Negotiating better card processing rates: what most businesses don't know
Do you inwardly groan whenever a customer asks to pay with a card? If card processing fees are leaving your profits in tatters, you could be overpaying. It's time to seek out a better deal.
Card fees add up — fast
When you start a business, you've got a lot to think about. With so many things to juggle, new business owners don't often spend a lot of time considering a card payment provider. Don't feel ashamed if you went with the first company you found with a quick Google — that's a surprisingly common experience.
After a while, though, you might start wondering if you're overpaying. When you begin to look for lower credit card processing fees, the results can be surprising. Yes, there are better deals out there, and savvy small business owners should try to find them.
What makes up your card processing fees?
Before you can get better card processing rates, you need to understand exactly what you're paying. Yes, every payment processor has different rates, but there are negotiable and non-negotiable components. Behind the curtain, your credit card processing fees can be broken down into three separate areas:
Interchange fees
A card payment is a little more complicated than most of us realise. We tap our cards, wait for the green tick, and move on, but there are a lot of moving parts behind the scenes. Processing a transaction is not free; the cardholder's bank charges a certain amount to do it. Interchange fees are paid to the bank to cover this amount. They're usually the largest part of a card processing fee, and may vary according to factors like credit vs debit cards vs contactless, the merchant's industry, and more.
Network fees
Ever wondered how companies like Visa and Mastercard make their money? Well, here's one way. Network fees are their slice of the card processing fee pie. Part of the fee gets sent to these card-issuing companies.
Processor markup
This is the area you need to pay attention to if you want to negotiate merchant account rates, as it's the component of the fee that goes to your payment processor. Again, part of it is non-negotiable, as the payment processor has its own costs involved. However, there is also a markup added to turn a profit, which you can try to negotiate.
Signs you’re overpaying — and how to check
Now, after that explanation, you might still think it's all as clear as mud. Unfortunately, banks and networks don't tend to publicise their precise card processing costs upfront, so the exact breakdown of your fees may seem like a closely guarded secret.
However, there are a few red flags that you should look out for. If you want to stop overpaying for card fees, check that your current provider doesn't include any of these warning signs:
Vague pricing
Look out for terms like "blended rate". In this case, the payment processor charges a single, fixed percentage for all transactions. That may seem nice and simple, but it can easily lead to overpaying. As mentioned above, fees vary depending on whether the customer is paying with a debit or credit card, whether it's an online or in-person transaction, and other factors.
Blended rates and similar terms prevent you from seeing a clear, transparent breakdown of where your money is going. They make it pretty much impossible to negotiate better rates.
Double fees
Some payment processors charge you twice. You pay a percentage for each transaction. On top of that, you also pay a monthly subscription fee. If you're in this kind of contract, you're almost certainly being overcharged.
Long contracts with exit penalties
When you first signed up with your payment processor, did you consider a way out? Some processors force business owners into very long contracts. To make matters worse, if you try to get out of the contract early, you may be charged a hefty exit fee.
If you're stuck in a situation like this, your best course of action may actually be to wait until your contract expires — then get out as quickly as you can.
High costs for low-volume businesses
Small businesses often struggle to get profitable, particularly early on. Paying high card processing fees can add to your problems; if you've got a low-volume business like a seasonal retail outlet and you're paying flat monthly fees, you may be losing a lot of money. Similarly, you may find problems if you have a food truck where most transactions are for very small amounts, but your fees are high.
To work out whether or not you're overpaying, it's a good idea to calculate your actual card processing costs per £100 taken. This will give you a clear idea of the real figures, allowing you to identify potential issues.
How to negotiate better rates (if your provider allows it)
Negotiation can be scary, but if you don't ask for something, you'll never get it. These tips can help you if want to know how to get cheaper card rates:
Get your data ready
You'll be in a better position to negotiate if you have all the relevant data to hand. In this case, that means putting together all your transaction data, including volume, average ticket size, and the amount that you're currently losing to fees.
Ask for interchange breakdowns
Be aware that providers may be reluctant to part with this information, but you can still try to push for it. An interchange breakdown should show you exactly where your fee is going, revealing how much is non-negotiable and how much can be negotiated.
Push for transparency
Comb through the interchange breakdown data carefully, looking for any hidden fees or unexpected charges. If you find any, they'll be the perfect starting point for your negotiations. Don't be afraid to request discounts on extras. Be firm and determined, and you're more likely to have success.
Be prepared to walk away
The strongest negotiators are those who have nothing to lose. Before you begin your negotiations, do your research on the competition so you're ready to leave your current provider if necessary. This may not always be possible, but if it is, make sure you keep your options open.
Or skip negotiation — and switch to a low-fee provider
If your negotiations have fallen through, or if you'd just rather not negotiate, there is another way. Look for a new provider which provides the same service for less, allowing you to reduce payment processing costs.
SumUp is one of the best choices for low-cost card processing. Here are some of the benefits of making the switch:
Clear, low rates
Make the switch to SumUp, and you'll be rewarded with flat, low rates with no hidden fees. What you see is what you get, which means no nasty surprises at the end of the month.
No ongoing contracts that tie you in for a long time
No monthly contracts or equipment leasing. You can walk away from SumUp at any time if you're not happy, and there are no ongoing fees to pay. Once you purchase a card reader, it's yours to keep, and if you're not ready for a card reader yet, you can even use Tap to Pay to take payments with your mobile phone.
Transparent pricing that scales with your business
You'll find different ways to take payments depending on your business needs. For a small, new business, start by buying a card reader and joining our pay-as-you-go service. As your business grows, you might want to upgrade to Payments Plus. This offers lower transaction fees in exchange for a monthly fee of £19.
Even if you join Payments Plus, you're not locked in. You can still cancel the service at any time, with no ongoing obligations in the fine print.
A five-minute sign-up
We know some providers make signing up a long, tedious process. That's not the case with us. Switching is easier than you might think. Just sign up for a SumUp account, order a card reader, and you're ready to go.
In fact, you don't even need to buy a card reader to get started: you can already use Tap to Pay in the SumUp app to take payments with only your smartphone.
You don’t have to stay in the dark about fees. Whether you negotiate or switch, better rates are within reach. If you're overpaying, take action today and find a better, cheaper way to move forward with your business.
