Updated October 16, 2023

Cheapest Credit Card Processing for 2023

By Kim P, personal finance expert at CreditDonkey
Read more about Merchant Services
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Looking for the best deal in credit card processing for your small business? Check out this list of low-cost solutions here.

© CreditDonkey

It's crucial for any business to accept credit card payments.

Unfortunately, credit card processing fees can be confusing and expensive.

Each company has different fee structures. And it's not as simple as finding the lowest price. In this guide, find the best, most affordable way for your business to accept credit cards.

Which credit card processing is best?
Here are the cheapest credit card processing companies:
  1. Square for Mobile Businesses
  2. Stripe for Online Businesses
  3. PayPal for Low-Volume Retailers
  4. Helcim for Quickly Growing Businesses
  5. Dharma Merchant Services for $10,000+ per Month
  6. Stax by Fattmerchant for $15,000+ per Month
  7. Payment Depot for $30,000+ per Month
  8. PayJunction for Low Average Ticket Size
  9. CDG Commerce for Full-Service Merchant Account

Cheapest Credit Card Processing Rates

Here is a quick comparison of the different fees charged by the top payment processing services.

CompanyPricing ModelProcessing Rates
SquareFlat rate2.6% + $0.10 (retail)
2.9% + $0.30 (online)
StripeFlat rate2.9% + $0.30 (online)
PayPalFlat rate2.7% (retail)
2.9% + $0.30 (online)
HelcimInterchange-plusStarts at Interchange + 0.40% + $0.08
(highest markup)
DharmaInterchange-plusInterchange + 0.15% + $0.08 (retail)
Interchange + 0.2% + $0.11 (online)
StaxSubscriptionInterchange + $0.08 (retail)
Interchange + $0.18 (online)
Starts at $99/month
Payment DepotSubscriptionInterchange + 8¢ (retail)
Interchange + 18¢ (online)
Starts at $79/month
PayJunctionInterchange-plusInterchange + $0.75
CDG CommerceFlat rate (<$10k/mo)
Interchange-plus (>$10k/mo)		2.75%+ $0.30 (retail)
2.9% + $0.30 (online)

Read on to learn more in detail about each one and to find the best credit card processor for your business.

Two Types of Providers

When looking for a credit card processing service, first you need to think about what level of service you want. There are two types of credit card processing solutions.

  1. Merchant Account Provider
    Merchant account providers are a full-service credit card processor. The main thing is that you get a unique merchant ID number just for your business. This number identifies you properly whenever there's a credit card transaction and lowers the risk of fraud.

    That also means you get your own merchant account, unlike with Payment System Providers (PSPs). Merchant accounts are best for larger, established businesses. It's because banks require underwriting to approve you as a client.

    They also have more complex fees compared to PSPs. Their subscription pricing model could include setup fees, monthly fees, chargeback fees, cancelation fees, etc.

  2. Payment System Provider (PSP)
    Payment service providers only offer credit card processing. You don't receive your own unique merchant ID. Regarding merchant accounts, you share one with other businesses.

    PSPs are also known as third-party processors. They let you accept online payments by integrating with your eCommerce store. To accept in-person payments, payment processors can also work with your POS hardware.

    You get what's called a "subaccount" instead of a dedicated merchant account. Your transactions are processed in a batch with many other businesses as well. It costs less because of the bulk processing.

    There's no underwriting required so it's quicker to get started. It's more suitable for a new business, or if you're a small business without a budget for a merchant account.

    But you're more prone to account stability issues. There's typically a lack of customer service, minimal PCI compliance assistance, and higher chance of frozen funds and fraud.

What's the difference between a merchant bank account and business bank account?
A merchant account is a type of bank account that allows you to accept credit card payments. You don't actually have access to this account.

When you take a card payment from customers, the funds are first deposited into the merchant account. From there, the money is transferred to your business bank account (usually in 1-2 business days), where you can use it.

