Small Biz: Yes, You Can Negotiate With Credit Card Companies
Swipe fees, interchange fees, hidden costs, and complex fee structures can make credit cards a form of payment you hope your customers do leave home without. However, even in the landscape of fine print and boilerplate language, there is room for negotiating your credit card processing fee. And in light of proposed legislation dubbed the "Credit Card Fair Fee Act", it is never too early for your business to build savvy in negotiating fair terms.
Here are a few tips to help you navigate your small business to friendlier credit card terms:
1. Know the lingo. There are a number of credit card processing fees that may be in the contract between your small business and the credit card company. Before you forge ahead with negotiating down fees, be sure you are familiar with the terminology. For example, "swipe fees" refer to the processing charges a business in excess of the cost of the amount charged to the customer. Interchange fees, which are part of the overall swipe fee, are the fees paid to banks that issue customers' credit cards.
2. Don't take their word for it. There are a plethora of merchants that can process your business credit card account. And though the first one you talk to may seem to be a bargain, do your homework by contacting at least two more. Keep a lookout for fuzzy fees such as membership fees, service fees, and compliance fees, how much is charged for each, and what the charges include. Side-by-side comparisons may be your ticket to a little monthly financial relief.
3. Change to transparent pricing structures such as "interchange-plus". If your credit card fees do not easily break down to a cost-per-swipe basis, your business likely has a complex fee structure involving percentile ranges that change based on the number of swipes or amount swiped. That may seem to mean savings in the future or for big purchases, but it will be tough to ever really gauge the per-swipe processing costs. Instead, consider switching to a noveau pricing structure such as the "interchange-plus" which is generally just the rate plus the interchange fee that goes to the provider. Keep it transparent and easy to track.
4. Watch out for hidden fees. Is there a fee for terminating the contract? How about a fee for a declined card? Or another for equipment? If so, try to negoiate those down (or out) those fees and also use them as a basis for comparing otherwise low per-swipe fees.
Once you have the basics down, put on your negotiator's cap and be ready to find a middle ground, and hopefully some significant cost savings for your business. Read the articles in the "Related Resources" for case studies of how other small business owners successfully negotiated their way to fewer credit card processing fees.
- How to Cut Credit-Card Fees (BusinessWeek)
- How to Deal With Credit Card Mumbo Jumbo (U.S. News & World Report)
- 3 Myths About Credit Card Fees for Businesses (U.S. News & World Report)
- Credit Card Processing Co.'s Demand Cash Reserves; 5 Tips on Credit Card Processors (FindLaw's Free Enterprise)
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