As a business owner, you can’t eliminate credit card processing fees—but you can reduce them. When you choose the right pricing model, improve transaction quality, remove junk fees, and steer customers to lower-cost methods, you’ll be able to cut processing costs meaningfully.
Taking these steps is more important than ever, as credit cards remain the preferred payment method for American consumers. A May 2025 report from the Federal Reserve Financial Services shows that credit cards account for 35% of monthly consumer payments (by count), followed by debit cards at 30%.
In this guide, we break down how SMBs can lower credit card processing costs. From how to tell if you’re overpaying, to when to make the switch, you’ll walk away with action steps to keep credit card processing fees at a minimum.
Key Takeaways
- Interchange and assessment fees are set by the card networks and issuing banks, but your payment processor’s markup is often negotiable.
- Your pricing model has the greatest impact on what you pay for credit card processing, and interchange-plus pricing is generally the most transparent option for understanding your true costs.
- Improving transaction quality by using tools like AVS and CVV, accepting card-present payments when possible, settling transactions promptly, and submitting Level 2 or Level 3 data can help qualify your business for lower processing rates.
- Surcharging or zero-cost processing can offset processing expenses by passing fees to customers, but these programs do not reduce the underlying cost of acceptance and are subject to card network and state regulations.
- Review your processing statements at least once a year to identify hidden fees, compare pricing, and determine whether switching to a more transparent payment processor could lower your overall costs.
Best Ways to Reduce Credit Card Processing Fees
There’s no single way to reduce your credit card processing fees. The best move is to stack the following tactics to lower your effective rate.
1. Use the right pricing model
To determine the best pricing model for your business, you need to understand how each one works. Analyze your business needs carefully, then decide on the pricing model that’s best for you.
- Flat Rate – One of the simplest pricing models, where you pay a single, fixed percentage (plus a small per-transaction fee) on every transaction, regardless of its value. Its simplicity and predictability make it one of the best choices for small businesses or businesses with low transactional volumes. However, it usually costs more at scale.
- Interchange-plus – In this model, you pay the interchange fee plus the processor markup on every transaction. Its transparency and reliance on actual interchange rates make it an excellent choice for businesses with high-volume transactions or varied payment types. However, statements can be difficult to read due to their detail, and costs can vary depending on the transactions.
- Tiered – By far the most complex to understand, it classifies transactions into three tiers—qualified, mid-qualified, and non-qualified—each with different processing rates. This classification can be very time-consuming to decode. Most merchants end up with a majority of their transactions in the higher-cost tiers, making this the least transparent and predictable pricing model.
2. Improve transaction quality
Improving transaction quality reduces your transaction risk profile, and the lower your risk profile, the lower your rates. Here are some ways you can accomplish this so your transactions qualify for lower processing rates:
- Use Address Verification Service (AVS) – AVS checks minimize the risk of fraud and chargebacks by authenticating the customer’s address against the one on the card issuer’s file.
- Use Secure Payment Systems – Ensure your payment systems capture and authenticate card CVV (security codes) to reduce losses and disputes. Systems equipped with advanced encryption techniques, such as tokenization, make payments more secure.
- Use Low-Risk Payment Methods – Card-present transactions are more secure and carry lower risk than card-not-present transactions.
- Settle Payments Faster – Don’t wait too long to settle transactions, as late settlements increase the risk profile. Settle transactions within 24 hours of authorization.
- Provide Level 2/Level 3 Data – If you process B2B transactions, sending Level 2/3 data for those transactions can lower your risk profile and, in turn, your processing costs. Level 2 data includes customer codes, tax amounts, purchase order numbers, etc., while level 3 data includes unit costs, quantities, product codes, etc.
3. Encourage lower-cost payment methods
Another way to reduce your payment processing costs is to encourage customers to use low-cost payment methods, such as debit cards. Additionally, since card-present transactions cost less to process, encourage in-person payments via credit card terminals that let customers swipe, tap, dip, or insert cards.
