Why Are Your Processing Fees So High?
Credit card processing fees have three components:
- Interchange fees — Set by the card networks (Visa, Mastercard). These are non-negotiable and make up 70-80% of your total cost.
- Assessment fees — Small fees charged by the networks themselves. Also non-negotiable.
- Processor markup — The fee your payment processor charges on top of interchange. This is the ONLY part you can negotiate.
If you're on flat-rate pricing (like Square's 2.6% + 10¢), you're likely overpaying because the flat rate includes a large built-in margin. Interchange-plus pricing separates the wholesale cost from the markup, making it transparent.
Strategy 1: Switch to Interchange-Plus Pricing
Flat-rate pricing charges you the same percentage regardless of the card used. A debit card transaction that costs 0.5% interchange gets charged at the same 2.6% as a rewards credit card at 2.1% interchange.
Interchange-plus pricing passes through the actual interchange cost and adds a fixed markup. This is almost always cheaper at scale.
Example savings: A restaurant processing $80,000/month switching from 2.6% flat rate to interchange-plus (avg 1.8% effective) saves roughly $640/month.
Strategy 2: Implement a Cash Discount Program
A cash discount program displays a slightly higher "card price" and a lower "cash price." Customers who pay cash get the discount. Customers who pay by card pay the listed price, which covers the processing fee.
Result: You can eliminate 100% of your processing costs.
This is legal in all 50 states when done correctly with proper signage and receipt formatting. Unison Payment Solutions provides fully compliant cash discount programs with dual-pricing terminals.
Strategy 3: Encourage Debit Card Usage
Debit card interchange rates are significantly lower than credit card rates — often 0.05% + $0.21 for regulated debit vs 1.5-2.5% for credit.
How to encourage debit:
- Prompt "debit or credit?" on your terminal
- Consider a small incentive for debit/cash
- Ensure PIN debit is enabled on all terminals
Strategy 4: Reduce Chargebacks
Chargebacks cost you the transaction amount + a $15-$100 fee per dispute. High chargeback ratios also increase your risk profile, which can lead to higher rates or account termination.
Prevention tactics:
- Use clear billing descriptors so customers recognize charges
- Send order confirmations and shipping notifications
- Respond to disputes within 24 hours
- Use chargeback alert services (Verifi, Midigator)
Strategy 5: Optimize Your Transaction Methods
How you accept a card affects the interchange rate:
- Card-present (chip/tap): Lowest rates — the card is physically verified
- Keyed-in: Higher rates — more fraud risk
- eCommerce: Higher rates, but can be reduced with 3D Secure (Visa Secure, Mastercard Identity Check)
If your staff manually keys in cards that could be swiped or tapped, you're paying higher interchange on every one of those transactions.
Strategy 6: Settle (Batch) Transactions Daily
If you don't batch your terminal at the end of each day, transactions can "downgrade" to a higher interchange category. Most terminals can be set to auto-batch at a specific time.
Strategy 7: Send Level 2 / Level 3 Data for B2B
If you accept corporate, purchasing, or government cards, sending enhanced transaction data (invoice number, tax amount, line items) qualifies you for significantly lower interchange rates.
Level 2 data typically reduces rates by 0.3-0.5%. Level 3 data can reduce rates by up to 1% on large B2B transactions.
This requires a gateway that supports enhanced data — ask your processor.
Strategy 8: Review Your Statement Monthly
Look for:
- PCI non-compliance fees (fix by completing your annual SAQ)
- Monthly minimum fees (negotiate removal)
- Statement fees, batch fees, or "technology fees" that add up
- Rate increases you weren't notified about
A free statement analysis from Unison can identify these within minutes.
Strategy 9: Negotiate or Switch Processors
If your current processor won't match competitive rates, switch. Month-to-month agreements mean you're not locked in. Key negotiation points:
- Processor markup (aim for 0.10-0.30% + $0.05-0.10 on interchange-plus)
- No monthly minimums
- No early termination fee
- Free terminal or terminal reprogram
- Next-day funding included
How Much Can You Actually Save?
| Monthly Volume | Typical Flat-Rate Cost | Interchange-Plus Cost | Monthly Savings |
|---|---|---|---|
| $25,000 | $650 | $475 | ~$175 |
| $50,000 | $1,300 | $925 | ~$375 |
| $100,000 | $2,600 | $1,800 | ~$800 |
| $250,000 | $6,500 | $4,250 | ~$2,250 |
These are conservative estimates. Actual savings depend on card mix, transaction method, and industry.
Get a Free Fee Analysis
Unison Payment Solutions offers a free, no-obligation analysis of your current processing statements. We'll show you exactly what you're paying, where you're overpaying, and how much you could save with interchange-plus pricing.
No high-pressure sales. Just transparent numbers.
FAQ: Credit Card Processing Fees
What is a good effective processing rate? For a typical retail business processing mostly card-present transactions, an effective rate of 1.8% to 2.3% is healthy. Online-only businesses may see 2.2% to 2.8% due to higher interchange on card-not-present transactions.
Why do rewards cards cost more to accept? Interchange fees fund the rewards programs (airline miles, cash back, hotel points). When a customer pays with a premium rewards card, the interchange fee is higher — typically 2.0% to 2.5% compared to 0.5% to 1.0% for a standard debit card.
Can I refuse certain card types? You can refuse American Express or Discover if you choose, but refusing Visa or Mastercard is typically not allowed under your merchant agreement. Most businesses accept all major card brands to avoid losing sales.
Should I use a cash discount or surcharge program? Cash discount is legal in all 50 states and tends to be better received by customers. Surcharging is prohibited in some states and often perceived negatively. Both can eliminate processing costs entirely.
What is interchange downgrade and how do I avoid it? Transactions can "downgrade" to a more expensive interchange category if you key in a card instead of swiping, fail to batch daily, or submit incomplete transaction data. Use chip/tap whenever possible and auto-batch every night.
How often should I review my processing fees? At least quarterly. Interchange rates change twice a year (April and October), and processors may adjust markups. A quick check of your effective rate each month takes five minutes and can save thousands annually.