricing structure, then that means higher credit card processing fees for you. So what do you do? It’s up to you to counter-incentivize your customers to use standard credit cards with lower processing rates.

So, how do you incentivize customers? Get creative. You can offer a few cents off their purchase, you can offer more stamps on their loyalty cards, you can offer freebies, or you can simply ask! It all depends on the business you run and the relationship you have with your cardholders.

9. Attempt to Process Transactions Via the Cheapest Avenue

Because interchange rates are also based on transaction locations, you should think about how card information is collected to reduce your processing fees. You may offer in-person sales, eCommerce, or both for your small business.

But certain avenues are cheaper than others. There are 3 main ways to accept payment: in-person. MOTO, and online. So, what is the cheapest way to process credit cards?

The answer: in-person. But don’t be fooled, you may have a cardholder who is purchasing something in-person, but if you collect card information manually, by keying in the information, it will be considered card-not-present. Which results in higher fees. Additionally, if an in-person payment is completed with a chip card, but the card is inserted into the credit card reader, you will also acquire higher fees.

Why is this? Online payments via virtual terminals or card-not-present transactions of any kind carry a higher risk for fraud. However, card-present transactions are seen as less risky and have lower fraud rates. Therefore, the card networks will charge less to process these transactions.

10. Avoid International Credit Cards

If it can be avoided in your line of work, a best practice to reduce your processing fees is to steer clear of international credit cards. International cards typically come with higher processing rates. It is recommended, however, to double-check with your payment processor before deciding to reduce the possibility of certain transactions from traveling cardholders.

If you do have to accept international credit cards with your certain line of work you could always simply offer discounts for customers that will agree to choose another credit card with lower interchange fees instead. In some cases, customers may even appreciate the perk of an option discount for a simple switch of card choice.

11. Maintain PCI Compliance

A huge blow to a merchant’s finances is chargebacks. Chargebacks occur most often when a cardholder claims a transaction was fraudulent. Maintaining PCI compliance will reduce the risk of credit card fraud through your merchant gateway.

The PCI Security Standards Council (PCI-SSC)along with the card networks created certain regulations known as the Payment Card Industry Data Security Standard (PCI DSS) to aid merchants in the safe processing of digital card payments.

Though PCI compliance is not legally required, failure to do so may result in merchant penalties such as:

  • Fines from the card networks
  • Costly processing fees
  • Data leaks
  • Lost revenue
  • Legal battles
  • Merchant account terminations
  • Loss of customer trust and loyalty

Even with such devastating consequences, it may be surprising to discover that research has concluded that 67% of merchants are not PCI-compliant.

PCI Compliance Standards

So, what are the compliance regulations that you should adhere to avoid these pesky problems? Well, there are 12 PCI compliance standards that are then broken down further into sub-standards:

  1. Maintain firewalls to protect sensitive information.
  2. Change default system passwords to a unique and difficult-to-crack password.
  3. Protect all stored data.
  4. Encrypt all cardholder information during transmission on public networks.
  5. Keep antivirus software up to date and running.
  6. Maintain secure systems.
  7. Limit access to any cardholder information to only those on a need-to-know basis.
  8. Assign unique login credentials to all staff with computer access.
  9. Minimize any physical access to card data.
  10. Track access to cardholder data and network resources.
  11. Frequently test installed security systems.
  12. Enforce policies that address security for all staff

12. Accept ACH Payments for the Lowest Merchant Fees

I know we’re talking about credit card processing fees, but did you know that you can reduce these fees by accepting another form of digital payment? Automated Clearing House (ACH) payments are another way to accept payment that costs a fraction of credit card processing.

Most ACH transactions have a flat fee, regardless of the cost. The average ACH transaction fee ranges from $0.20 to $1.50 depending on your ACH payment processor. So regardless if you process a $25 transaction or a $2,500 transaction you would pay the same, let’s say, $0.20 fee for both.

ACH moves funds directly from one bank account to another. It is one of the cheapest ways to accept payments online or in person. You simply need the customer’s account and routing number.

Make sure you can find a payment processor that offers the cheapest ACH processing you can find. But moreover, you’ll want to find a payment processor, like ECS, that can bundle ACH processing on top of their credit and debit card processing solutions.

woman handing cash to a man

13. Implement No-Cost Transaction Processing

No cost doesn’t necessarily mean what you think. There aren’t any credit card processors out there that will offer free payment processing for small businesses. Or for any business for that matter. Rather, merchants can work their way around having to take on those fees.


The first clever tool is known as surcharging. Surcharging is a way for merchants to pass the costs of convenient credit card processing directly to the cardholder. So if a customer were to choose to use a card, they would be made aware that there is a surcharge or convenience fee to do so.

With this option, merchants can still offer convenient ways to pay, without having to fork out their profits to do so. In turn, it’s as if they were benefiting from free credit card processing for small businesses.

Cash Discounts

The next “fee-free” transaction option is offering cash discounts. Yes, I know, it’s not as convenient as cards for your customers, but offering a discounted cost to customers who use cash is another way to avoid credit card processing fees.

Cash discounts may be a more rewarding checkout experience compared to a seemingly penalizing experience with adding a surcharge at the point of sale. Either one works if the goal is to lower your credit card processing fees. But one might be a better customer experience.

One thing you will need to keep in mind is that cash discounts and surcharges are legally regulated. The laws surrounding these “fee-free” transactions vary state by state. So you will want to be sure you double-check your state’s restrictions…or lack thereof.

14. Select a Transparent Merchant Service Provider

With all the tips we’ve provided above from fees, pricing structures, PCI compliance, surcharging options, etc, it’s time to make the best decision possible for your business when it comes to selecting the cheapest merchant service provider. Or most affordable with the best services for your business rather.

You will want to be sure you have a payment provider that meets all of your needs accordingly and has the least amount of unnecessary fees. Moreover, you want to be sure you are working with a credit card processing company that is flexible when it comes to pricing structures and payment solutions for your unique business.

Most definitely you will want to avoid being stuck in a long-term contract with no option to update your terms of service should your business begin to take off and expand.

Lastly, you want to be sure you have a merchant service provider that has an in-house team that is knowledgeable on chargeback management. You never know when your business will be hit by cardholder disputes and having a processor that can help you with rebuttals and even find ways to avoid these disputes in the future is an absolute must to maintain a low-cost merchant account.

Start saving on payment processing today!

Final Thoughts on Lowering Credit Card Processing Fees

Credit card merchant fees can add up if you are not careful. And pricing structures can be obscure, complicated, and even deceiving in many cases. But avoiding credit and debit cards completely is not an option for today’s merchants.

Low-cost credit card processing for small businesses can be accomplished. It just requires some research, time, and knowledge of the subject matter. Don’t be afraid to ask questions to different payment processors that you are considering signing up with.

Once you are confident your questions have been answered in full, you can make an educated decision on the best and cheapest payment processing option for your business. Or you can determine what you need to do to alter your processing habits to ultimately lower your credit card processing fees.

To contact sales, click HERE. And to learn more about ECS Credit Card Processing Fees visit Credit & Debit.