Credit Card Fees: How to Negotiate in 5 Easy Steps

By Korry D.

Illustration with title credit card fees

If you own a restaurant in 2019, you know how important it is to offer your customers the convenience of paying by credit card.

In an increasingly cashless society, people want the choice to swipe, tap, dip, enter their PIN, or use their phones to authorize mobile payments.

 As an accommodating merchant, you want to give your customers what they want – even if credit card fees become one of your biggest business expenses. 

That’s why it pays to be prepared when entering into an agreement with a payment processor, the company that provides you with payment terminals and the service that clears and routes credit card transactions.

There’s only one problem.

The fee structures associated with accepting credit cards are head-swimmingly complex.

There are processing fees, flat fees, and situational fees. Some are negotiable; some aren’t. Entering into an agreement with a payment processor is a lot like hiring a contractor to remodel your restaurant: it’s important to get a few quotes and negotiate the fine points. 

Now, for some good news.

You don’t have to take a master class in economics to secure a reasonable rate from a reputable payment processor. All it takes is preparation, an understanding of what’s negotiable, and a keen eye to determine the best fit for your business.

Here are 5 steps that’ll help you get the best payment processing rate for your restaurant.

Restaurant employee holding a payment terminal towards you
Tired of Paying Too Many Credit Card Processing Fees?

Find out which fees are negotiable and how to get the best price.

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Step 1: Understand Your Business

Before you even approach a payment processor, it’s important to anticipate the information they’ll need from you to prepare a customized rate.

If you have accurate, concise answers, the process will run smoothly and you’ll be in a better position to negotiate applicable fees. 

Here are some of the questions a payment processor will ask:

  • What are your monthly sales?
  • What is your average ticket size? 
  • What is your monthly or annual credit card processing volume? 
  • What type of payment terminal do you want? (i.e. wireless, fixed)
  • Do you want to rent or purchase your payment terminal?
  • Do you want a terminal that’s integrated with your POS system – or one that operates independently?

If you’re setting up a payment processing agreement before you’ve opened your restaurant, you’ll need to provide projections.

Rates vary among processing companies but are usually calculated per transaction and range between 1% and 4%. Some payment processors also add a fixed dollar amount per transaction, typically from $0.10 to $0.30. 

Payment processing companies typically offer better rates for higher-volume businesses in lower-risk industries, such as large grocery stores, retail chains, and restaurants that do real-time transactions (i.e. nothing with recurring charges or future delivery).

But it’s important to provide these companies with realistic, achievable numbers (your answers to the questions above), to make sure you get the most accurate rate quotes possible.

Step 2: Get Quotes from Multiple Processors

Now that you’ve put together a package of your numbers or projections and have considered your payment terminal needs, it’s time to shop around for a payment processing partner.

While cost is a big factor when selecting a payment processor, it shouldn’t be the only criteria. It’s important to align with a trusted company that has a good reputation.

There are plenty of payment processors who charge bargain-basement rates but may not provide dependable customer service. You’ll want to strike a good balance between a reasonable rate and a stable, trustworthy company – ideally one that’s affiliated with a financial institution.

Restaurant employee holding a payment terminal towards you
Tired of Paying Too Many Credit Card Processing Fees?

Find out which fees are negotiable and how to get the best price.

Download Guide

Tips on Finding Payment Processing Companies:

  1. Reach out to other, comparable restaurants and ask what companies they use. Ask them what they like or don’t like about their current payment processor, including services and fees.
  2. Look for big names in the industry. If they’ve been around for a while, chances are they’re a legitimate, dependable business.
  3. Research multiple third-party reviews before reaching out to a payment processor. If the same feedback – including features, benefits and disadvantages – keep coming up you’re probably getting a good picture of what they offer.

Step 3: Understand Credit Card Fees

While individual fees of different payment processors may vary, they all have a basic fee structure. On every statement, you’ll find three types of fees: processing, flat, and situational

When you’re comparing companies to each other, take a look at the prices associated with each type of fee. It’s important to understand which are negotiable and which are not.

Processing Fees

Payment processors are responsible for capturing fees from credit card brands and issuing banks and providing a routing service. They charge a number of credit card processing fees to recoup the charges and to be compensated for their services.

Type of feeWhat is it?Negotiable?
Discount rate (aka qualified rate, merchant rate, discount rate, or MDR)The fees for processing a payment made with a basic credit card (i.e. a card with no perks/rewards). It’s charged as a percentage of the total transaction (e.g. 1.5%).
Payment processors may make this “floor” price intentionally low to appear attractive to merchants. Beware: If it’s too low for them to make any profit, they’re probably jacking up fees elsewhere.
Interchange FeeEach credit card brand (e.g. Visa, Mastercard, American Express, etc.) has a published, percentage-based fee that they charge every time one of their cardholders uses their credit card. It’s the cost of authorizing the charge. 
The interchange fee is higher for cards with perks or rewards than it is for basic cards. 
The payment processor is responsible for paying this fee – and passes the cost on to the merchant. 
Non-qualified rateThis is a fee added to the discount rate (above) when non-basic credit cards (rewards, corporate, business) are used – and on transactions completed over the phone when the card is not present.
These cards (and card-not-present transactions) carry higher risks, so they’re processed at a higher rate. 
Card brand (assessment) feeThis is a fee paid to the card brand (e.g. Visa, Mastercard) on every transaction. 
The card brand sets the fee, and it applies to all types of cards (basic to premium). Payment processors may or may not mark this up. 
Transaction Fee A dollar amount fee on every transaction.Yes
Restaurant employee holding a payment terminal towards you
Tired of Paying Too Many Credit Card Processing Fees?

