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Getting the Cheapest Credit Card Processing

It is not difficult to get the cheapest credit card processing in Canada. You need to know what to look for and make sure you work with the best payment processor.

The truth about fees in credit card processing

The average interchange rate paid by merchants is about 1.81%. If you want to accept Visa and MasterCard, you’re not going to get below that on average. Any payment processor that tells you that they are cheaper than interchange is almost certainly hiding something. They are not going to lose money on payment processing.

Interchange is the non-negotiable costs that come from the credit card banks. That is the base cost. This is not the end cost that merchants pay. There are markups from payment processors. If that’s getting confusing, you can read here about the credit card processing industry.

Most merchants are paying 3% or more to credit card processing companies. Here’s what to look for to get the cheapest credit card processing.

Figure out if a merchant account or an aggregator account is cheaper for your business

There two main types of accounts you can have to accept credit cards. You can either get a dedicated merchant account for your business or you can have a shared merchant account that is used by many businesses at once. 


Merchant account

A merchant account is like a bank account. It is an account that is specific for your business. When you have your own merchant account, it is customized for your business and considers things like the amount of dollars you process, the average transaction size, and the different types of credit cards you accept. If you process more that $100,000 per year in credit card payments, it’s time to get a merchant account. It will save you money by reducing your credit card processing fees.

When you get your merchant account set up, make sure you work with a great payment processor that will set up the options that are optimal for your business so you can save. Things such as using the right merchant category code (MCC) makes a difference in your payment processing cost.


Payment aggregator account

An aggregator account is basically a shared merchant account. These are the accounts you get from great companies like Paypal, Square, and Stripe. They are fast to sign up and have no monthly fees. If you are processing below $100,000 per year, they are likely a good option. Once you get over $100,000 per year, the high transaction rates, like 2.9% and $0.20 per transaction, becomes higher than the lower rates with a true merchant account. This even considers the $10 per month fee that is generally charged with merchant accounts.

Put effort to accept the cheapest credit card types

The cost to you as a merchant is different depending on which credit card your customer is using. For example, the three most popular credit cards are Visa, MasterCard, and American Express. But these credit cards have different prices to you. In general, the order from cheapest to most expensive is MasterCard, then Visa, then American Express. For a simple transaction, here’s a baseline range for the different card brands:

  • MasterCard: 1.3% to 1.86%
  • Visa: 1.37% to 1.95%
  • American Express: 1.6% to 2.4%

If you can sway your customers to use MasterCard more, you’ll end up having cheaper payment processing. Now, each card brand also has different credit card types. Overall, corporate cards and rewards cards have higher fees. Basic cards have lower fees. 

As an example, if most of your customers are fancy corporate people, they probably have fancier credit cards. That will cost you more. The interchange tables show the difference so you know the true base costs. If you can get your customers to use more basic credit cards, you’ll save money.
Now keep in mind, debit cards are cheaper than credit cards. If you only accept debit, you’ll save even more. However, many consumers want to use credit cards these days. Many merchants also find that they get more customers and sales if they accept credit cards.

Attempt to always use the cheapest payment processing transaction method

You can tap a credit card (or you mobile phone), you can insert it with chip-and-pin, swipe it, use online payments, or manually enter a card. These methods have different rates charged to merchants. The order from cheapest credit card processing to most expensive is:

  1. Chip-and-pin or tap-to-pay
  2. Swiping a credit card
  3. Recurring payments (subscription payments)
  4. Online payments or manually entering credit card numbers
Consider the above payment methods. If you can ever use chip-and-pin or tap-to-pay, that is the method that will be the cheapest for your business.

Avoid international fees to get cheap credit card processing

When you accept credit cards that are from out of the country, there is an international processing charge. This charge is generally around 0.11%. Some payment processors will mark up the international charge even more, so you should watch out for it. As a side note, Clearly Payments never marks these up. If you can focus on accepting credit cards from your home country, you’ll save on payment processing rates.

If you get to the point where you are accepting a lot of USA credit cards, for example, it might be time to set up a USA merchant account. This way you will not be paying the international fees.

Use a cheap payment processor with transparent pricing

There are several different pricing methods in payment processing. Overall, stay away from tiered pricing that uses MDR. The pricing is so complex that it’s very difficult to know what you’re actually paying. Most merchants are on tiered pricing and they are paying too much. This is one of the reasons we never use tiered pricing. It’s against our mission to drive down the cost of accepting credit cards.

The best way to get the cheapest credit card processing is to use membership pricing, flat fee pricing, or interchange plus (cost plus) pricing. 

  • Membership pricing: you pay a flat monthly fee and only pay wholesale cost (interchange cost). This is great because the bigger you get, the more you save.
  • Flat fee pricing: you pay a flat fee, such as 2.5% and $0.10 per transaction for any card.
  • Interchange plus (cost plus) pricing: you pay the wholesale cost with a transparent markup, such as 0.20%. 
The above three methods are merchant friendly and give you the best chances at getting the cheapest credit card processing.
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