9 Tips on How to Get the Cheapest Credit Card Processing Rates for Your Business [2024 UPDATE]

Depending on your business, the amount you pay in credit card processing can add up to hundreds, if not thousands of dollars per month. That’s why it’s critical that you select a payment provider that offers the most cost-effective rates possible.

Doing that, however, is easier said than done. The world of payment processing can be complex and the players in the industry are adept at making you think you’re getting a good rate when you’re in fact, overpaying for credit card processing.

To prevent that from happening to you, we’ve put together some pointers to help ensure that you get the cheapest credit card processing rates for your business. Keep these tips in mind when you’re shopping around for a payment processor.

What Are the Cheapest Credit Card Processing Rates for Small Businesses?

There are no hard and fast answers to this because credit card processing rates hinge on a lot of factors, including:

• The card network. Visa, Mastercard, American Express, Discover, etc., set the interchange rates for various cards.
• Your processing volume. Typically, the more you accept credit cards and process payments, the lower the per-transaction rate is. For instance, at Payment Depot, merchants who have a monthly processing volume of $75,000 per month have a transaction fee of $0.10. But that amount goes down to $0.05 per transaction if their processing volume is above $150,000 a month – allowing you to have lower processing fees overall.
• Your transaction values. If your payment processor takes a percentage out of your sales, you will pay higher fees for larger transactions. (Sidenote: this doesn’t apply to our members, because we don’t take a cut out of your sales.)
• The types of business you have. High-risk industries may be subject to higher rates.
• Whether the card is swiped or keyed in. Swiped transactions generally cost lower because they carry lower risk compared to keyed-in transactions.
• Your credit card processor/merchant account providers. Your payment processor may mark up your rates, so specific costs can vary from one merchant account provider to the next.
• Your payment processing hardware. Even the hardware can factor into your processing fees, believe it or not. For instance, many very small businesses cannot necessarily afford a POS system that enables them to choose their credit card processor. Processors like Square provide extremely cheap credit card readers that enable those with new merchant accounts to easily accept credit card payments but then lock them into their credit card processing fees. 
• The payment methods you support. Believe it or not, the lack of software and hardware involved in a sale also influences your rates, which is something that online businesses need to know. Credit card payments taken virtually increase rates for two reasons. First, payments run through virtual terminals are run as card-not-present transactions, resulting in higher fees. Second, you’ll have to work with a payment provider who offers an API integration with your eCommerce software. This can limit your choice of providers.

That being said, you can expect credit card processing fees to range from 1.5% to 2.9% for swiped cards, and 3.5% for keyed-in transactions.

It’s also important to recognize that certain factors that affect your rate are totally within your control, while others, not so much. For example, interchange rates, which are set by credit card networks, are NOT something you can control.

However, you can lower your rates by choosing the right provider or by upgrading your equipment to lower your fraud risk and avoid keyed-in transactions.

All this to say that the best way to score the cheapest credit card rates, especially for small business owners, is to find those things within your control and make sure you’re using them to your advantage. 

Here are some action steps to help you do just that.

1. Be Aware of the Common Payment Terms and Processes

To properly shop around for a payment provider, you first need to educate yourself on the common words and phrases used by payment professionals. What are interchange rates? What do providers mean when they say “assessments?” What’s the difference between the issuing bank and the merchant bank?

It’s also important to be aware of how the business of credit card payments works. Who are the players involved in processing payments? What takes place behind the scenes when a customer swipes their card? Who takes a cut out of your revenue?

Having the answers to these questions will ensure that you make an informed decision when choosing a credit card payment service provider or merchant account. And as we alluded to earlier, a number of players in the industry implement shady sales tactics to get you on board with their company. By being aware of how processing works, you can avoid getting hit by higher-than-necessary fees.

We’ve discussed the ins and outs of payment processing quite a bit on the blog, so rather than rehashing the details here, we recommend you read up on the following:

• How to read a credit card processing statement
• Everything You Need to Know About Interchange-Plus Pricing
• What Are the Average Credit Card Processing Fees That Merchants Pay?
• How Credit Card Processing Works: The Key Entities Involved in Processing Payments for Businesses

2. Know Your Business and Your Numbers

Still, on the topic of educating yourself, it’s important to be aware of your business’s key metrics. Credit card processing rates will vary, depending on the number of credit card transactions that you process.

