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How To Cut Costs When It Comes to Payment Processing Fees

Want to know how to save cash and reduce payment processing fees? Check out these handy tips to cut costs as a small business owner.

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Running an online business is never cheap. As the saying goes, you have to spend money to make money. But that doesn’t mean you can’t cut unnecessary costs here and there, especially in areas like payment processing.

Whenever you accept a credit card payment, you usually have to pay a fee of between 1.5% to 3.5% of the sale’s price. It’s the cost of using the payment processor’s electronic payment services. You’ll always have to pay some fee, but you can lower this with a few smart strategies. Let’s look at these strategies in detail.

Set Up Your Account and Payment Terminal Properly

You can avoid some credit card payment processing fees by setting up your account and point-of-sale (POS) terminal properly. Ensure you set up your account while accurately listing your business type, the types of transactions you accept, and the frequency of transactions you receive from your customers. If you do all that properly, your credit card processor won’t charge you extra fees.

It’s also a good idea to process transactions every twenty-four hours. This limits the number of transactions the payment processor has to analyze, reducing processing expenses on their end. In the long term, this can add significant savings for your business.

It’s also important to make sure that any additional third-party systems you use will not charge customers additional fees either. For instance, your business may opt to use text-to-pay systems to help facilitate transactions between your business and customers.

Text-to-pay systems are simply tools that allow customers to make payments and pay invoices directly via SMS text messaging. This is a very convenient and great way to expand payment options for customers. Furthermore, most text-to-pay systems do not charge additional fees above what the payment processors they are synced to already charge. In other words, they are a way you can enhance convenience for customers and clients without additional costs.

Use an Address Verification Service

It may be worthwhile to use an address verification service (AVS). This verifies a cardholder’s billing address with the current card issuer, helping to fight off fraud and reduce the likelihood of contributing to fraud at your business.

Fortunately, implementing AVS is very simple. The customer enters their address as normal during the checkout process. But the address is then compared to the issuing bank’s address on file with the customer. In AVS, a code is sent to the merchant to authorize or reject the transaction at the last step.

This is a cheap way to reduce fraud or security fees from your payment processor. Furthermore, both Visa and MasterCard support AVS globally – Visa, in particular, offers a lower interchange rate when you perform AVS checks on credit card transactions.

Use Surcharging

You can also try surcharging. Surcharging is the practice of passing on the costs of credit card fees to your customers. You add a small percentage fee to all transactions that involve a credit card – in this way, your customers pay for the convenience of using a credit card rather than your company.

Of course, this can be positive or negative depending on how you frame it and how your customers are made aware of the surcharge fee. If you decide to use surcharging, make sure that customers know about this by posting a sign right before the POS or payment station, or the payment section of your website.

Furthermore, keep in mind that if you use surcharging, many customers may opt not to purchase at all instead of eating the charge and paying a little extra for credit card convenience. In addition, surcharging is only legal in some states.

Try Cash Discounting

For a more user-friendly means to cut costs and reduce payment processing fees, offer cash discount policies to your customers.

Cash discounting means giving customers a small discount when they pay for one of your products in cash. This isn’t practical for e-commerce stores, but it can be a great way to cut costs if you run a brick-and-mortar operation.

Visa and MasterCard both require you to post a standard price on your management software or POS. The standard price would be the cost of your goods if customers were to pay with a credit card, but you can apply a discount for cash customers.

In reality, that discounted price is the actual price of the product without the attached credit card fee, but customers don’t know that. They just feel happy that they received a discount!

Negotiate Directly With Credit Card Processors

Don’t forget that you can always try to negotiate directly with credit card processors and get them to lower your fees. If you’ve been running your business for some time and have a steady flow of credit card payments, you may be able to convince your credit card processor to reduce your fee by a percentage point or even a fraction of a percentage point. After all, the more money your business brings in, the more those credit card processors make in terms of profit.

Speak to your credit card processor as your business grows and you gain more customers. This might not be the best strategy at the beginning of your business’s lifespan, but it’s something to keep in mind as you scale up and become more successful.

Minimize Credit Card Fraud Risk

Lastly, don’t forget to take steps to reduce the risk of credit card fraud. You can do this in two ways:

  • Firstly, always swipe credit cards instead of manually keying in credit card numbers. When you swipe credit cards, you reduce the likelihood of accidentally inputting the wrong number, thus inadvertently committing credit card fraud.
  • Secondly, always enter security information, like the three-digit security code on the back of a card and the billing ZIP Code. This ensures that you have a legitimate card in your hands and not a fraudulent piece of plastic.


It’s more than possible to reduce payment processing fees and still accept credit card payments from your target customers. With these strategies, you’ll make more money than ever and continue to provide payment flexibility to your core audience.

If you’re still looking to get set up with payment processing, Gravity Payments can help. Check out our payment processing solution today.

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