by Matt Rej
Negotiating the best rate with your payment processor doesn’t end after your initial contract is signed. It’s something you should be doing on a regular basis to keep your merchant fees low.
But simply picking up the phone or sending an email asking for a better rate doesn’t always work. Not without leverage.
Here are some of the best levers to pull during those ongoing negotiations with your processor:
1. Volume
This is a big one if your business has grown since you originally signed your contract.
Your original rates may have been based on $1M in annual volume. But if you’re doing $5M+ or $10M+ now, your rates should reflect that.
Processors won’t want to lose your account at this level, and they’re more willing to make concessions as you scale.
2. Lack of Integration Support
Most businesses today use software that’s critical to their primary operations. The exact tools depend on your industry, but examples include practice management software, CRMs, field service management systems, accounting and billing software, etc.
It’s become standard for these solutions to offer integrated credit card processing, but only with a select handful of processors.
So if you’re using one of these tools for your business and your current processor isn’t supported, it gives you a ton of leverage.
You can make an empty threat to your processor, saying you’re going to switch to an integrated setup unless they lower your rates.
3. Unreasonable Rate Increases
Rate increases in the credit card processing industry are inevitable. Every processor does this, and the rates you originally agreed to aren’t going to last forever.
But if your processor is raising rates every year or potentially multiple times per year, that’s unreasonable.
Beyond the frequency of the increases, the amount of each increase should also be monitored. While a few basis points is reasonable, having your rates double, triple, or quadruple is not.
Push back against increases hard, and don’t be so willing to concede. Each time your rate goes up, it sets the baseline higher for additional increases around the corner.
4. Competitor Quotes
To be clear, we don’t suggest switching processors.
Despite the perceived short-term savings, it’s a hassle, rarely in your best interest, and it almost always ends up being more expensive in the long run.
That said, other payment processors will always undercut your current rates in a quote in an attempt to get your account.
So shop around, even if you have no intention of switching. Then show those quotes to your current processor and ask them to match or beat what you’re being offered elsewhere. Nine times out of ten, they’ll do it.
5. Contract Expiration Renewal Window
Threatening to switch providers (even if you have no intention) doesn’t always work if you’re under a contract that has strict termination clauses.
For example, if you’re only halfway through a three-year contract with a liquidated damages clause, you could be on the hook for six figures or more by breaking the agreement. You don’t have a ton of leverage here.
But that leverage definitely shifts back in your favor during the renewal window of the contract expiration. This is the best time for you to lock in lower rates and eliminate those excessive penalties from the new agreement.
If your processor knows you can walk away penalty-free, they’re more open to negotiations.
Just make sure you double-check the fine print of your contract to truly understand the negotiation windows. Some agreements contain auto-renewal policies that renew the exact same terms and length unless you make changes during a 30 or 60-day window before the expiration date.
6. Junk Fees Identified
When was the last time you sat down and audited your monthly credit card statement?
I’m not talking about a 30-second glance through the pages. I mean actually reviewing each line item, comparing them against previous statements, and investigating the names of fees that you don’t understand.
Most businesses never do this. And that’s why processors get away with adding junk fees to their accounts every single month.
These are fees that have been invented by processors as pure profit centers. They aren’t tied to any tangible service or benefit other than your processor’s bottom line.
If you can identify these fees and call the processors out on their BS during your negotiations, it puts you in the power seat at the negotiation table.
7. Billing “Errors”
Statement audits often reveal billing mistakes, too.
One thing I find fascinating is that in the thousands of statements I’ve audited over the years, I’ve never once found a billing mistake that favored the merchant. These errors ALWAYS result in overpayments.
You really need to know what you’re looking for to find them.
For example, sometimes they appear as padded assessments. Instead of the processor passing through network fees at cost (which they’re supposed to), they inflate the rate and pocket the difference. But the only way to catch this is by knowing the true assessment rate for that particular line item, and then comparing your rates against those published fees.
I’ve also found billing errors where everything looked correct except for the final amount of a line item that was charged. Transaction count, volume, and rate all look good until you do the match and see that you were overcharged.
8. Additional Services
Every processor will try to upsell you on additional services beyond basic processing. Some of these are legit, while others are mostly made up just to charge you more money.
The key here is identifying the ones that actually provide tangible benefits to your business. If you’re willing to add those on (at a cost, of course), your processor may be willing to drop your base rates.
For example, I know for a fact that PayPal and Braintree both make serious concessions the more services you add on. We see these quoted all of the time.
This tactic works really well, but only if you actually need other services that your processor offers. Don’t just sign up for stuff you don’t need or sign up for phantom services that don’t actually add value. That defeats the whole purpose of trying to save money.
9. Risk Level
Low-risk merchants have much more leverage than high-risk counterparts.
If you have a low chargeback ratio, operate in an industry that’s less exposed to fraud, and accept the majority of your transactions in person, then you definitely have a case for lower rates.
Your processor is never going to initiate a conversation with you to lower rates because of these factors. But if you start the dialogue and make a compelling case for yourself, they can be willing to adjust rates in your favor.
10. Multi-Location or Multi-Channel Consolidation
Some businesses use multiple processors, either for different locations or sales channels.
For example, your business might have started as a brick-and-mortar operation before expanding into ecommerce. And when you expanded, you got another processor for your online sales.
We’ve seen this with hotels and casinos, too. The front desk uses one system, online bookings use another, and on-site restaurants use something else.
Picking one processor and routing all of your volume there can give you a ton of leverage, and it’s a win-win for both you and the processor. They’ll gladly cut your rates if it means more volume sent their way, as it results in more money for their bottom line.
11. Tenure With Processor
How long you’ve been with your processor means something. I’m not saying you can’t negotiate after six months or a year (you should), but businesses who have been using the same provider for 5-10+ years should definitely pull that card during negotiations.
“Look, we’ve been using you for a decade and our rates have only gone up over that time. What can you do for me?”
Explain how loyal you’ve been. You stuck with them through outages or system failures. You didn’t switch even though you get calls from competitors every month. Use the human element to your advantage here, especially if you’ve had the same rep or point of contact for a while.
Final Thoughts
I recommend trying as many of these negotiation levers as possible to get lower rates. Just be forewarned that your processor does this every day, so don’t expect them to roll over so easily.
If you’re stonewalled or they won’t budge, it may be time to bring in some help.
Here at MCC, we negotiate with credit card processors on behalf of merchants. We know exactly which strings to pull and what to say to ensure you get the best deal. They may tell you that you’re already getting the best rate, but they can’t lie to us because we have proof from other merchant statements that they’re willing to go lower.