The factors that affect your rates include your credit card volume, average basket size, risk profile, and more, so have these figures handy before you shop around.

To be safe, make sure you have 3 months’ worth of data for the following metrics:

Credit card transaction volume – Be aware of how many credit card transactions you accept per month, as well as the total amount of sales volume processed.

Average transaction size – Many processors take a percentage out of each transaction. Knowing the typical basket sizes in your business will give you an idea of how big their cut is.

Types of payment cards used by your customers – Credit card processing rates can vary depending on the card used and payment methods. Debit cards usually see lower fees since the debit cards come directly from the customer’s bank account. On the other hand, corporate and rewards cards come with higher processing costs. If you have an idea of which types of cards are being used by your customers, you can make an educated guess on how high your rates would be based on how you accept credit cards.

Effective rate – The effective rate is the total fees charged divided by the total amount processed. This is the rate that you’re paying after you factor in the non-negotiable processing fees along with your provider’s markup. You can find your effective rate by taking a closer look at your merchant statement and running the numbers.

Chargeback to transaction ratio – To find your chargeback rate, divide your total chargebacks by the number of transactions within that same period. Anything higher than about 1% could put you in the “high-risk” category, which means you’ll end up paying higher rates, in addition to your one-off chargeback fees.

Why take the time to iron out these metrics? Simple: these numbers can directly affect how much you pay in credit card processing fees and even if you meet the monthly minimum sales threshold for certain pricing structures laid out by some processing companies.

Let’s say you’re trying to decide between two credit card processors. Processor ABC charges 2.5% + 30 cents per transaction, while Processor XYZ charges 1.30% and a monthly fee. The “best” rate for your business will depend on your transaction volume, transaction size, and types of cards processed, so it’s important that you know where you’re coming from in order to gauge which one is the best deal.

3. Shop for the Lowest Markups, Not Just Cheap Credit Card Processing Rates

As we mentioned previously, credit card processing rates consist of a number of components:

• Interchange and assessment fees
• Payment processing solution base rates
• Payment solutions’ markups on interchange fees

Interchange and assessment fees are non-negotiable. These fees are paid to banks and credit card networks, and credit card processors have no control over them. What processors do control are their markups—i.e., the amount you pay them in addition to the fees that go to banks and card networks.

When you’re evaluating payment processors, it’s important to shop on markups, and not rates, says Ellen Cunningham, marketing manager at CardFellow.

“Rates are only one piece of the total cost, and they’re easily manipulated. Nothing makes a salesperson happier than when you call and ask ‘What are your rates?’ because they know they’ll be able to play games with your pricing,” she adds.

Cunningham continues, “The smaller the markup, the better. Instead of asking about rates, ask about markup over wholesale. A processor that can’t (or won’t) tell you should raise a red flag.”

Here’s an example: a processor that uses interchange-plus pricing may charge something along the lines of interchange fee + markup, which is expressed in basis points (i.e., 1/100 of a percentage point). If the interchange rate is 1.50% and your processor’s markup is 50 basis points, you’ll be paying 2.00%.

On the other hand, a membership-based payment processor such as Payment Depot gives those with a merchant account access to the interchanges rates without an added markup. Instead, we charge a monthly fee to give those with a merchant account access to wholesale rates and transparent pricing.

So, if the interchange rate is 1.50%, then you’ll be paying just that amount, plus a flat monthly fee for your subscription to the payment service provider.

4. Know the Right Pricing Structure for Your Business

We’ve discussed payment processing pricing structures numerous times, and for good reason: having the right pricing model can mean the difference between paying a couple of hundred versus thousands of dollars in credit card processing fees.

Not all pricing models are created equal and the “right” one depends on your business. Here’s a quick recap of each of the different pricing structure styles used by credit card processors:

Interchange-plus – With interchange-plus pricing, the credit card processor adds a markup on top of the interchange or “wholesale” credit card processing rates. Unlike other pricing models, interchange-plus is pretty transparent because you know how much you’re paying in interchange fees and how much is going to your processor.

