How Your Business Can Avoid Credit Card Fees

Table of Contents

1. Common Types of Credit Card Fees
2. Why B2B Credit Card Fees Are Higher
3. Strategies to Avoid or Minimize Credit Card Fees
4. Alternative Payment Methods to Reduce Fees
5. Streamline Your Payments and Reduce Fees

Key Takeaways

• Credit card fees in B2B transactions can significantly impact cash flow and profitability.
• Common fees include processing, interchange, and gateway fees, but they can be reduced.
• Alternatives like EFT payments and Paystand’s B2B payment platform offer solutions to minimize or eliminate these costs.
• Shifting away from credit cards to automated payment methods can improve financial efficiency and save money.

In the B2B payments landscape, credit card fees substantially affect profitability, especially with larger, more frequent transactions. High fees can drain cash flow, making it essential for Canadian businesses to explore strategies to reduce these costs and boost profitability. While credit card payments are widely used, there are ways to reduce their impact and embrace more cost-effective alternatives, such as EFT payments and platforms like Paystand, which offer digital payment solutions tailored to B2B needs.

Common Types of Credit Card Fees

B2B businesses accepting credit cards typically encounter a range of fees, with each adding to the cost of each transaction:

1. Processing fees: Charged by payment processors to facilitate transactions, usually as a percentage of the transaction.
2. Interchange fees: Fees set by credit card networks (like Visa or Mastercard) and paid to the card-issuing bank. They are often the largest component of credit card costs.
3. Gateway fees: Fees charged by a payment gateway to process online card payments, adding to the overall transaction cost.
4. Monthly or annual fees: Some processors charge flat fees regardless of transaction volume, adding fixed costs to a business’s payment expenses.

For high-volume B2B businesses, these fees quickly add up, creating an ongoing cost that impacts profitability.

Why B2B Credit Card Fees Are Higher

Due to increased risk and larger transaction amounts, B2B transactions often come with higher fees than consumer transactions. Complex B2B payments may also require additional data (like invoice or purchase order numbers), increasing processing costs. Unlike B2C businesses, B2B companies may have limited options to pass on these fees, making it crucial to explore ways to reduce credit card dependency and gain control over payment-related expenses.

Strategies to Avoid or Minimize Credit Card Fees

Reducing credit card fees involves several actionable strategies:

1. Negotiate with payment processors: For businesses with high transaction volumes, negotiating lower rates with payment processors can yield significant savings.
2. Use tiered or flat-rate pricing: Some providers offer flat-rate or tiered pricing that may reduce overall costs compared to traditional interchange-plus rates.
3. Encourage lower-cost payment methods: Incentivize customers to use lower cost methods, like EFT or ACH payments, by offering small discounts or perks.
4. Utilize automation with platforms like Paystand: Paystand’s payment platform automates collections and offers alternatives to traditional credit card transactions, making it easier to reduce fees. Automated processes help streamline cash flow and reduce administrative costs, providing additional savings.

Alternative Payment Methods to Reduce Fees

Switching from credit card payments to lower-cost options can be a highly effective way to cut expenses for B2B companies:

• EFT payments: EFT (Electronic Funds Transfer) payments allow direct bank transfers, bypassing credit card networks and significantly reducing transaction costs.
• ACH transfers: ACH transfers are another cost-effective alternative for both one-time and recurring payments, particularly if your business has a subsidiary in the U.S. and doing a local transaction.
• Paystand’s Zero-Fee Network: With Paystand’s B2B payment platform, businesses can use a zero-fee payment network and features like Smart Match AI, which automates payment matching and minimizes reliance on costly credit card transactions. Paystand’s platform is designed for B2B needs, supporting large transactions and recurring billing, which further enhances financial efficiency.

By switching to these alternatives, B2B businesses can streamline their payment processes and reduce the financial burden of credit card fees.

Streamline Your Payments and Reduce Fees

Credit card fees in B2B payments can strain budgets and reduce profitability. Understanding common fees, negotiating rates, and shifting to alternative methods like EFT and Paystand’s B2B payment solutions can reduce costs and improve cash flow. By adopting these strategies, businesses can minimize expenses, optimize cash flow, and make payment processing more efficient. Learn more about how you can reduce fees and get paid faster with Paystand.