by Matt Rej
Saving money on credit card processing doesn’t happen automatically. And lots of merchants make mistakes that actively work against them. Some are tied to oversight during the transaction, while others involve big-picture optimization mistakes.
Fortunately, every single one of these is easy to fix. They don’t require a ton of time or effort on your end, and none involve switching payment processors. But the savings can be significant.
Fix these processing mistakes, and you can start saving thousands every single month.
1. Not Knowing What Your Effective Rate Actually Is
This is one of the biggest misconceptions in the world of credit card processing.
When a merchant gets asked how much they pay to accept card payments, they often default to the cost per transaction as their answer. Businesses using a flat-rate processor may say 3% + $0.10 per transaction, while merchants on an IC+ contract may say 30 bps per transaction.
But those answers don’t account for other processing-related costs.
Your effective rate (total processing fees divided by total card volume) tells the full story. It’s the most reliable way to track fee changes and increases over time, and it’s one of the fastest ways to determine if your processor is hiding markups in other places on your statement.
So many businesses assume they’re getting a good deal on credit card processing because their transactional rate seems fair. But once you factor in other fees, your processor’s markup could easily be double or triple what you think it is.
2. Never Re-Negotiating Your Processor Markup
When was the last time you negotiated rates with your credit card processor?
For most businesses, it was during the initial contract signing. Which means it’s likely been three, five, or even ten years since you’ve gone through this.
And over that stretch, I can guarantee your processor increased your rates, added new fees, and used other clever billing tricks that ensure they get higher profits while you pay more to accept credit cards.
Here’s a secret: you can re-negotiate your credit card processing rates at any time.
Yes, even if you’re “under contract” or “locked in” to a certain rate. You have more leverage than you realize when negotiating with your processor. It’s just a matter of pulling on the right strings to get a lower rate.
3. Assuming Flat-Rate Pricing is Cheaper Just Because It’s Simple
Flat-rate providers have done an incredible job marketing this contract structure as something that’s predictable and easy to understand. Instead of dealing with hundreds of different interchange categories that vary by network, card type, and transaction environment, you pay a “simple” flat fee for every card you process.
Huge mistake.
Is it easier to know that you’re paying 2.99% + $0.30 for every transaction? I guess. But wouldn’t you rather just pay less?
Flat-rate processing is expensive because it ensures that the highest possible interchange categories are still extremely profitable for the processor. Whether a transaction gets routed to a 2.30% interchange category or a 1.45% category, you’re still paying the same flat fee and your processor’s margins are through the roof.
Despite the perceived complexity, interchange-plus pricing is almost always going to be cheaper. The fix here is just asking your provider to change your contract structure to IC+. You typically don’t need to switch anything else.
4. Failing to Submit Level 3 Data on Commercial Transactions
For merchants accepting commercial cards on B2B transactions, you can qualify for significant interchange-level savings by capturing Level 3 card data during the transaction and submitting that data to the networks.
Under Visa’s Commercial Enhanced Data Program (CEDP), you can typically cut your processing fees by ~10% on these transactions.
Those are serious savings. For high-volume B2Bs paying ~$50k in Visa interchange fees on commercial transactions, this adjustment is a quick way to save $5,000 every single month.
But this doesn’t happen automatically. To qualify for Visa CEDP rates, you need to become a “verified” merchant and continue submitting accurate L3 data to keep your verification status.
Non-verified merchants can also save here in the form of CEDP credits, retroactively applied to your account.
5. Leasing Your Terminal Hardware
Credit card machines can be expensive. Even simple setups can run you $500 per device, and small businesses may need a minimum of three to ensure there’s a card reader at every checkout station.
Other businesses can incur significantly higher costs here. Like restaurants that need multiple $1,600 POS systems, plus customer-facing kiosks, kitchen display systems, and mobile readers for tableside payments.
There’s $10k upfront before you blink.
Paying a flat monthly fee for these systems may seem more appealing to avoid that cost, but terminal hardware leases are an expensive mistake.
A single $400 terminal can end up costing you $2,500+ over the course of a 36-month lease. And when the term is up, you don’t have anything to show for it. You don’t own the hardware, and you need to sign another (more expensive) lease.