You can even offer QR code payments if you can’t use a payment terminal, as they can be cheaper to process than keyed-in payments, depending on how your provider processes them. If your business often processes high-value invoices, consider switching to ACH processing.
Make sure you have enough promotional signage at strategic locations (e.g., points of sale) that recommend the use of these low-cost payment methods. Where legally permitted, merchants can even offer incentives to customers, such as discounts or loyalty points for paying with debit or in person, or, on the flip side, apply a surcharge to credit card payments to offset the higher costs (covered in more detail below).
4. Remove processor markup and junk fees
Interchange and assessment fees are fixed, but your processor’s markup is often negotiable. Here’s how:
- Get quotes from two or three processors and compare your effective rate, not just the advertised rate.
- Ask your current provider to match the best offer.
- Review your statement for junk fees, such as monthly minimums, PCI non-compliance fees, statement fees, gateway fees, batch fees, and early termination fees.
- Switch providers if necessary. If your processor won’t offer transparent, competitive pricing, moving to a new provider may be the easiest way to cut costs. See our guide to switching merchant services for the next steps.
5. Offset fees with surcharging, cash discounts, or zero-cost processing
You can’t eliminate credit card processing fees, but you may be able to shift some or all of the cost to customers, depending on your business model and local regulations.
- Surcharging adds a fee to eligible credit card transactions.
- Cash discounting offers customers a lower price when they pay in cash or, in some cases, with a debit card.
- Zero-cost processing is a compliant program that uses surcharging to offset processing expenses, so your business pays little or no processing cost.
Keep in mind that surcharge laws and card network rules vary by state and payment brand, including limits on when and how fees can be applied. Always verify compliance before implementing any of these programs. If you’re interested in this approach, providers like Kurv offer compliant zero-cost processing solutions.
What Credit Card Processing Fees Include
Credit card processing fees can fall into two categories: non-negotiable and negotiable. Understanding the difference helps you focus on the costs you can actually control.
- Non-negotiable fees are set by the card networks and issuing banks, so they’ll be the same regardless of which payment processor you use. They include interchange fees (paid to the issuing bank) and assessment fees (paid to the card network).
- Negotiable fees are the fees your payment processor charges for its services. While your contract fixes some, many can be negotiated or eliminated when you choose the right provider. These fees include the processor markup and additional service fees that vary by provider. Those other fees may include monthly account fees, PCI compliance or non-compliance fees, payment gateway fees, statement fees, chargeback fees, batch fees, and other administrative charges.
Because processor markup is the negotiable portion of your processing costs, your choice of payment provider has the biggest impact on how much you can save.
What Actually Causes High Credit Card Processing Fees?
As mentioned earlier, several factors affect card processing rates. While you can’t eliminate credit card processing fees completely, you can certainly learn how to get the lowest possible processing rates for your business. Here are the things to look out for:
- Pricing Model – The pricing model your payment provider uses (tiered, flat rate, or interchange-plus) can significantly affect the processing fees you pay.
- Transaction Volumes – Your business’s transaction sizes and volumes directly impact your credit card processing costs. Without the right pricing model, higher transaction volume can actually increase your costs rather than reduce them.
- Industry and Business Type – If your business belongs to an industry that’s deemed high-risk (e.g., casinos, online gaming, travel, etc.) for chargebacks, fraud, etc., chances are your processing rates will be higher.
- Processing History – If your business is new, has an unstable financial history, or has had high chargeback rates in the past, you may have to pay higher processing fees (because of the greater risk).
- Transaction Type – Your processing fees may also vary depending on the payment methods you choose to accept. For example, in-person swiped or contactless payments incur lower credit card processing fees than card-not-present payments (online, phone, mail), which are considered riskier.
- Card Type –The type of card your customers use for transactions also affects processing fees. For example, standard debit cards have low processing fees while premium and rewards cards typically incur higher interchange rates.
How to Know if You’re Overpaying?
The easiest way to tell if you’re paying too much for credit card processing is to perform a quick audit of your monthly statement.
