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How to Negotiate the Perfect Credit Card Processing Deal

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negotiating credit card processing fees

Negotiating credit card processing fees is intimidating, and for good reason. You probably don’t have to negotiate pricing very much in your everyday life, and you only have to negotiate a credit card processing deal maybe a few times in your entire life. Sales representatives at merchant services providers, on the other hand, negotiate these contracts every single day. When you deal with these representatives, you are immediately at a disadvantage, which hurts your overall confidence.

Confidence is key to successful negotiation. If you can’t confidently say that a deal sounds good or bad, all is lost. This quick guide gives you all of the necessary tools to stack the negotiating deck in your favor and give you the confidence to get the merchant processing contract terms you deserve.

1. Get an interchange-plus quote

If you want to have any concrete, meaningful bargaining power, it’s interchange-plus or bust. With interchange-plus, the salesperson must separate the markup from the wholesale transaction cost, and thus provide you with two simple numbers that you can easily compare with quotes from other vendors.

The two numbers are:

  • The percentage markup (e.g., 0.30%)
  • The transaction fee markup (e.g., $0.20)

You still have to pay for the interchange fee and other wholesale costs, of course, but those numbers are non-negotiable and therefore do not provide you with any negotiating power. All processors have to pay the same wholesale interchange costs.

Compare this with a standard tiered quote, which contains at least six numbers, including:

  • Qualified tier rate and transaction fee (e.g., 1.75% + $0.20)
  • Mid-qualified tier rate and transaction fee (e.g., 2.25% + $0.25)
  • Non-qualified tier rate and transaction fee (e.g., 2.90% + $0.30)

Because it’s impossible to know what percentage of your transactions will fall into each tier, and the markup and wholesale costs are not separated, making meaningful comparisons between tiered pricing quotes is simply not possible most of the time.

Some providers designed for lower volume businesses (like Square or PayPal) do not give interchange-plus quotes. But any traditional merchant account provider can give cost-plus pricing. If the representative refuses to, then it’s probably time to hang up the phone.

2. Examine fees to calculate the effective rate

So you’ve got your interchange-plus quote in hand, along with a complete list of fees. Now what?

Well, it helps if you have some expertise in payment processing (we can help if you’d like), but a careful newcomer can do a fairly good job of examining and sorting fees, which is the first step in the process of calculating the effective markup rate, which is the number you can use to make apples-to-apples comparisons across multiple processors.

Check out this infographic for more information on processing fees.

Looking at your fee page, highlight all of the fees that are “scheduled,” meaning they occur at regular intervals. Such fees include:

These fees figure into the markup cost.

Incidental fees (or one-time fees), on the other hand, are excluded from the markup. Such fees include:

It’s important to pay attention to these fees as well when you make comparisons, but they do not count as part of the effective markup.

NOTE: If you process a lot of card-not-present transactions, look out for an AVS (Address Verification Service) fee. Usually this fee is built into the markup quote for card-not-present businesses, but some providers are sneaky and include it as a separate fee. The AVS fee is charged every time you run a transaction without the card present (such as through a website or over the phone). The fee is usually small (maybe $0.10), but it adds up quickly. Multiply this fee by the number of card-not-present transactions you’ll have in a month, and add that number in with your other scheduled fees.

3. Calculate the effective markup rate

With your fees carefully examined and sorted, you’re ready to calculate the magic number. The effective markup gives you a single number that serves as a simple metric to compare actual costs, not just quoted rates, across a number of processing quotes. It’s the single most important number to consider when rate shopping, so pay attention!

You are given a rate and fee quote that includes the following:

  • Interchange-plus: 0.25% + $0.20
  • Monthly fee: $15
  • Annual PCI compliance fee: $72
  • Monthly gateway fee: $10

You predict that you will process $20,000.00 per month in card payments, with $100.00 being your average card payment transaction size.

Follow these steps:

  1. Multiply your markup rate by your monthly volume. (20,000 * .0025 = 50)
  2. Divide your monthly volume by your average transaction size to get your average number of transactions per month. (20,000 / 100 = 200 transactions)
  3. Multiply your average number of transactions per month by your per transaction fee. (200 * 0.20 = 40)
  4. Add up all scheduled fees. For fees collected annually, divide by 12 to get the monthly figure. (15 + 6 + 10 = 31)
  5. Add totals from lines 1, 3, and 4 to get your total cost above wholesale. (50 + 40 + 31 = 121)
  6. Divide total cost above wholesale by your total monthly card payment volume to get the effective markup rate. (121 / 20,000 = 0.00605)

So in this example, the effective markup rate is 0.60%, which is $121 in negotiable fees per month. This is the ultimate test to see if one provider will actually be less expensive than another, or if it just looks less expensive. Trust me, sales reps are experts at making a quote look less expensive without actually saving you any money.

4. Assess the overall value

The effective markup is a powerful number, but it’s not the whole story. Without assessing overall value, you could end up choosing the cheapest provider but not the best value.

For example, lets say you process $20,000 per month and you get three quotes. You do the math and get the following results:

  • Provider A: 0.60% effective markup, nothing else included
  • Provider B: 0.70% effective markup, includes gateway and virtual terminal
  • Provider C: 0.90% effective markup, includes gateway, virtual terminal, and shopping cart integration

If you don’t need a payment gateway or shopping cart integration, and all other things are equal, then the choice is clear. But let’s say you do need the gateway and shopping cart, now what?