Don’t fall for the “free upgrades” or “free maintenance” marketing ploys of these leases, either. You won’t need an upgrade so soon after purchasing your equipment, and there’s virtually no maintenance on modern systems.
Buy your hardware outright whenever possible. Leases are an easy way for your processor to pad their margins.
6. Ignoring Downgraded Transactions
Downgraded transactions carry the most expensive rates.
Sometimes these can happen at the interchange level (like Visa’s Non-Qualified Consumer Credit Fee at 3.15% + $0.10) or from your processor (like Elavon’s NQ Volume Fee of 0.55% over interchange).
And the same transaction could be affected by both of these, meaning a downgrade could cost you upwards of 3.70% to process. That’s outrageously high, and likely double what you should be paying if the downgrade was avoided.
If this happens in isolation, once or twice every few months, it’s really not the end of the world.
But if a significant portion of your processing volume is being downgraded, then it’s costing you thousands in overages every single month.
These are usually simple fixes. But if you just ignore them, you’ll never determine the root cause which means you’ll continue overpaying until it’s resolved.
7. Letting Junk Fees Pile Up Unchallenged
Junk fees are essentially charges invented by processors to pad their margins. They aren’t really tied to a specific service or tangible benefit to your account, yet they continue to pop up and increase over time.
They tend to have really legit-sounding names, like “annual regulatory fee” or “settlement funding fee.”
Others even have card networks in the name, and are listed alongside other network-level charges (Amex Sponsorship Fees, MC International Card Handling Fees, etc.).
Most businesses just see these and either assume they’re mandatory or don’t care enough to question them, not realizing how much they’re actually costing you.
Don’t let your processor get away with this. If you’ve never identified a junk fee on your statement and got it removed, I can practically guarantee you have some on there. Every processor does this, and they’re banking on the fact that you’ll let it slide.
8. Letting Your Processor Handle Interchange Optimization “Automatically”
For years, payment processors advertised “automatic interchange optimization” as a ploy to attract merchant accounts. And in some instances, this actually could save you money.
What these providers were really doing is exploiting interchange qualification loopholes.
They would use placeholders like all zeros while claiming to submit L2/L3 card data. It worked for a while, until networks cracked down on this, effectively ending automatic interchange optimization.
Today, if you want to qualify for reduced interchange rates via programs like Visa CEDP, you need to actually submit accurate Level 3 data for all required fields. No placeholders or “tricks” from your processor.
So if your provider is still claiming to do this for you automatically, chances are, you’re not getting reduced rates anymore. Double-check your statements to see if you have CEDP interchange categories or CEDP credits. If you don’t see either, then your processor has dropped the ball.
9. Trying to Switch Processors to Save Money
Once merchants realize they’re overpaying for credit card processing, a common mistake is assuming they need a new provider to cut costs.
That’s actually not the case. Getting a new provider is rarely cheaper, which is why we basically never recommend switching.
The biggest problem with switching is that your new rate will only be marginally less than what you’re paying now. Your new processor isn’t incentivized to offer you rock bottom rates because they know their quote only has to undercut your existing (and inflated) fees.
Second, those rates will be short-lived. Similar to your existing processor, your new provider will ultimately end up raising your rates and adding new fees over time.
Merchants also underestimate the costs associated with switching. Downtime, operational fees, new hardware, employee training, re-configuring integrations, and much more.
It’s significantly cheaper and 10x easier to just negotiate with your current provider. Trust me, the savings are available. You just need to know how to ask for them.
Final Thoughts
Conversatively, I’d say each of these mistakes is costing you 10 basis points.
Let’s say just four of the nine apply to your business. That’s 40 bps in savings right there. No switching, and minimal effort.
For other businesses, these mistakes could easily be costing you 20-30 bps each. And you might be doing 7 or 8 of them. Do the math. You could be overpaying by more than a full percentage point on every single transaction and not even realize it.
Contact our team here at MCC if you need help fixing or avoiding these mistakes. We’ll audit your statements for free to identify savings opportunities, then get them resolved so you can see the savings hit your account ASAP.
We find savings on 96% of statements that we audit. So there’s a good chance we’ll find something for your business.