First, calculate your effective processing rate:
Total monthly processing fees ÷ Total monthly card sales × 100 = Effective rate
Your effective rate reflects what you’re actually paying to accept card payments after all transaction and service fees are factored in.
The U.S. Chamber of Commerce notes that typical credit card processing fees range from 1.5% to 3.5%, so you want your effective rate to be on the lower end of this range if possible. When assessing how much you’re paying, you should also watch out for these red flags:
Multiple hidden fees
If you come across several junk fees (not related to transaction volumes), that’s a red flag.
High rates
Calculate your average fee percentage and compare it with the industry average. If what you’re paying is significantly higher, that’s a red flag.
Tiered pricing
If you encounter terms like “qualified,” “non-qualified,” or “mid-qualified,” this often results in higher, less predictable costs for many merchants.
Final Thoughts
Reducing your credit card processing costs doesn’t require cutting back on the payment methods your customers prefer. Instead, focus on the areas you can actually control. Start by choosing the pricing model that best fits your business, whether that’s transparent interchange-plus or predictable flat-rate pricing. From there, improve your transaction quality with tools such as AVS, CVV, prompt settlement, and Level 2 or Level 3 data, when applicable, and encourage lower-cost payment methods such as ACH, debit, or cash where appropriate. You can also consider surcharging or zero-cost processing if they align with your business model and comply with applicable laws and card network rules.
Whatever combination of tactics you use, make a habit of reviewing your statements regularly to catch unnecessary markup and junk fees before they add up. And if you’re evaluating a new payment provider, look for transparent pricing, no hidden fees, and tools that help reduce costs without adding complexity. Kurv offers flat-rate and interchange-plus pricing, free Tap to Pay, QR payments, and a virtual terminal, along with zero-cost processing as an option.
Ready to Grow Your Business?
Apply and start accepting payments within a day
Frequently Asked Questions
How can I reduce credit card processing fees for my small business?
Choose a transparent pricing model, improve transaction quality, and negotiate your processor’s markup to lower your costs. You can also encourage lower-cost payment methods like ACH or debit, remove unnecessary fees, and, where permitted, use surcharging or zero-cost processing to offset eligible credit card fees.
How do I qualify for lower processing rates?
The best way to qualify for lower processing rates is to reduce transaction risk. Whenever possible, accept card-present payments, use AVS and CVV verification for online transactions, and settle batches promptly rather than delay them. If you operate a B2B or B2G business, submitting Level 2 or Level 3 data can also qualify many commercial card transactions for lower interchange rates. These practices won’t change your processor’s markup, but they can reduce the underlying interchange costs on eligible transactions.
Can you eliminate credit card processing fees completely?
Credit card processing fees will always exist; it’s just a question of who pays them. If you’re a merchant, you can “eliminate” processing fees by passing them on to the cardholder through methods like cash discounting or zero-cost processing.
What’s the cheapest way to process credit cards?
There’s no single cheapest option for every business. Interchange-plus pricing is often the most cost-effective because it separates network fees from processor markup. If you process a lot of credit card transactions and higher-value transactions, you can lower your rates by negotiating high-volume discounts.
Can small businesses negotiate credit card processing fees?
Yes. Many processors will negotiate pricing, especially if your volume grows or you’ve been in business for a while. Even small businesses can qualify for better rates by switching providers or choosing transparent pricing.
Are ACH payments always cheaper than credit cards?
Usually, but not always. ACH payments tend to have lower fees than credit cards, especially for large transactions, but they can be more expensive for small, frequent payments or returns.
Does passing credit card fees to customers hurt sales?
Passing credit card fees to customers can hurt sales by increasing shoppers’ costs. That said, if you disclose those fees clearly and are upfront about your approach, customers are less likely to push back.
How often should I review my credit card processing fees?
At least once a year, or anytime your sales volume changes. Fees can creep up as your business grows, pricing models change, or new payment methods are added. When you regularly review processing costs, you can spot red flags sooner rather than later, and you’re less likely to overpay.
