5 Things Your Business Can Do Now to Cut Merchant Services Costs

Updated: August 27, 2009

Issue Summary

Being able to accept credit card and debit card payments from customers is now an integral part of running a successful business. But granting shoppers fast and convenient payment options can cost companies big bucks. That's because financial institutions, merchant service providers and independent third-party providers all charge businesses a variety of fees that, although miniscule, can add up to a significant monthly expense. These fees include:

  • Transaction fee: A flat rate fee charged with every transaction. This fee can run upward of $.30 to $.40 per completed transaction.
  • Monthly minimum fee: A guaranteed monthly minimum flat rate that you must pay regardless of the number of transactions processed.
  • Authorization fee: A fee charged the moment a transaction is processed.
  • Discount rate: Usually between 1 and 8 percent, the discount rate is the sales commission a merchant services provider earns on each sale.
  • Termination fee: What it costs to end your merchant account before the term expires. Merchant account terms typically range from one year to four years.

Fortunately, there are ways you can cut back on merchant services costs without sacrificing quality of service. Here's how.


1. Shop around. These days, there are plenty of options for finding a merchant services provider. Banks, credit card companies, third-party providers - they all offer merchant-services packages at varying costs. Before signing on the dotted line, make sure you shop around to find the best price available and don't be afraid to play providers off one another to land the most attractive deal. What's more, many providers have a habit of raising their prices after a month or two of service, so be sure to read a contract's fine print to avoid unpleasant surprises.

2. Avoid packaged goods.
Many providers pitch companies merchant service plans that include features such as software upgrades, paper, backups, downloadable accounts, and email marketing tools. While these suites can save money, they can also prove wasteful for companies that don't take full advantage of them. Rather, companies would be wise to purchase these value-add services on an as-needed basis rather than commit to additional package fees.

3. Consider direct-debit.
Direct-debit allows a company to deduct a payment directly from a customer's bank account. Using electronic funds transfer technology, money is taken directly out of a customer's checking or savings account and deposited into that of a business. By cutting out the middleman (i.e. VISA or MasterCard) for recurring billing of frequent transactions, a company can avoid having to pay hefty merchant-services fees. However, there are risks involved in direct-debit. For example, there are no guarantees that a customer's account will contain sufficient funds to cover a transaction so be sure to weigh the risks before eliminating a third-party provider altogether.

4. Keep an eye on chargebacks. Like it or not, there will be times when a customer will request his money back from a service or product provider. This event is typically accompanied by a fee, levied by the merchant services provider, to cover the costs associated with processing a chargeback. In addition to reversing the charge, companies are typically charged upward of $50 per chargeback, aren't always notified of the claim and disputes are often settled in favor of the cardholder. The result: a costly and cumbersome event that can hurt a business's bottom line and possibly tarnish a company's good standing with its merchant services provider.

To avoid such a fate, try to ensure that the name of your business matches that which will appear on a buyer's monthly statement for easy recognition. In a bricks-and-mortar situation, clearly display the conditions of the sale, as well as your store's refund and return policies. Keep an eye out for suspicious transactions such as those using foreign credit cards. And rely on a verification system that compares billing information with a card holder's records.

5. Leverage your data. Sometimes cutting costs isn't about watching your bottom line but getting the most bang for your buck. For example, while merchant services have long helped companies increase store productivity, boost sales and cut operational costs, many businesses are now viewing them as a marketing vehicle - an opportunity to gather data on customer buying behavior, manage inventory, empower store representatives, enhance customer service and establish strong loyalty programs.


Merchant services may carry high prices but with a little comparison shopping and plenty of due diligence, today's companies can offer customers convenient payment options while keeping transaction costs down.

For more information on merchant services, consult Focus' comprehensive Market Guide, pose a question to Focus experts here or join a discussion with like-minded peers in the Finance Group.

Featured Research
  • 2017 Video Conferencing Features Checklist

    If you’re in the market for a video conferencing system, you know that today’s systems offer more features and functionality than ever. Unfortunately, figuring out what you need is also incredibly difficult. more

  • The Contact Center Conquers the Cloud

    Contact Centers have come a long way over the past few decades. Learn how this important asset has evolved into the cutting-edge offerings of today. more

  • The New SMB Phone Systems Comparison Guide

    Does your small or medium-size business need a new phone system? Then you're in luck! Our new, updated comparison guide helps you cut through superfluous information and narrow down your list of solution providers. Get the latest data on phone system features, pricing, and performance metrics in an easy-to-use format. more

  • Contact Center Software on a Budget

    Although contact center software is necessary for a modern contact center, it can be outrageously expensive. Many companies find that their budget bloats during the implementation process. more

  • How UC Can Help Your Business Survive the Holidays

    The holiday season is filled with frenzy and excitement for businesses and consumers alike. Consumers prepare gift lists, compare brands and prices, and begin shopping with a vigor that is not present most other times of the year. For many businesses, the holiday season accounts for a large profit bump at the end of each year, and companies strive to exceed their goals and keep customers happy during this rush late in the year. more