Financials and Cash Flow

Five ways to manage payment processing costs

Understand what may affect payment processing fees and simple ways to save.

Published: July 14, 2015
Updated: December 16, 2016

Accepting credit and debit card payments is a cost of doing business — and a great way to provide convenience to your customers and potentially grow your business.

It's important to understand payment processing fees and how to manage them. Fees are most commonly affected by the type of card used, where the card is accepted, how your account is set up, and how quickly your business settles transactions.

Use these simple tips to help reduce your payment processing costs:

1. Swipe or insert cards when possible

When accepting payments in person, swipe or insert cards as often as possible to take advantage of card-present rates. Avoid using a keypad to manually enter card information, which can be more costly and time-consuming, and risks data entry errors. Reduce hand-keyed transactions by properly maintaining and cleaning card readers so they capture all information.

If manually entering card information is unavoidable, such as if a card is demagnetized, minimize costs by properly training your staff to answer all questions prompted by the card terminal.

2. Regularly evaluate your payment solutions

Make sure you have the right solutions in place to meet your changing business needs and manage costs:

  • Regularly evaluate the payment processing solutions you have in place to ensure you have the right ones for your business

  • Contact a payment processor to conduct a competitive review of your monthly statements

  • Ask about special offers for new customers, such as equipment discounts or rebates

3. Avoid voice authorizations

If a transaction is declined, your point-of-sale terminal might prompt you to phone the call center. Voice authorizations may be less secure and have trouble capturing the electronic authorization codes needed for lower transaction rates. Because of this, payments with voice authorization are often subject to higher fees. You'll also be charged for the service, even if the transaction isn't authorized. Avoid unprompted voice authorizations, or ask the customer for another form of payment.

4. Send settlements and respond on time

For many businesses, transaction settlements are sent separately from when the payment is authorized. These are usually sent in batches that include multiple settlements at once. Sending settlements within a specific time frame can help you avoid higher costs. Typically, when payments are made face to face, settlements should be submitted within one day to qualify for the lowest rates. When the card is not present, such as for online orders, merchants have up to a week to send settlements before being subjected to higher costs.

Make sure your terminals are connected to a reliable data or phone line so this does not interfere with sending timely settlements.

Also be sure to respond to media retrievals (where customers ask for more information about a transaction), chargebacks, and disputes in a timely manner to avoid related costs.

5. Avoid authorization and settlement amount mismatches

Discrepancies between your authorization amount and your settlement amount can lead to higher costs. However, specific industries have some leeway with variations in these amounts. For example, in businesses such as restaurants where tipping is commonplace, the cardholder usually determines the tip amount after the payment has been authorized. In other industries, such as hotels, authorization occurs before all incidentals to the final transaction are known. Talk to your payment processor to see how you can manage authorizations and settlement discrepancies.

Understanding these five tips can help you manage your payment processing costs.  

If you're interested in learning about Wells Fargo Merchant Services, contact your local Wells Fargo representative or visit