Insights

Lowering Credit Card Processing Fees with Optimized Payments

As a finance leader, you already have a lot on your plate. Understandably, lowering credit card processing fees may not be at the top of your to-do list. But there are several good reasons why it should be. All those little charges can mount up quickly, so learning how to reduce credit card processing fees can significantly impact your bottom line. According to a report by the National Federation of Independent Business (NFIB), credit card fees are among the top three operating expenses for businesses, after rent and payroll expenses. Additionally, a study conducted by the National Restaurant Association found that credit card processing fees are the second-highest cost of doing business for restaurants, after labor costs.

Cutting back on business expenses will always be a critical factor in profitability, and many credit card fees are not as inevitable as you may think. Optimized Payments provides expert advice and advanced analytics to leverage payment data for critical insights that lead to significant savings and maximized profitability.

Delayed settlement increased cost by 4%
Delayed settlement increased cost by 4%
Delayed settlement increased cost by 4%
Delayed settlement increased cost by 4%
Delayed settlement increased cost by 4%

How Do Credit Card Processing Fees Work?

Let’s start at the very beginning, as you can’t lower credit card processing fees effectively without a solid understanding of how they work.
Credit card processing fees, or swipe fees, are applied whenever a customer makes a payment using a credit or debit card. It’s virtually impossible to eliminate credit card processing fees altogether because each entity involved in the transaction needs to be paid for their service. That includes:

The card issuer

The card network

Credit card processors

Payment gateways

Payment facilitators (Payfacs)

Your bank

It’s important to understand that credit card processing fees and chargeback fees are two separate costs. Chargebacks can occur when a customer or an issuing bank disputes a transaction. However, credit card processing fees refer to the cost of accepting credit card payments, which consists of interchange, assessments, and acquiring fees. Optimized Payments’ services can help businesses lower credit card processing fees and chargebacks by providing analytics to help manage chargebacks and improve payment processing efficiency

Interchange Fees

Interchange fees are transaction fees that you pay to the card-issuing bank whenever a customer makes a purchase using a credit/debit card. Several variables are involved in calculating an interchange fee, including card type, transaction type, business type, and elements sent in the authorization and settlement messages. Interchange rates include a flat per item rate plus a percentage of the sales total. The average interchange fee equates to around 2% of the purchase amount, representing about 80% of the total cost of a transaction.

Assessment Fees

Assessment fees or network fees are charged by the card networks (e.g. Visa, MasterCard, Discover, American Express) to cover their costs of operating and maintaining their payment networks. These fees are typically charged to the acquiring bank or payment processor, which in turn usually passes them on to the merchant as part of their overall credit card processing fees. Assessment fees are charged for each transaction event like an authorization and settlement, and includes a fixed per item rate and percentage of the sales total.

These fees have grown both in the number of fees charged as well as the overall impact on the cost of payments, and sometimes are referred to as nuisance fees. Networks maintain all links to issuing banks and average about 16% of the total cost of a transaction. Here’s an exhaustive list of all network fees.

Acquiring Fees

A merchant acquirer or payment processor is a financial institution that acts as a critical link between you and the card payment networks. For large merchants, merchant acquirers or acquirers, typically pass interchange and network fees at cost and charge authorization and settlement fees for their services. Acquirers provide customer service, reporting, and other value-added services and support for gateways, hardware, tokenization, fraud mitigation, and alternative payment methods. Acquiring fees typically average 4% or less of the total cost of payments.

How to Offset Credit Card Processing Fees

There’s no one-size-fits-all rulebook on how to avoid credit card transaction fees, and wrapping your head around the various tactics you can utilize to recoup costs can feel complex and overwhelming. But Optimized Payments can help. Our expert team is on hand to assist you with savings solutions based on the following key objectives.
Interchange Optimization
With over 1,000 unique interchange categories in play on any given transaction, it can feel impossible to know whether you’re receiving the most favorable rates, let alone work on reducing them. While not all variables can be influenced, others can. Our software uncovers cost-saving opportunities that can lower credit card processing fees and improve your bottom line.
Processor and Card Network Negotiations
Independent negotiation is challenging because data surrounding acquiring fees, gateway fees, and network incentive agreements isn’t publicly available. Our software gathers market intelligence on all these variables and leverages the insights to help you get reduced rates and upfront incentives.
Interchange and Processor Fee Audits
Many companies never consider lowering credit card processing fees. They simply accept the charges as an inevitability. But that’s not the case. For example, miskeyed pricing could be taking a significant toll on your bottom line. Our proprietary software sifts through millions of records to find gaps and uncover how to recoup credit card processing fees through retroactive refunds and credits.
Payment Strategy
Whether you’re looking to create a payment strategy from scratch or reach a specific payment goal, our experienced consultants can help. From resolving existing problems to implementing new solutions, we can accelerate your timeline, help you save money, and enhance your customer experiences in one streamlined process.
RFP Management
Actioning your RFP with Optimized Payments takes just two to four months. Our experts can help you avoid all the common pitfalls and assist with complex processes like payment terminal acquisition, gateway and security solutions, omni-channel tokenization, and vendor consolidation.
Debt Routing Strategies
Our sophisticated analytics systems evaluate different transaction routing scenarios to recommend optimal solutions that deliver the most significant cost savings through card network incentives that result in lower credit card fees.

Our Services

The process of lowering credit card processing fees becomes much easier with analytics, consulting, and strategy from Optimized Payments.
Analytics
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Analytics

Our cloud-based, automated solutions help you consolidate all your card payment vendor data in one place and evaluate your transactions to reveal vital metrics and cost-saving opportunities.

Consulting
Happy Optimized Payments Client
Consulting

With over 18 years of experience in the electronic payments industry, we provide valuable and actionable insights via web-based dashboards, automated email alerts, consulting recommendations, and ongoing support.

Strategy
Strategizing with Optimized Payments Team
Strategy
We’ll help you tailor your payment strategy and select the right partners to generate ongoing cost savings using various tactics, including chargeback management and alternative payment methods.
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Why Optimized Payments

Why Optimized Payments?

There are several great reasons to choose Optimized Payments to help you eliminate and reduce credit card processing fees.

Independence

Independence – We possess in-depth knowledge of the payments industry and its key players, allowing us to navigate the landscape effectively. However, our commitment to maintaining independence ensures that we approach each client’s needs objectively, providing unbiased recommendations and solutions.

ROI

We offer both fixed-fee and gain-share engagements, and the cost of our consulting usually pays for itself within a few months.

Experience

We’ve helped over 700 merchants (many in the Fortune 500), generating over $500M in savings to date.

Customer satisfaction

We have an NPS score of 96, among the best in the world across all industries.

Get Started with Optimized Payments

Unlock the full potential of your business with first-class payment analytics and consulting services from Optimized Payments. Our experts can provide tailored solutions to optimize efficiency and profitability. Don’t wait any longer. Reach out today to get started!