Tiered pricing – The processor bundles up the interchange and assessment fees with their markup, and they will then charge you based on three tiers: qualified, mid-qualified, and non-qualified. And because the provider combines all fees into 3 buckets, this pricing lacks transparency around how much you’re paying. It’s typical that this pricing model includes additional fees shared with you after signing your (often three year plus) contract.

Blended or flat rate pricing – This is the simplest pricing model to understand because the processor charges you a single rate or flat fee for all your transactions (versus separating them into different tiers or separating the interchange costs from their markup.)

Membership – Providers that use a membership model charge you an annual membership or subscription fee for access to wholesale credit card processing fees. These processors don’t take a cut out of your sales via transaction fees, nor do they markup interchange and assessment credit card processing service fees.

It’s important to understand how each different pricing structure works, because not all pricing models will be a good fit for your business.

As Cunningham puts it, “flat rate pricing (offered by companies like Square, PayPal, and Stripe) is low cost for certain types of business, but not others. For example, Square will typically be cheapest if your average transaction is under $10 or if you only accept a few thousand/month in cards. Otherwise, it’s an expensive solution. Don’t be fooled by simplicity. Simple does not automatically equal lowest cost.”

Her advice? “Read up on the credit card processing companies and pricing models available so you know what you’re looking for.”

Ultimately, many credit card processing companies will look to lock you into a long-term contract, so understanding and choosing between these fee structures are generally a huge financial decision for businesses.

Tips for the Cheapest Credit Card Processing Fees for eCommerce

As an owner of an online business getting the lowest prices on credit card processing is so important for your bottom line. Because eCommerce business is done without a face to face card present interaction, the credit card brands attach more risk to each transaction, which means it will cost the merchant more in interchange rates.

This higher risk means business owners need to get the cheapest credit card processing fees for eCommerce stores, meaning you need to get the wholesale interchange cost without any additional markup. 

At Payment Depot, that’s exactly what we do. We give the cheapest credit card processing for eCommerce stores, as well as all other businesses, because we give you the direct wholesale cost from the card brands.

5. Consider Zero-Fee Credit Card Processing

Another way to achieve lower rates is to implement a zero-fee or zero-cost credit card processing program, which passes on the credit card transaction fees to the customer. 

Zero-cost credit card processing typically works in one of two ways:

Surcharging – You add a surcharge to credit card transactions, which means when customers choose to pay using a credit card they’ll incur a credit card transaction fee on top of their purchase.

For instance, you can add a 3% surcharge to all credit card transactions to offset the fees. In this instance, if a customer buys a $10 item, they’ll pay an additional 30 cents if they use their credit card. 

Cash discounts – When you implement cash discounts, all the prices in your store are already marked with credit card prices, which means credit card fees are already baked into your regular pricing. But if someone uses cash to pay for their purchases they’re given a discount at the point of sale. 

Going back to the $10 product example, with a cash discount program that item would cost $10.30 because you’ve baked in credit card fees (3%) into the pricing. Now, if the customer pays using cash, they’re given a 3% discount, so they only end up paying $10.

In both cases, the merchant is able to offset credit card fees, thus lowering (or even eliminating) overall processing fees and costs.  

6. Lower Your Fraud Risk

A good way to lower your rates is to reduce your risk for fraud. As Jacob Lunduski, the lead credit industry analyst at Credit Card Insider notes, “Generally the higher fraud risk a merchant poses, the higher their credit card processing fees will be.”

According to him, you can lower your fraud risk by swiping credit cards to accept payments versus keying in the card information. Processors charge lower transaction fees for the former because it comes with less risk compared to manually entering the credit card details.

Lunduski also recommends entering the billing ZIP code and security code as you accept payments, whenever possible, and to use address verification services to verify the cardholder’s billing address with the card issuer.

Taking these steps, he says, can help fight fraud and keep your monthly fees low in the process.

7. See If You Qualify for Level 2 or Level 3 Data Processing

If you’re a B2B or B2G type of business, you may be able to save up to 1% in interchange fees through level 2 and level 3 data processing. These processing levels require you to collect and provide more transaction information to credit card networks. You also need to conduct self-assessments and comply with requirements from credit card companies. 