Best Credit Card Payment Processing for You

The best credit card processing solution for you depends on your monthly sales volumes, business type, and average transaction amount.

Here's the general rule of thumb to narrow down your search.

  • New or small business: It's best to use a payment service provider with flat pricing, like Square or PayPal. The application process is quick so you can get started processing credit card sales right away.

  • Low to mid-volume sales: Interchange-plus pricing can help you save on processing fees. Check out Helcim for this model. With Helcim, the higher your sales, the more you can save. You don't even need to call them to lower your rates. It happens automatically.[1]

  • Large business: If you're a business processing over $15,000 in credit card transactions each month, then consider subscription-based pricing, like Payment Depot. The processor doesn't charge additional markup on the interchange rate, so your savings will more than justify the subscription fees.

Next, you'll learn more in detail about the top picks for each type.

Not Sure What's Best for You?

Answer a few short questions in our credit card processing quiz and receive tailored recommendations for the best processor to save money.

Cheapest Credit Card Processing Companies

The cheapest credit card processing company is the one that provides the features you need at the lowest price for your type of business.

Here is an overview of our top picks for each category below. We also break down the benefits and drawbacks of each.

Square: Best for Mobile Businesses

Square is a flat fee payment processor. It is best for small mobile businesses with mostly in-person swipe/chip purchases. It's ideal for small businesses like food trucks, seasonal sellers, market vendors, coffee shops, etc.

Cost:[2]

  • Swipe or chip transactions: 2.6% + $0.10
  • Online transactions: 2.9% + $0.30
  • Key-in transactions: 3.5% + $0.15

All card payments are charged the same processing costs, whether it's credit cards or debit cards, Visa, Mastercard, Discover, or American Express cards. This makes card processing rates simple, but they may not be the cheapest. There are no other monthly fees.

Pros:
With a free Square reader and low per-swipe fees, using Square Payments is an easy and affordable way for new businesses to start. It can also be used offline on your mobile device, so you can literally accept credit cards anywhere, even without an internet connection.

There are no hidden fees beyond the per-transaction flat fees. In fact, Square does not even charge a chargeback fee for disputes.

The Square Point of Sale (POS) app is one of the most powerful, making it a great choice for mobile payment processing. You can set discounts, issue refunds, send invoices, get detailed reporting, manage your customer database, and handle employee and inventory management, all on the app.

All accounts get a free virtual terminal, payment gateway, and online store. Everyone can also get a free Square reader that plugs into your headphone jack or lightning port. Chip reader can be purchased.

Square also offers plans with special rates for retail, restaurant, and appointment-based businesses.

Square offers some add-on services for extra costs, such as loyalty program, payroll, and marketing.

Cons:
Even though this flat-fee structure is the most predictable, the transaction cost could be quite high. Larger businesses may be better suited with interchange-plus pricing.

Square's customer service does leave much to be desired too. Their support hours are rather restricted and they prefer clients find their answers in their knowledge database.

Contract:
Month-to-month; no cancellation fee.

Stripe: Best for Online Businesses

Stripe is one of the most flexible payment processors for internet-only businesses. It's ideal for larger eCommerce businesses, in-app purchases, and online stores that accept global payments.

Cost:[3]

  • 2.9% + $0.30 per transaction
  • In-person payments: 2.7% + 5¢ with Stripe reader
  • Contactless payments: 10¢ per authorization
  • Additional 1% for international payments in any currency

Pros:
Stripe is known for a lot of advanced API developer tools that allow for complete customization of your checkout experience. It can be customized with a variety of programming languages, but you'd have to have a developer.

Stripe's main focus is on helping eCommerce merchants have robust storefronts and billing features. Some even consider their payment processing as secondary.

Stripe integrates with dozens of online shopping carts, including Shopify, WooCommerce, and X-Cart. It also has integrations especially for business-to-business (B2B) businesses.

It offers hundreds of apps and extensions for all features, including invoicing, accounting, marketing, and operations.

