Slashing Credit Card Fees: How Businesses Can Save Through Reducing Processing Fees

If you run a business that accepts credit card payments, you know how processing fees can eat into profits. While some fees are unavoidable, there are ways to reduce how much you pay with each swipe. There are many ways to reduce processing fees, but a lot of them involve hurting the customer in turn (raising prices, raising the minimum purchase requirement, customer surcharge) and as a small business, you can’t afford to lose your loyal customer base. Here are some key strategies for savings.

1. Understanding Processing fees and different models :
   ‍There are different types of credit card processing fees which is the amount the seller pays to the credit card companies per transaction, and it’s essential for businesses to understand the different plans available to them. Two main processing fees are blended pricing model and interchange plus pricing model:
   
   ‍Blended Pricing Model: The seller pays the payment processor one flat rate for all card transactions, regardless of the card type. The flat rate is an average of the various interchange fees charged by card networks. The processor bundles these fees into one rate.
   
   Interchange Plus Pricing Model: With interchange plus pricing, the merchant pays a base fee plus the exact interchange fee associated with each transaction and rates vary based on the card type - traditional cards have lower fees, while premium/rewards cards have higher fees which allows them to benefit from the lower interchange fees.

2. Finding the right type of pricing:
   Now that you understand the different types of pricing models, it’s important to choose the one that is the most optimal and fits the best with your business model. Comparatively, Interchange-plus pricing is one of the most cost-saving. With this pricing, you only pay the base interchange fee per transaction plus a flat markup. Compared to tiered models with higher rates for rewards cards, interchange plus pricing is a lot more cost effective in terms of processing fees. 
   Some payment processing solutions like Otterz give its customers this option through processing credit card transactions with an interchange-plus pricing model, passing along the lowest possible fees according to the merchant’s volume.
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3. Offer payment acceptance alternatives with integrated solutions :
   You can also save by processing more debit transactions, which have lower capped rates. Accepting cash, checks, and ACH can help spread costs across payment types too. If you sell online and in-person, take more transactions in the store to avoid higher card-not-present fees. This doesn’t mean raising the minimum purchase requirement, but rather creating cash-based incentives. Accept payments through multiple channels, in-person, online, and remote, with low-cost payment processing solutions. Make sure that the solution you’re using has competitive pricing when card-not-present.
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4. Stabilize cash flow through increasing customer loyalty :
   Customer loyalty is vital to a company for many reasons, one being that consistent purchasing stabilizes cash flow which helps offset credit card processing costs. This means implementing a subscription service or reward system for customers to encourage their return and subsequent purchase. An integrated solution like Otterz provides business insights into your finances which can help you make decisions about what type of system you want to implement for your company. 
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   With the right provider and pricing model, businesses can significantly reduce credit card processing expenses. Simplified optimization through transparent rates, allows your business to keep more revenue from every sale.