There are quite a lot of hoops to jump through, but if you process a large volume of B2B and B2G transactions, the effort may be worth it. You can also make things easier by using a solution like PayTrace which auto-fills the data fields required to qualify for level 2 and 3 processing rates. (Pro tip: We integrate with PayTrace, so if you’re a B2B merchant, talk to us about qualifying for these data levels.)

8. Consider Other Fees That Come with Credit Card Processing Services

Getting the cheapest credit card processing rates isn’t just about lowering your transaction fees. Often a credit card processing company will charge additional or hidden fees, effectively raising your overall costs. 

It’s best to be aware of these costs, so you can either work with your provider to get rid of them or find another processing company that doesn’t charge those fees. 

Some examples of these added costs include:

• Batch fees
• Statement fees
• Setup fees
• PCI compliance or PCI non-compliance fees
• Cancellation fees or early termination fees

When trying to determine if a merchant account services provider is going to charge additional fees, there are a few techniques you can utilize:

• Ask if the provider uses qualified and non-qualified rates. These terms can be used instead of saying they have a tiered structure for pricing. The provider might also use verbiage like, “rates start at” to indicate a tiered structure instead of a monthly membership fee or subscription fees.
• Ask if the credit card processor charges mark-up on the interchange. Many companies will try to withhold that information to make their transaction fees appear more attractive.
• Find out if the processor provides some refund on their fees if you have to refund a purchase. Ultimately, no processor actually receives all interchange fees back when you process a refund, but they are given some and you should find out how much of that is passed to you.

9. Avoid Negotiating with Your Existing Provider

While you may be tempted to re-negotiate your rates with your current provider, Cunningham says that this isn’t such a good idea.

“In most cases, the best advice for negotiating with an existing provider is don’t negotiate with an existing provider. A processor that’s overcharging you now will overcharge you in the future. Why give them another chance to keep the high rates going?” she says.

“This is particularly true if your payment processor uses tiered pricing, the kind with non-qualified rates. If so, switch and switch soon.”

Cunningham adds that some payment processors might make you think that they’ve lowered your rates, when in fact they’re only manipulating their pricing model.

“Payment processors are happy to lower your rates… temporarily. Then they slowly raise pricing over time. Or, if you’re on a tiered structure of pricing, they’ll just start considering more of your transactions non-qualified and charge the higher non-qualified rate. Your rates went down, but your actual processing costs didn’t.”

That’s why instead of renegotiating with your current payments providers, she recommends finding “a payment processor that offers a lifetime rate lock so you can avoid rate creep over time and skip the hassles of monitoring rates.”

Cheapest Credit Card Processing Companies

Now that we’ve discussed some tips to help you lower your costs, let’s look at a few credit card payment processors that offer favorable rates.

Payment Depot

Yes, we’re a little biased, but the fact is, Payment Depot’s membership model and transparent pricing afford merchants some of the lowest rates in the market. Rather than taking a cut out of your sales, we simply charge a flat membership fee and gives you access to interchange costs—without the markup. Think of it as paying wholesale rates instead of retail pricing. 

Payment Depot’s monthly subscription fee starts at $79 a month and goes up to monthly fees of $199, this monthly fee is depending on your transaction volume. 

Payment Depot is ideal for medium and high-volume merchant accounts that process $10,000 or more in card transactions. 

Square

Square uses a flat-rate pricing model with no monthly fees. The company’s fees are as follows: 

• 2.6% + 10¢ for contactless payments, swiped or inserted chip cards, and swiped magstripe cards. 
• 3.5% + 15¢ for keyed-in transactions
• 2.9% + 30¢ or 3.5% + 15¢ for invoicing

Square is best for lower-volume merchants that process less than $10,000 per month. 

Stripe

A leading provider of payment gateways, Stripe’s pricing are as follows:

• 2.9% + 30¢ for online transactions
• 2.7% + 5¢ for card-present transactions

Stripe is best for eCommerce businesses and those that process online payments, though it’s not the cheapest option for those that transact in person. 

As you can see from the statement, this merchant saved $1,284 in the first month with Payment Depot. We really do provide the cheapest credit card processing for eCommerce because we cut out the transaction fees and markup.