The Stripe reader is also available if you need to take in-person payments or if you're on the go. It works well with the Stripe ecosystem and integrates with its other features such as billing.

Cons:
Since Stripe is meant to be completely customized, it may be overwhelming if you don't have developer resources (or expensive if you have to hire one). So it may not be ideal for small online businesses that don't need advanced customization.

Contract:
Month-to-month; no cancellation fee.

PayPal: Best for Low-Volume Retailers

PayPal also offers a flat processing fee for all payment types. It's best for a new or small business with less than $5,000 in monthly sales, or businesses with low average transaction amounts.

Cost:[4]

  • Swipe, chip, and tap transactions: 2.29% + $0.09
  • QR code transactions $10.01 and above: 1.90% + $0.10
  • QR code transactions $10 and under: 2.40% + $0.05
  • Online credit and debit transactions: 2.99% + $0.49
  • Online PayPal and Venmo checkout: 3.49% + $0.49
  • Keyed-in transactions: 3.49% + $0.09
  • Virtual terminal: 3.09% + $0.49

PayPal also offers some special transaction rates for these types of businesses:
  • Nonprofits (online websites): 1.99% + $0.49
  • Micropayments plan: 4.99% + $0.09

Pros:
The PayPal Zettle POS app lets you accept card payments on your mobile device. You can get the lowest in-person processing fees with it. Let's say you process over $10 of PayPal and Venmo QR code payments. You can get a reduced processing rate for that.

You can offer the best range of payment options to customers. With PayPal being such a recognized brand in the payments industry, it's a big advantage to let people pay with PayPal and Venmo on your website and even in store. You can also send an invoice.

PayPal is incredibly easy to set up. You can use it with most major ecommerce platforms. Within minutes, you can install a free online checkout button and begin accepting all form of payments, including credit cards, PayPal, Venmo, and even e-check payments.

Cons:
The online transaction rates are the highest amongst other third-party processors (like Square and Stripe). But being able to accept PayPal and Venmo may be worth it to you.

If you want to accept payments over the phone, the virtual terminal is only available under the PayPal Pro plan and costs $30/month. This is a lot considering that Square offers this for free. In addition, recurring billing for subscriptions is an extra $10/month.

Contract:
Month-to-month; no early termination fees.

Helcim: for Quickly Growing Businesses

Helcim is the most transparent a payment processor can get. You'll get an overview of the potential cost of interchange rates, card brand fees, and processor markup.

It's best for quickly growing businesses because you don't need to haggle for lower processing fees when you grow your sales volume. It just happens automatically.

Average Cost:[5]

  • In-person transactions: 1.94% + 8¢
  • Keyed and online transactions: 2.51% + 25¢

Pros:
Helcim doesn't have monthly fees, cancellation fees, setup fees, deposit fees, user fees, and PCI compliance fees. You won't even get tied to long-term contracts, so you can switch processors more conveniently if you need to.

Also, the higher your sales volume, the more you can save. For example, a processing volume of up to $50,000 (for in-person payments) has a markup of 0.40% + 8¢. But once you begin processing over $50,000 up to $100,000, the markup lowers to 0.35% + 7¢.

You can accept payments from major card brands. Plus, you get to take contactless payments like Apple Pay and Google Pay.

Want to know how good Helcim is? It's ranked as one of the best credit card processors, best ACH payment processors, and best online processors for small businesses.

Cons:
Unlike its competitors, there are only 2 POS hardware options with Helcim. You can opt for their smart terminal ($349) or card reader ($109).

Also, Helcim doesn't work with high-risk businesses. It's best to look elsewhere if you belong in risky industries.

It's highly likely that you won't find cheap processing rates as a high-risk business. Payment processors typically charge up to 3% transaction fees for risky industries to offset the potential cost of chargebacks and fraud.

Contract:
Month-to-month; no cancellation fee.

Dharma Merchant Services: Best for $10,000+ per Month

Dharma Merchant Services charges some of the lowest credit card processing rates on the market. But they only work with higher transaction volume merchants.