Find out which fees are negotiable and how to get the best price.

Download Guide

Flat Fees

Flat fees will vary by payment processor. Here are some of the most common types of flat fees.

Type of feeWhat is it?Negotiable?
Annual feeCharged once a year for the payment processor’s services.Yes
Monthly feeCharged every month for the payment processor’s services.Yes
Batch feeThe cost of sending each “batch” of completed transactions for the day to the bank for payment.Yes
Network access feeA fee charged by the credit card brand for accessing their network.Yes
Online reporting feeThe fee for the ability to view your statement online.Yes
PCI feeMeeting the Payment Card Industry (PCI) Data Security Standard is mandatory. All payment processors must ensure their merchants are following the rules. 
Some payment processors charge an additional fee to ensure compliance.  
Statement  feeThe cost of preparing and providing your billing statement. You may try to bypass this fee by asking for online-only access.Yes
Terminal feeThe cost of renting, leasing, or buying a terminal. Yes

Situational Fees

As their name suggests, situational fees are charged when specific situations arise. They aren’t necessarily regular or predictable, so it’s important to understand the types of fees that could be incurred.

Here are some of the ones to watch for.

Type of feeWhat is it?Negotiable?
Chargeback feeThis is levied when a customer claims fraud or wants a refund. 
The payment processor will charge this fee for processing the chargeback. 
Retrieval request feeThis is a fee for retrieving information when a customer requests a chargeback (refund).No
International feeApplied when a customer uses an international credit card.No
Liquidated damages feeIf you choose to terminate your contract with the payment processor before the agreed-upon date, they may charge a fee associated with the monthly profit value of your account.Yes
Monthly minimum feeMerchants who fail to reach their transaction total for the month or year may be charged this fee. 
The payment processor may choose to charge you the difference between the agreed-upon monthly minimum and the actual transactions. 
Non-sufficient funds (NSF) feeIf you don’t have enough funds in your account to pay the payment processor fees, you will be charged a fee.No
Set-up feeThe cost of setting up or creating an account with a payment processor.Yes

Step 4: Compare, Compare, Compare

For the restaurant industry, payment processors typically provide two types of pricing models

  • Cost Plus
  • Flat Fee

 Most restaurants today use the cost plus model for its transparency and easy-to-understand terms and fees.

Under this model, you’re responsible for the non-negotiable interchange fee (for the type of credit card) plus the payment processor markup. The markup is a fixed percentage of the total check, the card brand fee, and a per-transaction flat fee. 

The cost plus pricing model has a straightforward formula like this: 

1.54% + 0.10% + 0.10% + $0.25 = 1.74% + $0.25 total processing fees

This type of simple formula makes it easy to compare processing fees from company to company. 

When reviewing quotes from payment processing companies, it’s not always possible to compare apples to apples. Some processors may charge low fees in one place but higher somewhere else. Some may include hardware such as electronic credit card readers (or terminals)in the agreement.

Take a look at the flat and situational fees as well. Using our negotiating cheat sheet, focus on the ones that are negotiable and consider asking for a better rate on some or all of them.

You’ll also want to look at contract termination terms. You may decide the flexibility of a shorter-term contract outweighs the benefits of a lower cost elsewhere.

 Step 5: Negotiate

When you’ve narrowed it down to one or two payment processors, it’s time to make sure you’re getting the best deal possible. Here are some tips on negotiating:

Be Prepared

Don’t just take a cursory glance at the quotes you’ve gathered from payment processors. Pore over them so you understand exactly where and how they’re making money. A low rate on one credit card fee may be neutralized with an excessive fee elsewhere. You should be able to list the pros and cons of each quote before you head to the negotiating table. Use our cheat sheet to help you keep track of what the fees are for and which ones are negotiable.

 Ask Questions

After you’ve gone over the quote with a fine-toothed comb, book a call or in-person meeting and ask the sales rep to go over it with you, line by line. Ask them to explain each feature and fee. It wouldn’t hurt to gasp or wince from time to time. Seriously. They may react to your body language or verbal cues with a better price. If not, when you arrive at each negotiable fee, ask for the best price they have. Point out what their competitors are charging.

Demand Price Matching

If you’ve uncovered a better price elsewhere, share it with the payment processor you want to work with to see if they can price-match. Even if they can’t meet the exact price, they may be able to offer perks like free payment terminals or a shorter contract. This may be worth more than a lower fee.

Get Advice from Other Professionals

Take your time when reviewing quotes from payment processors. Don’t let them rush you into making a decision. Consider sharing them with an accountant or lawyer to help you find the right overall fit.

“Is That the Best You Can Do?”

When you think you’ve negotiated your contract to the lowest possible price and the best possible features, take one further step before you close the deal. Be absolutely sure that they are giving you the most optimal pricing. It’s surprising what a simple question can accomplish.

When you consider the number of credit card transactions your restaurant will ultimately process every day, it’s well worth the time it takes to understand credit card fees and negotiate them to within an inch of their life. 

The best payment processing rate for your restaurant is out there. It’s up to you to find it.

Want to learn more about payment processing?

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Photo of Korry D
by Korry D.

As the former Senior Product Marketing Manager at TouchBistro, Korry helped restaurateurs navigate payments by deeply understanding both restaurants and the payments market. He has a passion for hockey, beer, and hot wings, and loves when all three happen at once.

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