On the right side of the comparison, you see that Payment Depot’s markup was $0, we lowered the transaction fees by over $300, had a lower chargeback cost, and had zero processing fees. All of this resulted in a $1,200 savings!

Want to see how your current processor compares to Payment Depot? Send us a statement and we will show you how we are the cheapest credit card processing for eCommerce.

Don’t Wait to Lower Your Rates

If you’re overpaying in credit card fees, it’s best to take action immediately. Every penny you’re unnecessarily paying means lower profits you can reinvest in your business. Being stuck in a lousy credit card processing contract can have dire results for your company both in the short and long term.

Our advice? Run the numbers. Know your payment metrics and then educate yourself on how the industry works. Once you know which pricing model works best for you, start having conversations with different vendors and ask the right questions to find the best credit card processing vendor for you.

And if you need help figuring out if a quote really is a better choice, get in touch with the our team. We can analyze your statement or proposal for free, and determine if you can save even more.

Think of Payment Depot as the good guys and gals of credit card processing. We don’t overcharge you to process card payments, and we actively help you to find ways to lower your costs so that you can accept credit card payments with ease. And if we determine that our services aren’t the best fit? We’ll happily point you in the right direction.

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FAQs about Credit Card Processing Rate

Q: What factors influence credit card processing rates?

Credit card processing rates are influenced by various factors, including the type of card used (Visa, Mastercard, American Express, Discover, etc.), your processing volume, the value of your transactions, the type of business you have, whether the card is swiped or keyed in, your credit card processor or merchant account provider, your payment processing hardware, and the payment methods you support.

Q: How do the transaction volumes and values affect processing rates?

Typically, the more you accept credit card payments and process transactions, the lower the per-transaction rate is. If your payment processor takes a percentage out of your sales, you will pay higher fees for larger transactions.

Q: What can I do to get the cheapest credit card processing rates for my business?

To get the cheapest credit card processing rates, you can educate yourself on common terms used by payment providers, understand your business’s key metrics (e.g., credit card volume, average transaction size, types of cards used), shop for payment processors based on their markups rather than rates, use the credit card processing pricing structure that suits your business, consider implementing a zero-fee credit card processing program, and reduce the risk of fraud.

Q: What are zero-fee credit card processing programs?

Zero-fee credit card processing programs pass on the credit card transaction fees to the customer. This can be done through surcharging, where you add a surcharge to credit card transactions, or cash discounts, where those paying with cash are given a discount at the point of sale.

Q: How can I reduce my risk for fraud to lower my processing fees?

You can reduce your risk for fraud by swiping cards to accept payments versus keying in the card information, entering the billing ZIP code and security code whenever possible, and using address verification services to verify the cardholder’s billing address with the card issuer.

Q: What are some examples of additional or hidden fees in credit card processing?

Additional or hidden fees can include batch fees, statement fees, setup fees, PCI compliance or non-compliance fees, and cancellation or early termination fees.

Q: What are some recommended credit card payment processors that offer favorable rates?

Some of the recommended credit card payment processors include Payment Depot, Square, and Stripe. Each offers different rates and pricing models suitable for businesses with different volumes and processing needs.

Q: What is Payment Depot?

Payment Depot is a credit card payment processor that offers a membership model and transparent pricing. Instead of taking a cut out of your sales, it charges a flat membership fee and gives you access to interchange costs without the markup. You could consider Payment Depot as paying wholesale rates instead of retail pricing.

Q: Should businesses renegotiate rates with their existing provider?

Typically, renegotiating with your existing provider is not recommended. The rates may seem lowered temporarily, but the actual processing costs might not decrease. Instead, it’s recommended to switch to a processor that offers a lifetime rate lock to avoid rate creep over time and skips the hassles of monitoring rates.

Q: What are the different pricing structure styles used by credit card processors?

Different pricing structure styles used by credit card processors include Interchange-plus, where the processor adds a markup on top of the interchange. The Tiered pricing structure, where the processor bundles the interchange and assessment fees with their markup, Blended or flat rate pricing, where the processor charges a single rate or flat fee for all your transactions; and the Membership model, where providers charge an annual membership or subscription fee for access to wholesale credit card processing fees.

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