Cost:[6]

  • Storefront: Interchange + 0.15% + $0.08
  • Online: Interchange + 0.20% + $0.11
  • Restaurants: Interchange + 0.15% + $0.08
  • $25 per month
  • Discounts for businesses processing over $100k/month

Pros:
Dharma Merchant Services has very transparent low rates. Plans are separated into whether you have a retail store, eCommerce store, or restaurant.

All accounts get the MX Merchant payment gateway, which also includes a virtual terminal, customer database, invoicing, and recurring billing feature. It offers integration with most major shopping carts.

Dharma is also known as a socially conscious company. Each year, it gives back to nonprofit organizations in the categories of social justice, education, environment, health, and animal welfare.

Cons:
The funding time is 2 business days, which is longer than other companies offering next-day funding. Usually, Dharma only works with larger business owners processing over $10,000 a month. [7]

Contract:
Month-to-month billing; there is a $49 account closure fee.[8]

Stax by Fattmerchant: Best for $15,000+ per Month

If your business takes over $15,000 in credit card sales per month, then consider looking into a subscription-based merchant services provider like Stax by Fattmerchant.

Cost:[9]

  • $99/month - processing up to $250,000/year
  • $199/month - $250,000-$500,000 in processing/year
  • Custom pricing - over $500,000 in processing/year
  • Custom rate for over $500,000 annually
  • In-store: Interchange + $0.08 per transaction
  • Online: Interchange + $0.18 per transaction

Pros:
Stax does not charge a per-transaction markup. You only pay direct interchange costs on your transactions, plus the monthly fee. This can make it the cheapest option for mid-size businesses.

Stax offers a good combination of technology and price. It offers an excellent integrated payments platform with a lot of robust tools. You can handle mobile and online payments, invoicing/recurring billing, customer database, inventory, and employee management.

In addition, it has advanced analytic tools to identify and compare sales trends.

It even offers developer APIs to create your own custom shopping cart solution on your website, app, or software.

Cons:
There are extra fees for add-on features like payment gateway and one-click shopping cart setup (for the lower tier plans). The add-ons will be clearly communicated so you know what your final monthly subscription price is.

Contract:
Month-to-month; no early cancellation fees.

Payment Depot: Best for $30,000+ per Month

For very large businesses, Payment Depot offers the cheapest credit card processing fees. It also has a membership-based pricing model.

Cost:[10]

  • Pricing Plans start at $79/month (Process up to $250,000/year)
  • Custom quote if you need to process more than $250,000 annually
  • In-store: Interchange + 8¢ per transaction
  • Online: Interchange + 18¢ per transaction

Pros:
Payment Depot offers four pricing plans with different processing volume limits, so you can choose the best fit for your company. For this reason, very high-volume merchants will usually find a better deal with Payment Depot than with Stax.

It only charges a very low per-transaction fee with no percentage markup, plus the monthly fee.

In addition, it offers next-day funding if you process your batch by 5 PM Central time.[11]

Payment Depot offers a variety of hardware options for purchase (including the popular Clover POS systems). Or it can reprogram your existing processing equipment for free.

Cons:
If you cancel, Payment Depot charges a 20% restocking fee for returned equipment.

Payment Depot doesn't work with high-risk merchants. It may also deny you if you have bad personal credit or if your company has an unfavorable reputation.

Contract:
Payment Depot has a membership-based pricing plan. You'll be charged a monthly fee for use of the service. You can cancel at any time with no termination fee, so you're never locked in.

PayJunction: Best for Established Retailers

PayJunction is another solid option for established businesses with a steady $10,000 or more in monthly sales volume. It offers good features for retail stores.

Cost:[12]

  • Credit cards: Interchange + 0.75%
  • Checks: 0.75%

Pros:
PayJunction's main selling point is paperless transactions. Paper receipts are messy, wasteful, and toxic. PayJunction's Smart Terminal digitally stores your customers' transaction histories, card and ACH info, and signatures. You can easily pull them out if you need to (like for a refund).

