5 ways to lower your credit card processing fees

US companies should follow these steps to lower credit card processing fees ahead of changes from Visa in April.

Debit and credit card processing fees in the US can be complicated. But it’s important to understand the underlying costs involved in processing a transaction to make sure you’re not being overcharged.

Let’s say you’re a US-based company selling any type of product or service online or in a physical store. The following changes in credit card processing fees take effect in April 2018 and will apply to you.

Interchange fees and penalties: the basics 

In the US, interchange fees are a major cost for businesses. As a business owner, any of your transactions can be downgraded by credit card schemes (the largest are Visa and Mastercard). A downgrade means you don’t meet specific requirements established by these networks and will pay a higher fee. You may also be charged integrity fees – essentially, fines for not including all relevant information. All of these easily add up and account for a huge chunk of processing costs.

For American companies, Visa charges transaction integrity fees ($0.10/transaction) on your consumer or commercial debit and prepaid transactions that do not qualify for Custom Payment Service (CPS) interchange rate. In other words, if your transaction is downgraded, you will likely pay this fee as well.

Starting in April 2018, Visa will extend this fee to credit card transactions too. When performing a transaction, follow the tips below to take control of your interchange costs and avoid extra fees.

1: Use an Address Verification Service for credit cards

Address verification service (AVS) is a system that verifies the cardholder’s billing address with the card issuer. AVS is a well-known fraud-fighting tool and has a big benefit in the card-not-present world. But not many know that this can play a major role in your cost savings.

Visa and Mastercard both support AVS globally. In the US, Visa incentivizes businesses to use AVS by providing a lower interchange rate when you perform an AVS check on transactions.

Example of your savings: A card-not-present Visa rate on a traditional credit card is roughly 1.80% + $0.10. Without AVS, your rate would be as high as 2.30% + $0.10. That’s almost 50 basis points savings on your interchange, and in addition, starting in April, you will save the $0.10 in integrity fees.

If you work with Adyen, follow the steps in our documentation to submit your AVS data.

Customer pays a merchant who wants to lowering their credit card processing fees

2: Settle transactions quickly 

Settling your transactions in a timely manner helps reduce interchange downgrades. For most US cards, the capture (clearing call) must happen within one day of the authorization to qualify for the lowest interchange rates, except for certain travel and entertainment businesses, which can be captured within 8 days. If you are working with Adyen, set the capture delay to either “Immediate” or “1 day” to benefit from the reduced costs.

3: Send customer service info for transactions 

For card-not-present transactions, merchants should send identifying information about the transaction, such as their company's URL or email address. This will be shown on the cardholder’s statement and helps the shopper identify what they paid and to whom. It also lets the shopper know who to reach out to if there’s a problem. The transaction will be downgraded if this information is missing.

4: Include transaction-specific data 

Certain types of merchants may send additional transaction information to lower an interchange rate. If your company is B2B, working with business clients instead of consumers, you can submit transaction-level information (line item details and the tax amount, for example) to qualify for Level 2/3 interchange rates. 

5: Don't enter credit card details manually 

Whenever possible, particularly in Point of Sale settings, avoid entering credit card details manually. Always swipe a card or use a chip-and-PIN entry. This not only improves security processes in the store, but also ensures that you can benefit from a lower interchange rate. 

Learn more about credit card processing fees

These are just a few simple steps you can take to avoid higher interchange rates and integrity fees. Adyen will always work with its customers to ensure they get the lowest fees based on rules set by the major card networks.

Our team of payments experts is also on hand to answer further questions. To learn more about Adyen, send a note to Salessupport@adyen.com or click below.

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