What’s the cheapest way to accept credit card payments?

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  1. Introduction
  2. What are the cheapest methods to accept credit card payments?
    1. In-person transactions
    2. Online transactions through an all-in-one provider
    3. Direct bank payments
  3. How do payment gateways compare in terms of cost?
  4. What are the hidden fees to watch for?
  5. What strategies can reduce processing costs?
    1. Shop around for better rates
    2. Encourage in-person swipes when possible
    3. Use stored payment methods
    4. Stay current with security
    5. Evaluate cross-border expenses
    6. Fight for lower chargebacks
  6. What is the trade-off between cost and quality in credit card processing?
    1. Uptime and support
    2. Fraud protection
    3. Added features
    4. Customer confidence

Most businesses in today’s market need to accept credit cards – a practice that can come with interchange costs, assessment fees, the processor’s markup, and hidden charges. In 2023, US businesses paid over $172 billion in card processing fees. But there are ways to minimise costs, such as switching providers, choosing an in-person system for some transactions, storing payment info for repeat customers, and remaining on top of dispute prevention.

The right solution depends on the specific needs of your business. When choosing a payment processor, a local family-run shop might prioritise a simple, flat-rate deal for in-person transactions, while an online subscription service might need integrated recurring billing that automatically charges customers every month. Below, we’ll explain how to accept card payments affordably while still providing a dependable experience for customers who expect quick, secure checkouts. Here’s what you should know.

What’s in this article?

  • What are the cheapest methods to accept credit card payments?
  • How do payment gateways compare in terms of cost?
  • What are hidden fees to watch for?
  • What strategies can reduce processing costs?
  • What is the trade-off between cost and quality in credit card processing?

What are the cheapest methods to accept credit card payments?

Different ways of accepting cards come with different price points. One business might deal only with web-based transactions, while another might do nearly all sales in person. Choosing the right method (or combination of methods) can save you money. Although fees for card-not-present (CNP) transactions are usually higher due to the perceived risk, here are some options that tend to come with lower costs.

In-person transactions

In-person card transactions are often priced lower than online payments because there’s less fraud risk. If you’re running a physical shop, you can accept these payments with a card reader at your checkout counter. Payment can be completed by swiping or inserting the physical card or by tapping your card-connected device to make a contactless payment.

Online transactions through an all-in-one provider

Internet-based businesses usually need a payment gateway, a payment processor, and a merchant account. They pay a fee to each of these providers (either monthly or per transaction). All-in-one services combine those pieces, so you pay one rate rather than multiple bills.

Direct bank payments

Offering a bank transfer option (e.g. an e-cheque or direct payment) usually costs less than card-based transactions. This can be a good option for large invoice payments, subscriptions, and any scenario that involves repeat customers who don’t mind the extra step of entering bank details.

How do payment gateways compare in terms of cost?

A gateway is a combination of software and infrastructure that transmits transaction details after someone hits “pay now” on a site or taps a card in a store. Some providers are all-in-one gateways that include everything for a single fee: the gateway, payment processing, and a merchant account. With other providers, you’ll use their gateway while keeping your merchant account separate. This can be a good option if you have an existing deal with a specific merchant services provider or you want extra control over the payment stack, but it can mean paying additional fees.

Gateways usually offer one of two billing setups: a flat rate (a consistent percentage plus a small flat fee) or an interchange-plus model (the actual interchange cost plus a markup). Flat rate is predictable, and it’s a good option if your average ticket size is fairly steady. Interchange plus can be cheaper for certain businesses, especially at higher volumes or if their cards run at lower-than-average interchange categories. The best choice depends on which pricing model suits your daily flow of transactions.

What are the hidden fees to watch for?

Here are some hidden fees to watch for when accepting credit card payments.

  • Monthly minimum: Some processors require you to meet a minimum charge total each month. If you fall short, you pay the difference.

  • Statement fee: Some providers bill you for generating statements. You can sometimes avoid this fee by going paperless, but check the contract.

  • Early termination: Some providers charge an early termination fee if you decide to switch to a new provider before the contract term expires.

  • Chargeback: Disputes happen when customers challenge a transaction. Even if you win the dispute, you might pay a fee.

  • Batch: Some providers charge a small amount each time you finalise the day’s transactions.

  • Account maintenance: Some providers charge a monthly account maintenance fee to cover administrative overhead.

What strategies can reduce processing costs?

Reducing the cost of accepting credit cards doesn’t necessarily mean changing providers. Sometimes, you can get to your goal by tightening procedures or exploring creative ways to handle payments. Here are some strategies to reduce processing costs.

Shop around for better rates

Payment providers want your business. Comparing rates can lead to lower markup fees if you’re doing consistent or high-volume transactions. If you’re in a flat-rate plan and your numbers have grown significantly since you first signed up, point it out to your processor and see if you can get a deal.

Encourage in-person swipes when possible

In-person transactions generally cost less. If you run a hybrid store that sells online and in a physical space, consider ways to route local buyers to your in-store setup instead of steering them towards online checkouts. Even a pop-up or local kiosk can help reduce some of the more expensive card-not-present fees.

Use stored payment methods

For businesses with frequent repeat transactions, storing card details through a secure token system can reduce friction for returning customers, cut down on failed payment attempts, and possibly lower the risk profile. That can mean fewer penalties or declines that require manual fixes.

Stay current with security

Fraud can lead to lost revenue, plus dispute fees that pile up. Many providers have built-in tools to help flag suspicious charges. It’s a good idea to implement these settings, even if it feels like an extra step. If you’re slammed with too many disputes, your processor might raise your rates or push you into a higher-risk category.

Evaluate cross-border expenses

If you do business internationally, your provider could be adding a surcharge for each foreign card or currency conversion. Stripe, for instance, discloses extra cross-border or currency conversion fees. Confirm if these fees exist, and see if you can offset them by opening local entities or using a provider with more favourable international coverage.

Fight for lower chargebacks

Improving your checkout flows, making sure your product descriptions are accurate, and providing responsive customer service can reduce your number of disputes. Each dispute, no matter the outcome, usually comes with a fee. Fewer disputes means fewer needless charges on your statement.

What is the trade-off between cost and quality in credit card processing?

A fraction of a percentage point can have a big impact on your monthly bill once you start reaching higher volumes. Still, the cheapest possible option isn’t always the smartest choice. Here’s what you might lose if you consider only the upfront cost of your card processing options.

Uptime and support

Think about how often you might need technical help from your processor. If something goes wrong and it takes a long time to get a response, that downtime could cost more than what you saved on transaction rates. Check reviews, and see how reliable the platform is.

Fraud protection

Cheap providers might skimp on built-in features to prevent fraudulent transactions. Dealing with disputes is stressful, and the fees can pile up. A few extra basis points on each transaction might be worth it if it reduces your fraud risk by a large margin.

Added features

Some payment companies throw in subscription billing, analytics, invoice generation, or other extras. Even if those features each tack on a small add-on cost, they might replace separate software systems you’d otherwise pay for. This can save you money, or at least centralise everything so you’re not juggling separate bills and log-ins.

Customer confidence

Buyers might feel more comfortable when they see a payment method they recognise. A stable, user-friendly checkout can reduce cart abandonment. If your payment page looks unprofessional or clunky, you could lose business. Sometimes, that lost business is more damaging than a small difference in processing fees.

The content in this article is for general information and education purposes only and should not be construed as legal or tax advice. Stripe does not warrant or guarantee the accuracy, completeness, adequacy, or currency of the information in the article. You should seek the advice of a competent lawyer or accountant licensed to practise in your jurisdiction for advice on your particular situation.

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