How to reduce credit card processing fees

How to reduce credit card processing fees

Reducing bank charges for credit card processing is a strategic challenge for companies. This is particularly true in the e-commerce sector, where these costs can significantly affect profit margins.

Whether you run an online store or a physical store, these fees are generally between 1.5% and 3.5% of transaction value. They are charged to cover the services of card issuers and payment providers.

Although often overlooked, they can add up and have a noticeable impact on your profits. Fortunately, there are solutions for optimizing these expenses by :

  • Understanding their origin
  • Adopting appropriate reduction strategies
  • Diversifying the payment methods offered to your customers.

This practical guide will help you analyze, compare and act to minimize these costs.

The different types of credit card processing fees

Credit card processing fees cover the different types of costs associated with card transactions. These fees cover the various steps and parties involved in processing a payment, from the issuing bank to the payment platform. Here’s an overview of the main types of associated fees:

Interchange fees

Interchange fees are one of the main components of processing fees. They cover the costs and risks involved in managing the transaction.

These fees are paid by the acquiring bank (the merchant’s bank) to the issuing bank (the cardholder’s bank).

Card networks, such as Visa and Mastercard, determine the amount of these fees according to criteria such as the type of card used and how the transaction is processed. They are generally higher for premium cards or online transactions.

Evaluation fees

Evaluation fees are amounts that the acquiring bank pays directly to the card network (e.g. Visa, Mastercard, or others).

Although they are generally lower than interchange fees, they represent an essential part of overall payment processing costs.

These fees enable the card network to finance its operations and guarantee the security of transactions.

Payment platform fees

Payment platforms, which act as intermediaries in online transactions, also charge specific fees for their services. These fees cover :

  • securing sensitive card data
  • Validating transactions and transferring funds between the various parties involved.

👉 Platform providers such as Stripe, PayPal or Square often charge a percentage of each transaction, to which a fixed fee may be added.

Payment dispute fees

Payment dispute fees, also known as  » chargeback fees « , are incurred when a customer disputes a transaction.

This fee covers the administrative costs involved in investigating, processing and eventually refunding the transaction.

Payment disputes can arise from a variety of causes, such as fraud, billing errors or product or service disputes. A high rate of disputes may result in additional costs or restrictions for the company.

These costs, although sometimes insignificant at first glance, quickly add up. Let’s take a concrete example: an e-merchant making 1,000 transactions a month, with an average shopping basket of €50. A 0.5% difference in applied fees could represent hundreds of euros in monthly savings.

Factors influencing credit card processing fees

Credit card processing fees are determined by a multitude of factors, which vary according to the specifics of your business and your choice of payment solutions.

payment method

Understanding these factors is essential to optimizing your costs and choosing the options best suited to your needs.

Here are the main factors to consider

Type of card used

The type of credit card involved in a transaction plays a significant role in processing fees.

Standard cards, such as traditional debit or credit cards, have lower interchange fees.

However, premium cards, such as those offering rewards programs or exclusive privileges, incur higher fees. This is due to the advantages they offer users, which are partly passed on to merchants.

Company type and sector of activity

The sector in which a company operates is also a determining factor.

Sectors deemed to be high-risk, such as tourism, financial services or entertainment, are often subject to higher fees.

These fees reflect the increased risk of fraud or payment disputes associated with these industries.

Conversely, companies operating in sectors considered safe generally benefit from lower fees.

Transaction size and volume

The volume and value of transactions processed by a company directly influence processing fees.

Companies with a high volume of transactions often have greater bargaining power and can obtain lower rates.

Similarly, low-value transactions may incur relatively high fixed fees in relation to the transaction amount, while higher-value transactions are often subject to percentage fees.

Transaction processing method

The method used to process payments has an impact on fees. Transactions carried out in person, such as swipe or chip transactions, are generally considered less risky and therefore less costly.

On the other hand, transactions entered manually or processed online present an increased risk of fraud, and are often associated with higher fees.

