PSP fees or Payment Service Provider fees can be a big drag on your business expenses. By saving them, you can reduce your overall costs, which you can use to reinvest in your business or simply keep more of your hard-earned profits.
In this article, we’ll show you a few tried-and-true methods for reducing your PSP fees. So if you are looking for ways to cut costs on PSP fess, read on!
What are PSP fees anyway?
PSP or Payment Service Provider fees are the charges assessed by a company to provide payment processing services. These fees can include things like transaction fees, statement fees, and account maintenance fees.
While PSP fees may seem small, they can add up quickly – especially if you process a lot of payments each month. For example, let’s say you run a small business that processes $10,000 in sales each month. If your PSP charges a 2% transaction fee, that’s $200 in fees every month!
Different types of PSP fees.
There are three main types of PSP fees:
Interchange fee:
Interchange fees are set by credit card companies (e.g. Visa or Mastercard) and it is paid by the merchant’s bank to the customer’s bank. This fee includes a percentage of the total transaction amount plus a small per-transaction fee.Assessment fee:
The fee is determined by the card network and type, which is collected by payment processors and paid to the payment networks for evaluation of transaction batches. Assessment costs are separate from interchange charges and apply to total monthly sales.Provider markup:
The provider markup is the fee that the PSP charges for their service. It’s the “profit” that the PSP makes from processing your payments. This fee can be negotiated, so it’s important to shop around for a PSP with competitive rates.
What are some ways to reduce PSP fees?
There are a few key ways that you can save on PSP fees, here are some of the main ones
Increase your turnover
The more money you process through your account, the lower your overall fee percentage will be. This is because PSPs generally charge a lower percentage for higher volume accounts. So if you can increase your sales, you’ll likely see a decrease in your PSP fees.
Reduce chargebacks
Chargebacks happen when a customer disputes a charge on their credit card statement. While there are some instances where chargebacks are legitimate, such as if the customer never received the product they purchased, there are also cases of fraud or friendly fraud.
To avoid paying fees for chargebacks, it’s important to have a clear and easy-to-understand returns and refunds policy. You should also keep an eye out for suspicious activity, such as unusually large orders or orders from new customers using multiple credit cards. This will help to reduce the number of chargebacks you receive.
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Make your business low risk
Certain businesses are considered to be high risk by PSPs, which can result in higher fees. These businesses include those that sell digital goods, have a high return rate, or are in an industry with a lot of fraud.
If your business is considered high risk, there are a few things you can do to reduce your fees. First, you can try to negotiate a lower rate with your PSP. You can also look for a PSP that specializes in high-risk businesses, as they may have lower fees. Finally, you can take steps to reduce the risk of chargebacks, such as implementing fraud prevention measures or offering customer support.
Set a threshold for small transactions
Some PSPs charge a higher fee for small transactions, so it’s important to set a threshold for these types of charges. For example, you might set a minimum purchase amount of $10 or $20 for credit card purchases. This will help to reduce the number of small transactions that are processed, and as a result, the fees you pay.
Shop around for a PSP with competitive rates
Not all PSPs are created equal – some have higher fees than others. So it’s important to compare the rates of different providers before you choose one. By shopping around, you can find a PSP with rates that fit your business needs.
Conclusion
So there you have it! These are some of the best ways to reduce PSP fees. Make sure to follow these tips and you’ll see a reduction in your costs. We hope this article was helpful. Thanks for reading!
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Get A Free Consultation
Book a free call with us to discuss how we can help you expand in new regions, scale, and get the cash flowing in your business.
