Why Are My Merchant Account Fees So High? (And What You Can Actually Lower)

You looked at your merchant statement, did the math, and the fees came out higher than the rate you were quoted. Maybe a lot higher.

You are not imagining it, and you did not do anything wrong. A merchant statement has a lot of moving parts, and the rate on the front of the agreement is only one of them.

Here is why fees end up higher than expected, which parts you can actually change, and which parts nobody can.

Why are my merchant account fees so high?

Usually it is one of five things, and often more than one:

1. Your card mix changed. Rewards cards, business cards, and cards typed in by hand cost more to accept than a basic debit card swiped in person. If more of your customers are paying with premium cards, your cost goes up even though nothing on your account changed.
2. Your pricing model hides the real cost. Some pricing structures move transactions into higher-priced buckets without telling you why.
3. Monthly fees add up. Statement fees, PCI fees, gateway fees, and minimums are small on their own and large together.
4. Your rate went up quietly. Most processing agreements let the processor change pricing with notice, and that notice is often a line on a statement nobody reads.
5. Your volume is small compared to the fixed fees. A $25 monthly fee is almost nothing on $50,000 a month and a lot on $3,000.

The quickest way to see your real cost is your effective rate: total fees divided by total sales. I walk through exactly how to find it in how to read your merchant statement.

What part of my fees can I actually lower?

Your fees come in three layers. Two of them are set by the card brands, and only one is negotiable.

• Interchange. Set by Visa and Mastercard and paid to the bank that issued your customer’s card. The rates themselves do not change from processor to processor. What can change is which rates your sales qualify for. An account set up with the right business category and the right way of accepting cards, whether that is in person, keyed in, or online, lands in lower interchange categories than one that was set up wrong. That is worth having someone who knows the setup look at.
• Card brand fees. Also set by the card brands. Not negotiable either.
• Your processor’s markup. This is the part your processor sets, and the part you can ask about.

That means the honest goal is not “get my fees to zero.” It is “make sure my account is set up right, and that I am paying a fair markup on top of costs nobody can negotiate.”

The fees worth asking about

These are the lines I look for first on a statement:

• PCI non-compliance fees. Charged when your yearly security questionnaire is not on file. Often fixable in an afternoon.
• Non-qualified or mid-qualified charges. Transactions moved into a higher-priced bucket. Worth asking why.
• Equipment leases. Leases on card terminals can run for years and cost many times what the terminal is worth.
• Monthly minimums. A charge if your fees fall below a set amount.
• Fees that appeared without explanation. If you do not recognize a line item, ask what it is and when it started.

When you call your processor, the question to ask is simple: “Can you walk me through every fee on my last statement, and tell me which ones are your markup?”

Why high-risk accounts cost more

If you have a high-risk account, some of the difference is real and expected.

A high-risk account is underwritten to allow for more chargebacks and larger sales. The processor carries more exposure, and the pricing reflects that. That is different from paying more because of fees nobody explained.

So the question for a high-risk merchant is not “why am I not paying retail pricing.” It is “do I understand every line, and is the markup fair for what the account allows me to do.” If you are not sure what makes a business high risk in the first place, start here.

“My fees are only a few hundred dollars a month. Is this worth my time?”

Try the math on a year.

If you process $15,000 a month and your effective rate is one point higher than it should be, that is $150 a month, or $1,800 a year, for doing nothing differently.

Checking takes one statement and about ten minutes, or you can send it to someone who reads them every day.

Frequently asked questions

Is a flat rate cheaper than interchange plus?

Usually not. A flat rate has to be set high enough that the processor does not lose money on its most expensive cards, so you pay that same rate on the cheaper ones too. It is easier to read, but it is rarely the lowest you could pay. Interchange plus shows you the real cost and the markup separately, which makes it easier to see what you are paying for.

Can I negotiate with my current processor instead of switching?

Often, yes. Ask for an itemized review of your fees first. If nothing changes, you have a clear picture to compare against other offers.

Will switching processors fix high fees?

Only if the problem is the markup or the extra fees. Switching does not change interchange rates, although a correctly set up account can qualify for better ones. Switching can also come with an early termination fee, so read your current agreement before you move.

Want someone to read your statement with you?

Send me your last three merchant statements and I will tell you your effective rate, which fees are worth questioning, and whether your pricing makes sense for your business. Start your free statement review here.

About the author: Julie Franke is a Certified Payments Professional (CPP) and has led Electronic Merchant Services since 2015. She has worked in payments since 2009 and specializes in helping high-risk and high-ticket businesses get approved, stay approved, and keep their money moving. EMS has served business owners since 2001.