This paperless processing also makes for a very easy setup and minimal hardware. You can get the Smart countertop terminal for free if you can provide 2 months of billing statements.

It charges one single percentage markup plus the normal interchange rates. This can be a little bit high but could be cheaper for businesses with a small average transaction size. And there is no monthly fee.

Cons:
PayJunction is not ideal for very small businesses. If you process less than $10,000 in business transactions per month, there is a $35 monthly fee, so it's best to look elsewhere.

Contract:
Month-to-month; no early cancellation fees.

CDG Commerce: Best Full-Service Merchant Account

CDG Commerce is a full-service merchant account ideal for small to mid-volume businesses. It offers different pricing structures based on how much you process per month.

Cost:[13]

  • Online transactions: 2.90% + $0.30
  • Swiped or mobile transactions: 2.75% + $0.30
  • For $10,000+: Interchange + 0.25% + $0.10
  • $10 monthly fee

Pros:
CDG offers tiered pricing based on the processing volume of your business. It offers a simplified flat rate plan for smaller businesses processing $1,000 to $10,000 a month. For established businesses, it offers interchange-plus pricing, which is often more affordable.

CDG offers its equipment with no upfront costs, so that makes it easy for newer businesses to set up. You can get a credit card terminal and POS for free, but must purchase insurance. CDG includes free updates and maintenance of the hardware.

CDG also gets bonus points for offering 24/7 customer support by phone and live chat.

Cons:
While CDG claims to provide the equipment for free, they do charge insurance. But it's still pretty affordable. The credit card terminal costs $79/year, which comes out to just $6.58 per month. And the POS system will cost $39/month for complete protection.

Contract:
Month-to-month; no early cancellation fees.

Optional security package available for $15 per month.

Other Processing Companies to Consider

If the ones above don't fit your needs, here is a list of other payment processors to consider.

  • Intuit QuickBooks Payments:
    QuickBooks offers a flat fee pricing of 2.4% + $0.25 for swiped payments[14]. Compared to processors like Square and PayPal, this pricing structure could be cheaper for small businesses with larger average order value (around $100).

    Plus, QuickBooks offers other business solutions like accounting software, payroll, and inventory tracking.

  • National Processing:
    National Processing offers low interchange-plus pricing for small businesses. Larger businesses can switch to subscription pricing (membership fees starting at $59/mo) with a lower markup rate. Restaurants have a discounted rate. Users can be eligible for a free Clover Go mobile reader.

  • Chase Merchant Services:
    If you already have a business checking account with Chase, you can check out Chase Merchant Services to have everything under one roof. It offers payment processing for in-person, online, and by phone, and it's month-to-month billing.

    In addition, Chase offers other business services, including business credit cards and small business loans.

  • National Bankcard:
    This popular merchant processing provider works with some of the biggest brands, like Shell, Dominos, and KFC. Processing rates start from 0.25%, though the only way to get your final quote is to speak with a rep. It offers a free card reader and payment terminal.

  • Flagship Merchant Services:
    Flagship is one of the oldest merchant account providers around. Today, they operate as a reseller for iPayment. They offer month-to-month contracts with no setup, cancellation, or gateway setup fees.

    However, the company does have a myriad of additional fees. It's best to negotiate these fees based on your needs.

How do I avoid processing fees?
You can't avoid processing fees since it's how your processor and credit card networks make money. But you can negotiate for cheaper markup fees. The more card sales you have, the more likely you can negotiate. That's because you're a more valuable client to the provider if you process more credit card transactions.

What to Look for in a Cheap Credit Card Processing Company

Make sure to think about these factors when comparing companies. You're not only looking for the cheapest credit card processors. You should find one that offers what your business needs.

Pricing structure:
This can be very complicated. There are several pricing models. A new or micro business owner will do best with the simplicity of flat-rate pricing. A large business owner should consider interchange-plus or subscription-based pricing.

