How To Offset Or Lower Your Credit Card Processing Fees

Credit card processing is getting more expensive. Inflation is driving up costs, and interchange fees keep rising.

The good news is you can lower — or at least offset — those fees. Here are practical steps you can take, plus how to tell if you’re paying too much.

8 Ways To Lower Your Credit Card Processing Fees

Here are eight easy steps to lower your credit card processing costs.

Negotiate With Your Processor

Most merchants don’t realize they can simply ask for a better deal. While you can’t negotiate interchange fees set by the banks, processors may cut their markup or reduce recurring fees to keep your business.

Switch To A Cheaper Processor

Changing providers can save a lot, but it’s not always simple. Retailers may need new hardware, and eCommerce businesses should confirm that their payment gateway and stored customer data will still work. Plan carefully so the switch doesn’t disrupt your business.

Avoid Keyed-In Transactions

Manually entering card numbers is both riskier and more expensive than swiping, dipping, or tapping. Whenever possible, use a physical reader. If you rely on a virtual terminal, pair it with a card reader for in-person payments.

Use Address Verification Service (AVS)

The Address Verification Service (AVS) compares a customer’s billing and entered address to help block fraud. It doesn’t lower per-transaction fees, but it can prevent chargebacks that are far more costly.

It’s essential for eCommerce and very useful for phone or mail orders, though some processors charge about ten cents per transaction.

Submit Transactions Within 24 Hours

Submitting sales late often triggers higher interchange fees or downgrades your transaction to a more expensive pricing tier if you have tiered pricing. The safest approach is to batch all transactions at the end of each day.

Minimize Batch Fees

Some providers charge around ten cents per batch. Submitting multiple batches in a day makes those costs add up fast. Batching once per day usually saves the most money.

Use Credit Card Tokenization

Tokenization replaces sensitive card data with secure “tokens,” reducing fraud and often qualifying your business for lower interchange fees. Most modern payment gateways include it for free, making it a no-brainer for eCommerce and integrated POS systems.

Avoid Leasing Hardware

Leasing terminals is almost always a bad deal. A four-year lease can cost four to five times more than buying outright, and contracts are usually noncancellable. Purchasing equipment upfront is far cheaper in the long run.

3 Ways To Offset Credit Card Processing Fees

If lowering costs isn’t enough, you can legally pass fees to customers as long as you follow card network and state rules. Here’s how.

• Add a convenience fee: This is a fixed fee charged when customers use a non-preferred payment method, like credit cards. Rules vary by card brand, so check with your processor before adding it.
• Offer a cash discount: Instead of adding fees, raise your listed prices slightly and give customers who pay with cash or debit a discount. Customers tend to view this more positively than a surcharge.
• Add a credit card surcharge: Surcharging adds the card processing fee directly to the customer’s bill. It’s legal in most states, but rules are complicated and some customers resent it. If competitors don’t surcharge, you may lose sales, but it can still work if carefully managed.

Are You Paying Too Much For Credit Card Processing?

The easiest way to know if you’re paying too much for processing is by calculating your effective rate, which is defined as your total processing fees divided by your total sales volume for a given month.

​Effective Rate = Total Processing Fees / Total Sales Volume

For example, if you processed $10,000 last month and paid $250 in fees, your effective rate is 2.5%.

Most small businesses land between 3% and 4%. If yours is higher, you’re probably overpaying (unless you’re in a high-risk industry, where 6–8% is common).

The Bottom Line On Lowering Your Credit Card Processing Fees

You can’t change interchange fees, but you can control processor markups, avoid costly habits like leasing, and implement security tools that lower risk. If fees are still too high, consider offsetting them with a cash discount program or switching providers altogether.

Many cheap credit card processors can usually offer you lower costs than the traditional merchant account providers. While you might have to sacrifice some of the bells and whistles, you’ll save money on processing costs and improve your cash flow in the process.