Card acceptance fees too high? Shop for a new merchant processor


Your Business Credit
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

Ask Elaine a question or read her prior answers in the 'Your Business Credit' archive.

Question Dear Your Business Credit,
I own a franchise business that deals with fire and water damage incidences for residential and commercial properties. Most work is billed to insurance companies. The insurance company then pays the insured direct. We are responsible for collecting payment from the insured.

Many insureds like to use a credit card for payment. Obviously, with this comes a fee to my business. I already pay a high percentage of my revenue for royalties to my franchisor and now I am forced to pay another percentage for credit card processing. My average job is $3,500. At a 10 percent royalty and a 5 percent processing fee, that is $525 of my revenue. Is there any way around this? -- Joseph

Answer Dear Joseph,
Yikes! Those are a lot of fees to be paying. I can see why you are frustrated.

I wish I could give you a quick way to put your credit card fees on a diet, but in this case, you'll have to do some legwork. Get those fees in shape now and you'll see rewards all year round.

The first step is to shop for a better merchant processing contract. Contracts aren't all the same, and small details make a difference in what you pay. Ask other merchants in your franchise chain which firms they are using. Since they have similar businesses to yours, a merchant account provider who offers them good rates may be a good fit for you, too. Sometimes trade associations have a relationship with a merchant account provider, too, so if you belong to such a group, it may be worthwhile to inquire about this.

Of course, since you signed a contract with your current processor, you may have to wait until it ends to switch. But start doing the research now to find out what you need to do to cancel the contract if you find a better deal. 

If you can't get a better deal on your merchant processing account, you may want look into adding a surcharge for credit card usage, which I discussed in a previous column, "Merchants can usually add credit card fees." The advantage is it may let you offset some of your costs. The disadvantage is that any time you pass along extra costs, you are likely to get some pushback from customers. 

Instead of adding a surcharge, you may want to promote other payment options to the insured. People may be choosing credit card payments because it seems easy, but they could be open to other options. If your franchisor allows you full control over your website, consider highlighting the other choices on a page that says "Payment options." If you can offer the options of payments by ACH or checks, these could save you money. Ask your banker for suggestions on payment options you may not have considered. You'll also need to check with your franchisor to make sure any new payment policies you add do not violate the agreement you signed.

Given that you are paying so much of your revenue to the franchisor, I'd suggest you get your other costs in shape for spring, too. The more you can do so -- without hurting the quality of the service you deliver -- the greater the profits you will take home.

Every quarter, ask yourself some key questions:

  • Are your labor costs in line with your overhead?
  • Is the cost of leasing or owning your location worth it? Or could you be getting more value by moving somewhere else?
  • Are you getting the best prices from suppliers?
  • Are there ways you can lower overhead by improving energy efficiency?
  • Are there other inefficiencies in how you operate that you can save money by fixing?
  • Are you auto-paying for services you no longer need?
  • Can you lower costs for travel by cashing in some of the rewards points for your credit cards?

Clearly, you're thinking frugally when it comes to your credit card costs. Make sure you bring that same mindset to all of your overhead. You'll be surprised at the savings you can achieve by devoting just one business day to this.

See related: Minimize costs of card acceptance without surcharges, Can you ditch your merchant account for a better deal?, Beware shady merchant processing contracts

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Published: April 13, 2015

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