Company processing history

Another criterion often taken into account is the company’s credit card processing history.

Merchants with a low rate of disputed payments (chargebacks) and good compliance with payment card industry security standards (PCI DSS) may benefit from more advantageous fees.

Conversely, a history of irregularities or high risk can increase costs.

Geographical location

A company’s geographical location also influences processing costs. The associated costs can vary considerably from country to country, depending on:

✅Local regulations
✅Financial infrastructures
✅Agreements in place between payment providers
✅Card networks.

Trading models and pricing

Finally, fees also depend on the pricing models chosen and the negotiations carried out with providers.

Some models, such as flat rates, offer a simple structure, while tiered rates or « interchange plus » models allow customization according to transaction profile. The company’s ability to negotiate these rates can significantly influence overall costs.

How to identify the most competitive providers

Choosing the right payment service provider is a crucial step in optimizing your costs and guaranteeing a smooth payment experience for your customers.

Solutions such as Stripe, PayPal or Payment.net are often cited for their efficiency and simplicity.

However, their rates and functionalities vary according to a number of criteria, including transaction volumes, geographical zones and the types of cards used.

Here are the essential steps for comparing providers and identifying those that best meet your needs:

Analyze each provider’s pricing structure

Each provider offers a different pricing structure, generally comprising a fixed fee per transaction and a percentage of the amount processed.

In your analysis, consider :

  • Fixed and variable fees per transaction.
  • Additional fees for premium cards or international transactions.
  • Differences in costs depending on the volume of transactions you process.

👉 A detailed comparison will enable you to identify solutions offering a good balance between cost and service.

Identify options with no hidden charges

Some providers offer attractive rates but include hidden charges, such as :

✔️Costs for fund withdrawals
✔️Monthly fees for access to certain features
✔️Penalties for not meeting quotas.

To avoid unpleasant surprises, choose service providers who offer full transparency on their pricing.

Evaluate integrations with your existing tools

A competitive provider is not just about low rates. It must also integrate easily with your existing tools, such as your e-commerce site, CRM or ERP system. Make sure that :

📌APIs or modules provided by the service provider are compatible with your systems.
📌Integration processes are simple and well documented.
📌The functionalities offered (subscription management, recurring payments, etc.) meet your company’s specific needs.

Negotiate rates adapted to your volumes

If your company handles a high volume of transactions, you have considerable leverage when it comes to negotiating with service providers.

In many cases, they offer sliding-scale rates based on the quantity or value of transactions. Proactive negotiation can enable you to benefit from more advantageous conditions, reducing your costs over the long term.

Use the address verification service (AVS)

The AVS service verifies the address provided by a customer with that registered with the credit card issuer.

This process significantly reduces the risk of accepting fraudulent transactions. Lower risk can translate into lower fees, as processors often charge lower rates for transactions they consider less risky.

What’s more, implementing AVS also helps reduce payment disputes (or chargebacks), which are costly both financially and administratively.

Encourage debit card transactions

Debit cards generally generate lower processing fees than credit cards. You can encourage your customers to use their debit cards in several ways:

  • Promotional signage: Place posters or visible reminders in your points of sale to encourage customers to give preference to debit cards.
  • Financial incentives: Offer small discounts or benefits for debit card transactions.

👉 This strategy not only reduces your processing costs, but also speeds up the transaction process, providing a smoother experience for your customers.

Optimize credit card processing fees

Reducing credit card processing fees is essential to preserving business margins, especially in e-commerce. By understanding the source of costs, negotiating with service providers and diversifying payment methods, it is possible to minimize these expenses.

Platforms such as Payment.net offer versatile payment solutions, supporting a variety of transaction modes. Their rates are adjusted according to the volume processed and the specific services used, enabling costs to be kept under control.

Simple actions, such as encouraging debit card payments or using address verification tools, can limit risks and lower costs. The right strategy ensures greater profitability while improving the customer experience.