If you are the owner of a business in the U.S., this is something that most business owners do not know. Your current rate of processing is actually flexible. It is up to the small business credit card processor on how they are going to charge your business. But the thing is that most of them are actually open to negotiations, especially if you are knowledgeable about your numbers. This guide dissects proven insider tips so that you can confidently negotiate with any small business credit card processor to get the best deal.
1. Recognizing Your Present Metrics
Before moving forward with your small business credit card processors, look for the key metrics to track. Numbers you’ll want to track:
- Total Amount Processed Monthly
- Average Ticket Size
- Card Mix (Debit, Credit, Rewards, Business)
- Chargeback Ratio
- Effective Rate (Total Fees ÷ Total Volume)
An effective rate can be the strongest negotiation tool. Businesses utilizing tools such as asset-backed credit lines will already know their cash flow data. This data will provide greater financial transparency to the processor, setting you up as a lower-risk business consumer.
2. Compare Your Rates to Industry Benchmarks
All small business credit card processors handle industries differently, depending on the risk level. For instance:
- Restaurants: High risk, as there can be tipping, as well as potential disputes
- Retail outlets: Lower risk due to the use of EMV chip transactions
- Service Providers: Fewer Chargebacks
Research benchmark processing rates in your industry. As long as you can assert, “Industry average is 2.3%, but I pay 2.9%,” your negotiating strength will greatly increase.
3. Utilize Your Processor Volume as a Negotiating Tool
Since processors are paid per transaction, clients with higher volumes are beneficial to a processor. When negotiating with your small business credit card processor, or in comparing processors, be sure to provide:
- The recent 6 to 12 months of statements
- Any seasonal spikes in sales fluctuate from month to month
- Future marketing campaigns
- Projected annual growth
If you’ve used a small business loan calculator to estimate your revenues, present them with those estimated revenues. By doing so, you are establishing your revenue expectations to be consistent throughout the duration of the relationship; this will enhance your credibility with the processor.
4. Don’t Ask for Generic Lower Rates, Ask for Specific Reductions
During the negotiation, broad requests will not lead to success. Therefore, try asking your small business credit card processor for cuts in targeted areas:
- Percentage rate
- Per-transaction fee
- PCI non-compliance fee
- Monthly minimums
- Statement fees
- Gateway charges
- Batch fees
5. Collect Competing Quote
Nothing will motivate a small business credit card processor quite so much as the threat of competition. Get written quotes from at least two other processors. When presenting them:
- Highlight the lowest numbers
- Do not share the entire statement with anyone.
- Let your current processor know you are considering other options
Most processors and carriers will “discover” hidden discounts once you indicate a serious intention to switch
6. Timing is Key to Benefit from Negotiating
Negotiating is better at different times.
- When you have had a good sales month
- When it’s time to renew annual contracts
- When processors are typically slow for business
- When your company has stabilized financially
If your business has recently improved its cash flow from receiving an asset-based line of credit, make sure to point this out. The fact that your business has become a more stable company allows small business credit card processors to justify offering lower rates on your behalf.
7. Be Willing to Walk Away
What’s your greatest strength? It’s the ability to change or switch. If your Small business credit card processor is unwilling to cooperate or continues to surprise you with unexpected fees, think about moving on. Today, most companies are offering:
- No long-term contracts
- Transparent interchange + pricing
- Next-day funding/ Same-day funding
- Lower monthly fees
The changeover could take a day, but the potential savings are enormous.
8. Requesting a Trial Period for New Rates
Before making any long-term commitments, ask your small business credit card processor for the following:
- A 60 to 90 day testing period
- No commitment until the end of that period
- A written estimate of projected savings
Once the testing period is over, compare your statements with those of the previous month. If you have improved your results (e.g., higher volume or decreased chargebacks) as a result of using the new rate, request a further adjustment in your rate.
Conclusion
Negotiation is a strategy, and it has nothing to do with confrontation. By understanding your numbers, knowing your industry averages, and acquiring quotes, you will be able to leverage any small business credit card processor. Your size, stability, and growth rate will serve as the foundation of your negotiation strategy, and you will be able to demand the rates you deserve. After all, nothing is fixed in the credit card processing world; you simply need to ask.
