Negotiating Merchant Account Fees

The following text has been adapted from Fee Sweep. Download your copy of Fee Sweep here.

Negotiation image
© Depositphotos – James Steidl

One of the most important things to remember is that nearly all merchant account providers are selling the exact same product: a merchant account. To differentiate themselves they either compete on rates or market a value-added service (i.e. proprietary hardware, software, virtual terminal, payment gateways, etc.).


Step 1 – Narrow your list of providers

Once you have determined your credit card processing needs, it’s time to find a couple merchant account providers that specialize in those needs. Many providers partner with other companies to supply their payment equipment, systems and gateways, but there are also companies that are “one-stop-shops” and include everything under the same roof. Be sure to ask the provider if they directly supply, and offer support for, all of the services you will be using and the costs associated with any third-party services.

We’re Awash in Resellers

Many ISOs in the merchant services industry do nothing more than market and re-sell merchant accounts of a larger merchant account provider. These ISOs make money by either marking up the transaction rates, or supplying a product (such as a virtual terminal or e-commerce shopping cart) and charging a monthly fee for it. Always ask a company if they are supplying their own merchant account or reselling one provided by a different company. If they are reselling the merchant account, ask which company will be supplying the customer support.

Resellers aren’t all bad. Sometimes they have more pricing flexibility than the larger merchant account provider because of agreements stating that the large provider will not undercut its resellers. Resellers often supply the customer service of the accounts they sell, which can mean better and more personal customer support. In any case, be sure to research the company, and any other involved companies, before signing any documents.


Step 2 – Leverage competition

The merchant account industry is fiercely competitive. Picking more than one provider and making them compete for your business will leave you as the winner when the dust settles. On the flip side, it could also mean that you will be dealing with relentless phone calls from sales agents during the process. However, in the end, the brief nuisance will be well worth the trouble in the amount of money you will save.

Demand Interchange-plus

We’ve already established that Interchange-plus is the best rate structure, but it is worth repeating. As soon as you request Interchange-plus pricing, you will put the power on your side of the negotiating table. Just mentioning this pricing will announce to your agent that you are well-educated on merchant account rates and it will help squelch deceptive rate quoting tactics. If a provider refuses to offer Interchange-plus pricing, then kindly end the conversation with them and move on to a more reputable provider. Keep in mind that if you have a “high risk” business type, or poor credit, that you may not qualify for Interchange-plus. Once you’ve gotten the Interchange-plus quotes from your three providers, make the providers compete against each other.

Lower and Eliminate Miscellaneous Fees

We covered the other fees you might see earlier but, as a reminder, the fees below can usually be lowered or eliminated with a little negotiation. Keep in mind that these fees may go by other names. If you see a fee that you don’t recognize, ask about it.

If you see fees by any other name, get clarification on them. If they sound negotiable, then try to get rid of them. Keep in mind that these companies must make a profit too, so they might not be willing to submit to all of your demands. At the end of this book, there is a sheet that you can use to track rates and fees while comparing providers.

Negotiate the Service Length Agreement

In most cases, you will want to negotiate for a month-to-month agreement with no ETF. However, if you are confident that you are going to be in business for a long time, then a longer agreement can sometimes be in your benefit. Just make sure that the language of the contract says that the merchant account provider is held to the agreement as much as you are. You don’t want to give them the flexibility to raise your fees while keeping you locked in.


Step 3 – Close the Deal

Once you have negotiated a great deal for yourself, ask for the contract. Be sure to read the entire document. Make sure that all of the rates and fees you agreed upon are stated correctly in the contract itself and refuse to sign it if you see any discrepancies. Once you are satisfied, sign the contract, make copies for yourself before giving it back to the provider and store it in a safe place in case you need to reference it later. Do not depend on the provider to keep a safe copy for you. Create your own.

Pro Tip* – It is wise to set up a separate checking account for your merchant account deposits and to manually move your daily deposits to a different checking account that you use for your day-to-day operations. You will also want to remove the option to allow overdrafts on the account used for your merchant account deposits (many banks have this as an optional feature). Why? Your merchant account agreement allows your provider to deposit and withdraw from your attached checking account, without notice. Separating your depositary account from your primary checking account protects your operating cash in the event the provider attempts to debit large and unexpected fees or cash reserves.

What to Expect Next

As mentioned earlier, the underwriting process may require you to undergo a credit check. If you have poor credit history or a high-risk business type, you may have to settle for higher transaction rates to get approved. The entire underwriting process from application to approval/denial usually takes 2-5 business days, but can take longer if additional actions are needed. Depending on your business type and sales volume, you also may be asked to submit any or all of the following items:

  • Business license
  • Incorporation documents
  • Bank reference
  • Trade references (current suppliers or vendors with whom you have credit terms – i.e. Net 30 days)
  • Photos (exterior photos of your business with signage, and/or an interior picture of inventory or office environment)
  • A lease document, or deed
  • Marketing materials
  • Website address
  • Bank statements
  • Balance Sheet
  • Profit & Loss Statement
  • Previous merchant account statements

To mitigate risk with certain business types, some merchant account providers may want to establish a “Cash Reserve,” “Daily Discount,” or “Personal Guaranty” for your account.

Cash ReserveLike a deposit paid for an apartment, this is a cash deposit paid by you to the provider in order to establish a fund to protect the provider against losses due to fraud, malicious activities, and excessive Chargebacks.

Daily Discount – Instead of establishing a deposit upfront, this method sets aside a portion of your daily transaction income to establish a Cash Reserve.

Personal Guaranty – This establishes a reserve with the use of assets other than cash, or by associating your personal credit with the account.


You’re All Set!

In this article and in the previous sections of “Fee Sweep,” we’ve covered everything you will need to know to about getting the best rates and fees that the credit card processing industry offers. Now it's time to put your new knowledge to work! If you're ready to choose a merchant account provider, head over to our Top Rated Processors page. To get rate quotes from top providers, fill out our matching questionnaire. If you have any questions or concerns, please let us know through our contact page or in the comment section below.


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The preceding text has been adapted from Fee Sweep. Download your copy of Fee Sweep here.

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