If you process large transactions, custom plans may work best for you. To fully understand how fees work, read our guide about credit card processing fees.

Is it illegal to charge credit card fee?
It's no longer illegal to charge a credit card fee or "surcharge" in most states. But it must be clearly displayed at checkout (in-person and online) and stated on receipts. Keep in mind that you'll need to register your surcharges with Visa and Mastercard. And that is not allowed for debit card transactions.

You can read our article on credit card convenience fees for more information.

Add-ons:
Watch out for additional fees, such as setup fees, PCI compliance fees, batch fees, and statement fees. Some providers also charge for virtual terminals and payment gateways. And some charge extra for things like fraud protection and subscriptions billing.

Accepted payments:
Merchant services and payment providers typically let you accept online payments in a variety of ways. You can accept debit and credit card payments, or e-wallet payments. Others even let you take cryptocurrency payments and eChecks.

If you need to accept in-person payments, some payment processors work with POS hardware. Take Square, for example. A card-present transaction can also mean lower transaction fees.

Card-not-present transactions typically have higher processing fees. That's because the possibility of chargebacks and fraud is higher.

Pro tip: To lessen your transaction charges, you can set up a cash discount program. It's a rewards program that offers cash discounts to customers who pay in cash. Accepting credit cards can open your doors to more customers. But giving incentives may just change their payment preference when they purchase in-store.

Monthly transactions:
Some companies charge a fee if you don't meet a minimum monthly processing dollar amount. Of course, for new businesses, choose a company without minimum requirements.

Funding schedule:
Typically, you get next-day funding for processed credit card transactions. Some providers transfer funds after 2-3 business days.

But there are merchants who offer same-day funding or fast-track funding. Even better, there are those who offer instant payouts. That way, you won't need to worry about cut-off times and cash flow problems.

Contract terms:
Beware of long-term commitment and termination penalties. Luckily, many of the credit card processing companies today offer month-to-month contracts, so you have the flexibility to cancel without having to commit for life.

A long-term contract is more common for high-risk industries. These are often seasonal businesses or small businesses with occasional sales. It also includes those with a high possibility for chargebacks and fraud.

Cost of equipment:
Card present credit card transactions will require the proper hardware. Some companies give you the option to buy it outright or lease. Some may even supply devices free of cost.

You can get a free mobile reader or a free credit card terminal, for example. There's typically a range of hardware to choose from. If you already have existing equipment, you can check to see if the provider can reprogram them.

PCI compliance support:
Merchants must comply with Payment Card Industry Data Security Standard. Your processor should help you with achieving PCI compliance, or else you'll have to handle it on your own.

Type of customer support:
Not all companies provide quality customer support. When you have a problem or question, you want to be able to reach someone. If you worry about setup or tech support, this is something important to pay attention to.

Test out a company's customer service to get an idea of how responsive they are and the hold times. It's also smart to read user reviews.

Industry support:
Payment processors don't always support all types of businesses. There are those that avoid working with high-risk industries. But there are others who specialize in them.

These industries typically include guns and firearms, adult products, and tobacco and cigars. Check with the payment processor if they can work with your industry. You could go for high-risk merchants if they don't.

Keep in mind that high-risk industries typically have higher transaction fees.

A high-volume business is typically considered high-risk by credit card processing companies. More transactions equal greater risk for fraud and chargebacks. Although low-volume businesses are low-risk, not all providers work with them.

That said, growing your small business from a low-volume business to a high-volume one can mean that your processor might drop you as a client eventually.

Credit Card Transaction Fees Explained

© CreditDonkey

There are three components to the total transaction fees:

  1. Interchange fees:
    These are fees charged by credit card networks (Visa, Mastercard, etc.), and they go to the issuing bank. They are non-negotiable. It's the same no matter what processor you're using.

    The interchange rate depends on things like the type of card and brand. Debit cards have lower rates. Rewards cards have higher rates than normal credit cards.

