Getting a notification that your credit card processor raised the rate can be frustrating – especially if the increase is significant. You depend on processing customers’ credit cards to run your business, but excessively high fees cut into your profits.
The good news is there are steps you can take if your credit card processor raises your rates. Before panicking, start by reviewing your contract carefully to see if the increase is allowed. Then consider shopping around – getting competing quotes from other processors is a great way to put pressure on your current provider.
If another offer comes close, present it to your current provider and ask them to match or beat the rate to keep your business.
Switching credit card processors can be a hassle but may be worth it if the savings are substantial. Either way, don’t just accept the higher rate – there are always options.
You have the power as a customer to negotiate a better deal or take your business elsewhere. This article will cover the different strategies available to make sure you’re getting the best rate possible and paying only what’s fair for the credit card processing services you require.
The first thing you should do when your credit card processor notifies you of a rate increase is review your contract thoroughly. Your agreement will detail the specific terms and conditions around rate changes, so it’s important to understand exactly what those provisions say.
Look for any sections that discuss adjustments to processing rates. Do they reserve the right to change rates at any time for any reason? Or are rate increases only allowed under certain circumstances, like an increase in interchange fees from the card brands?
Some contracts will specify things like minimum notification periods for rate increases, so verify they notified you within that timeline.
Check for any long-term rate guarantees. Some processors offer a locked-in rate for an initial term, like 12 or 24 months, after which rates are subject to change. If you have a rate guarantee in place, verify exactly when it expires before accepting the new rate.
Also, look for any mandatory contract terms or early termination fees. If you have a multi-year agreement in place, you may be obligated to continue service for a minimum period of time. Knowing about any fees for breaking the contract early will impact your options.
Once you’ve reviewed your contract and determined you have the option to consider other providers, it’s time to start comparing rates from competing credit card processors. Getting quotes from multiple processors is one of the most effective ways to determine if your current rate is competitive and negotiate a better deal.
There are many factors to evaluate besides just the processing rates themselves. Look at the monthly or statement fees, customer service and support options, integration capabilities, and any value-added features the processor offers. For some businesses, the extras like reporting tools, data security, and risk management can be as important as the actual rates charged.
When getting quotes, be sure to provide as many specifics as possible about your business. Things like your average transaction size, monthly volume, and peak periods will help processors give you an accurate proposed rate. You may need to provide your current processor’s rates as a starting point for comparison.
In many cases, just having competing offers in hand will be enough to get your current processor to reduce their rate in order to keep your business.
Don’t be afraid to negotiate, explaining that you have received better offers but want to stay if they can match or beat those rates. Your processor will likely be willing to at least reduce your rate somewhat rather than lose a customer.
If after comparing rates and negotiating you determine that switching processors would result in meaningful savings, then making the transition may be worth it. Most processors will handle account setup and funding, credit card and P.O.S. terminal replacement, and transitioning your current accounts over to their platform.
But this process typically takes 4-6 weeks, so plan for some downtime and disruption to your business during the switch.
Even if you’ve received better offers from competing processors, it’s worth asking your current credit card provider to reduce their rate before deciding to switch. Your existing processor has the incentive to keep your business, so negotiating with them should always be the first step.
Start the conversation by expressing your needs. Explain that the rate increase will negatively impact your business and put you at a disadvantage. Let them know you’re considering other offers but would prefer to stay if they can meet your pricing requirements.
Present the actual rates from the competing quotes you received. Your current processor may be willing to match those exact rates in order to retain your business. At the very least, they may negotiate some reduction from their proposed new rate.
Don’t settle for a verbal agreement. If your provider agrees to reduce your rate, insist that the change be put in writing through an amendment to your existing contract. Verbal rate reductions have a way of “disappearing” over time, so get the new rate terms in an updated agreement that you both sign.
Consider offering a longer contract term in exchange for a lower rate. Processors often give discounted rates for 3 to 5-year agreements, so locking in a rate for an extended period may work to your benefit. Of course, only commit to a longer contract if you’re confident your business needs won’t change significantly.
Ultimately, even if your current processor refuses to reduce their rate at all, you’ve now determined with certainty that switching may be your best option. At least you tried to negotiate first before making the decision to go through the hassle of changing providers.
Switching credit card processors can be a hassle, so you don’t want to do it lightly. But if the savings are substantial enough, it may be worth jumping through the hoops needed to make a switch.
Start by crunching the numbers. How much will the new processor’s lower rates actually save you each month? Then figure in any setup fees or transfer costs they charge. If the total savings over a year or two outweigh those initial expenses by a wide enough margin, a switch may pay for itself relatively quickly.
Also, consider the disruption to your business during the transition. For up to 6 weeks, you may have trouble accepting card payments. Talk to customers in advance to manage expectations and prepare alternative payment methods if needed. And have a plan for how your employees can operate during this period.
Look closely at the new processor’s customer service and features. Will they offer the support you need going forward? Do their tools and capabilities match what you require? The hassle of switching won’t be worth it if the new processor can’t actually meet your long-term needs.
If negotiating a lower rate with your credit card processor is unsuccessful, another option is to look for ways to reduce the amount of processing fees you pay overall. Here are some strategies to consider:
Promote non-card payment options. Offering alternatives like checks, ACH payments, and cash can reduce the number of credit card swipes your process. Even having customers pay via an eCheck option on your website lowers the interchange fees you’ll incur.
Negotiate discounts. Ask your processor if they offer any volume-based discounts or tiered rates for higher transaction volumes. Even a 1% discount off your current rates can make a big difference for your business over time.
Modify card-on-file usage. If you store customers’ credit cards for easy reorders, pause recurring charges for a period of time to save on fees. Then reconnect those saved cards when needed.
Optimize your Merchant Category Code (MCC). Processors assign an MCC that determines your credit card rates. Getting an MCC that accurately reflects your business can help secure slightly lower rates.
Limit certain card types. Premium cards like American Express and debit cards typically have higher interchange fees. Consider passing those costs onto customers who use those cards or limiting their acceptance.
Implement a credit card surcharge. Many states now allow merchants to pass a small surcharge fee (often 2-3%) onto customers who pay with a credit card. This protects your margins without raising base prices.
Getting hit with a credit card processing rate increase can be frustrating. But don’t let your provider take advantage of you. There are steps you can, and should, take to avoid overpaying.
Start by reviewing your contract thoroughly. Then shop around and bring competing offers to your current provider. Most will work with you to keep your business by matching lower rates.
If negotiating fails, switching providers may be the best option. But don’t stop there – also identify ways within your business to reduce processing fees overall. Every penny saved counts.
The key is to be proactive. Assert yourself by requesting justifications, getting the full facts, and having honest conversations with your provider. If higher rates really are unavoidable, at least you tried your best. But most importantly, don’t simply accept the increase without a fight. You have leverage – use it to your advantage and get the fair rate you deserve.