Well Provider A costs about $120. Provider B costs $20 more than A. Provider C costs $60 more than A.

How much are the gateway and shopping cart integration going to cost if you get them elsewhere? The gateway could easily be $20 per month or more, so option B is at least as good as A. If Provider C is offering a good shopping cart, that could definitely cost $40 or more elsewhere. This means that they are all about the same in terms of value, despite the effective markup differences. But Provider A offers the best flexibility, since you are free to choose the gateway and shopping cart you’d like to use.

Other things that impact value might include quality of customer support, quality of reporting system, deposit times, etc. These are more difficult to quantify, but should be considered when you make comparisons of value.

5. Look out for contract termination terms

Everyone will tell you to read your contract, myself included. But the reality is that it’s a very long contract, and if you’re not familiar with the industry terminology, standards, and legalese, you likely won’t be able to glean much useful information from the majority of it. And the truth is that the vast majority of the contract is non-negotiable.

I still recommend that you try to read it, since it is a legally binding agreement. If you only read one section, make sure it’s the part that outlines the termination procedures. Ideally your contract will have an early termination fee waiver so that the contract is ostensibly month-to-month. (Note that contract terms will still outline the termination fee, which is why it’s so important to make sure the waiver is included.)

All of our featured providers have no early termination fees!

If you can’t get the early termination fee waived, at least look out for the auto-renewal clause. This clause – which was present in literally every contract I’ve ever read – makes it so that after your initial contract term expires (usually three years), the contract AND early termination fee renew automatically! This means that even if you satisfy the initial contract, you could still end up being stuck with the early termination fee.

Perhaps the most important thing to look out for in the termination section of the contract is any language referring to “liquidated damages.” This type of early termination fee allows the provider to collect thousands of dollars in “damages” from projected revenue loss based on your early cancellation. Never ever agree to this.

6. Shop around

One of the best negotiating tools you can arm yourself with is multiple rate and fee quotes. Talking to at least three different providers before making a final decision not only helps you build confidence in the process, it gives you real-world information regarding the fees and rates appropriate for your business.

Everyone wants to know how much he or she should pay for credit card processing. The answer is: The lowest quote you can find. The numbers vary too widely for me to give a concrete answer, but the fact of the matter is that if one provider can give you a low quote, any other processor will be willing and able to match that rate and fee quote to win your business. So even if you have your heart set on one processor, it doesn’t hurt to get another quote or two. If one of the other quotes is lower, show it to the provider you’d prefer to work with and get them to match it.

You have to be careful to assess the effective rate and overall value here, since one rate and fee quote might look better than another, but not actually be as valuable to you.

7. Never agree right away

Here’s a rule to live by: Take your time. Don’t buy into any limited time offers or high-pressure sales tactics. Even if you’re pretty sure you want to sign on with a particular provider, give yourself a day to think it over and look at the numbers. The salespeople might be in a rush to close the deal, but you shouldn’t be. If the representative is trying to rush you into signing, remember that you don’t owe him or her anything. If the pressure escalates, take your business elsewhere.


By educating yourself about payment processing, you build the confidence necessary to deal with professional sales representatives and negotiate the lowest credit card fees. Leveling the playing field in this way helps to ensure that both parties get a fair deal. But remember that not every merchant services provider is out to rip you off. Sometimes the opening offer is actually 100% fair and won’t require any negotiation. By getting an interchange-plus quote, determining your effective markup, assessing overall value, and following the other guidelines in this article, you’ll be able to determine if negotiation is necessary and ensure that you’re getting the best value possible for your particular business.

To learn more about how much you should pay for credit card processing, check out this article. To get fair rates and contract terms when negotiating credit card processing fees without the worrying about getting ripped off, take a look at some of our favorite payment processing companies. Let us know how your negotiations go in the comments!

Tom DeSimone
Based in New York’s Hudson Valley, Tom has written for Merchant Maverick since 2013 and currently serves as the website’s managing editor for payment processing content. His work is cited by publications including TechCrunch, Washington Business Journal, and Bank Advisor. Press seeking expert comments for stories related to credit card processing can reach him via LinkedIn for a prompt reply.
Tom DeSimone
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Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.


    1) My coaching business is considered high risk. I need Gateway and processor that works with Shopify. I want to know people’s experience with Payment Cloud. Their interchange plus rate is much better than Durango, 1st data and others. Do you know if Payment Cloud has charge higher fees than what the contract originally said? Payment Cloud’s Agreement has in at least seven different places in their sections describing the schedule of their fees the following phrase, “as amended from time to time”. Is this typical?

    2) Payment Cloud Agreement states “the schedule of fees is predicated on my business’ average monthly sales volume…”. My sales volume could vary by 5 to 10 K per month so it sounds like they could change my fees. Anyone know if they would? They insist on a renewable 24 months contract with early termination fee of $595.

      Lisa Brumm

      What about using a pin pad for debit cards? I’m being told 2 different things from 2 companies. One says it doesn’t matter anymore, it’s the same fee whether they use pin pad or not. The other company is saying .10 a transaction on the debit card, no matter the amount. Who is correct?

        Laurie Dion

        I will forward you a copy of a contract I was about to sign between my company and Costco Elavon account, and then another person from Elavon sent me a second contract, these people are so dishonest. I am sad as I have had a Costco card for over 20 years and also loved Costco customer service. can’t believe they are involved with this company I guess money rules everything

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