  2. Assessment fees:
    Assessments are charged by the card networks and take up a very small percentage.

  3. Processor markup fees:
    This is the fee charged by your card processor. The cost will vary depending on the processor and can be negotiated. This is the fee you should be comparing when comparing credit card processors.

    You may see the markup expressed in "basis points" (bps). One basis point = 0.0001, or 0.01%. If a processor displays their markup as 50 bps, that means 0.50%.

Some providers separate out the interchange and markup fees, while others blend them all together into a flat-rate fee. And some include it into a monthly membership fee. Learn more here.

How much are credit card processing fees?
Credit card processing fees generally range from 1.5%-2.9% for in-person swiped transactions. Online transaction fees are a little higher at 3.5% due to higher risks of fraud. The total processing costs will depend on the card network and processor you choose.

Now that you understand what are included in the processing fees, it's time to find out what rate is a good deal for you. Read on.

How to Calculate Credit Card Processing Fees?

Credit card processing fees can be unique to your business depending on your provider's pricing model. If you're shopping for a new payment processor, calculating your effective rate can help you get the best deal.

The effective rate depends on your total monthly sales and total processing cost. The formula is (total processing fees / total sales volume) x 100.

Here's a calculator you can use to check:

Effective Credit Card Processing Rate Calculator

Let's say your payment processor charges you $125 for processing fees. If your monthly sales are at $5,000, then you get a rate of 2.5%

That said, a processing fee that's 2.5% or less can work great for your small business.

You can read this article on effective rates and processing fees to learn more about them.

Next, let's talk about the behind-the-scenes from the moment a customer pays you to you paying your processors.

How does credit card processing work?

Payment processors enable you to accept major credit cards and debit card payments. They connect your business to credit card companies. That way, funds can be transferred from the issuing bank (customer's bank) to your bank account.

There are 6 key players in action whenever you process payments.

They include:

  • Cardholders (customers)
  • Merchant (you)
  • Acquiring bank or merchant bank
  • Payment processor
  • Credit card association (Visa, Mastercard, American Express, etc.)
  • Issuing bank (your customer's bank)

There are three stages to credit card processing. There's the authorization, settlement, and funding stage. The authorization stage is where the card details of your customer get approved or declined by the issuing bank.

Approved funds are settled into your merchant account. Then, the payment processor transfers the amount to your business bank account minus the fees.

You can read our article on how credit card processing works for in-depth explanations.

If the fees take a toll on your profit, there are ways to lessen them. You can negotiate with processors or pass on the fees to your customers. We'll discuss these in the next sections.

Can You Negotiate Cheaper Processing Costs?

If you are a larger business, in most cases, you can negotiate the processing company's markup fee. Many companies offer discounted rates or even custom pricing if you process over a certain amount.

For example, Square offers custom rates if your annual sales exceed $250,000. Stripe can help you design a custom package if you process more than $100,000 monthly.

There are a couple of ways you can negotiate fees:

  • The percentage markup: Negotiate the percentage if your average order value is larger. For example, getting it down from 0.3% to 0.2% can make a huge difference. Every penny you can save adds up.

  • Per-transaction fee: Negotiate this fee if you have smaller transaction sizes. If the markup was 20 cents per transaction, reducing it to 10 cents will save a ton over thousands of sales.

In general, the more you process per month, the more ability you have to negotiate rates. Don't be shy to ask; there's nothing wrong with wanting to save.

Negotiation Tips to Reduce Processing Rates

If you're thinking of negotiating with your current processor or switching providers, here are some things to know for a smoother negotiation:

  1. The interchange rates are not negotiable. Those are set by the card associations. But you can negotiate anything the provider has control over. This includes the processor markup, monthly fees, payment gateway fees, equipment fees, etc.

  2. Typically, only the Interchange-Plus and Subscription pricing models can be negotiated. Because in these plans, the processor markup is clearly separated, so it's easy to negotiate that rate.

  3. You have more negotiation power if you're a valuable client. This means having high volume sales, good account history, and not a lot of chargebacks.

  4. Shop around and get a few quotes in writing. This gives you something to go off of. You can go to your preferred provider and ask to match the lowest rate.

Check out our in-depth guide on how to negotiate the best credit card processing deal.

How to Lower Credit Card Processing Fees

You know about the criteria when canvassing credit card processing companies. You also learned tips for negotiating. Is there any other way to lower your processing fees?

Here's a list of what else you can do:

  • Enable surcharges. A surcharge is a percent of the value of what your customers purchase through a credit card. Let's say your customer made a purchase for $100. A surcharge of 2% will mean an additional payment of $2.

    Keep in mind that there are rules to follow with surcharges. Read our article on convenience fees to learn more.

  • Set up a cash discounting program. Instead of adding to the base price of your products and services when customers pay through a credit card, you offer cash discounts when they pay in cash.

    Your customers will save some money while you save on processing fees.

  • Accept alternative payment methods. Some payment processors let you take ACH payments, eChecks, and cryptocurrencies. Or you can focus on card-present transactions.

  • Buy hardware instead of leasing them. Some payment processors let you lease POS hardware. It's great if you don't have the budget upfront. But purchasing hardware outright can help you save on costs in the long run.

  • Choose scalable plans. It makes sense to switch processors if it will save you on processing fees. But a payment provider that lets you switch plans and fees as your business grows can be convenient.

What the Experts Say

Being your own boss is tough. But it's rewarding to create something of your own.

As a part of our series on small businesses, CreditDonkey asked business owners to answer some of our readers' most pressing questions:

Bottom Line

It's important to be able to accept credit cards whether you run a retail business or ecommerce store. But processing fees will cut into your profit. Finding the cheapest credit card processing option for you requires time, but it's worth the savings.

Here's a summary:

  • Startups and small business owners will find flat-rate pricing to be the best place to start. This offers the most affordability and predictability.

  • On the other hand, larger businesses will find much cheaper rates with interchange-plus or subscription pricing. These models offer more transparency.

Just like with any product, thoroughly compare processors and their features to see what makes most sense for your business needs. Ask the providers as many questions as possible before making a decision, especially if there's anything you don't understand.

References

  1. ^ Helcim. Pricing, Retrieved 09/06/23
  2. ^ Square Pricing, Retrieved 9/06/23
  3. ^ Stripe Pricing & Fees, Retrieved 9/06/23
  4. ^ PayPal Merchant Fees, Retrieved 9/06/23
  5. ^ Helcim. Pricing, Retrieved 08/11/23
  6. ^ Dharma Merchant Services Rates, Retrieved 9/06/23
  7. ^ Dharma Merchant Services. How quickly will I receive my funds?, Retrieved 9/06/23
  8. ^ Dharma Merchant Services. Closing your account, Retrieved 9/06/23
  9. ^ Fattmerchant Plans & Pricing, Retrieved 9/06/23
  10. ^ Payment Depot Pricing Plans, Retrieved 9/06/23
  11. ^ Payment Depot, Retrieved 9/06/23
  12. ^ PayJunction Pricing, Retrieved 9/06/23
  13. ^ CDG Commerce Pricing Plans, Retrieved 9/06/23
  14. ^ QuickBooks Payment Pricing, Retrieved 9/06/23

Write to Kim P at feedback@creditdonkey.com. Follow us on Twitter and Facebook for our latest posts.

Note: This website is made possible through financial relationships with some of the products and services mentioned on this site. We may receive compensation if you shop through links in our content. You do not have to use our links, but you help support CreditDonkey if you do.

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About CreditDonkey
CreditDonkey is a credit card processing comparison website. We publish data-driven analysis to help you save money & make savvy decisions.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed on this page are those of the author's alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.

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CreditDonkey does not know your individual circumstances and provides information for general educational purposes only. CreditDonkey is not a substitute for, and should not be used as, professional legal, credit or financial advice. You should consult your own professional advisors for such advice.

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