Looking at your merchant statement every month can be disheartening. You are the one driving traffic, doing checkout optimisations, and sending out the ideal products. However, a big part of that revenue, which has gone through the line item of “payment processing fees”, disappears at the end of the month.

Doesn’t it feel like a tax on your success?

A lot of merchants consider these payment processing fees as a business’ fixed costs that cannot be avoided, just like rent or electricity. But that is not true. The truth is that payment fees are not the same for all; they vary depending on the way transactions are processed, and not on the amount of sales made.

If your system is not up to scratch, then expect to pay more for each swipe, dip, or click. The silver lining is that most of these additional charges are due to self-inflicted mistakes, which can be rectified.

Here are the six most common mistakes that happen in business and the way out of them.

1. Using the Wrong Pricing Model

The biggest mistake often happens before you even process your first transaction: signing up for the wrong pricing structure.

Many businesses choose “tiered pricing” because it looks simple. The processor groups transactions into buckets like “Qualified” (low rate) and “Non-Qualified” (high rate). It sounds easy, but it’s often a trap. The processor decides which transactions land in which bucket, and suddenly, you find most sales landing in the expensive tier without knowing why.

To control costs, you need transparency regarding your payment processing fees. A model like Interchange-plus shows you exactly what the card network charges versus what the processor charges. This clarity highlights where your money is actually going.

2. Failing to Provide Level 2 and Level 3 Data

Did you know that the more information you give the bank, the less they charge you?

If you process B2B (Business to Business) or government transactions, card networks expect more data than just a card number and amount. They look for “Level 2” or “Level 3” data, such as tax IDs and invoice numbers.

When you skip this data, the network views the transaction as “higher risk” because it lacks detail. Consequently, the transaction downgrades to a lower qualification tier, and your rate shoots up. If you deal heavily in B2B sales, automating this data entry could save you thousands.

3. Settling Your Transactions Too Late

In payments, speed equals trust. And trust equals lower fees.

When you accept a payment, those funds sit in a virtual holding pen until you “batch” them out for settlement. The golden rule is to settle every 24 hours.

If you wait longer, say, 48 hours, the interchange rate increases. Card networks view delayed settlements as riskier because a lot can happen in a few days, such as returns or fraud. By automating your system to settle every evening, you ensure you always qualify for the lowest possible base rate.

4. Ignoring Address Verification Service (AVS)

Fraud doesn’t just lose you merchandise; it hikes your processing rates.

When a customer enters their card info, most gateways ask for a billing Zip Code or address (AVS). If you configure your settings to ignore AVS mismatches to reduce friction, you are inviting higher payment processing fees.

Transactions that pass AVS checks are considered safer by issuing banks. If you bypass this security step, the transaction is flagged as riskier, and the fee goes up. It is a double-edged sword: you risk higher fraud, and you pay more for the privilege.

5. Mismanaging Chargebacks

Chargebacks are the bane of any merchant’s existence. But beyond the immediate loss of funds and penalty fees, high chargeback rates permanently damage your standing.

If your business crosses a certain threshold (usually 1% of transactions), card networks may label you a “high-risk merchant.” Once you are in this category, your standard processing fees skyrocket. You might even be forced into a “reserve” situation where the processor holds back a percentage of your daily sales. Preventing disputes isn’t just good service; it’s a cost-saving strategy.

6. Entering Card Details Manually (Keyed Entry)

Sometimes technology fails, or a customer calls in an order. In these moments, it is tempting to type the card numbers into the terminal manually.

This is known as a “keyed-entry” transaction. To card networks, this is the riskiest transaction type because the physical card isn’t present to be read. Consequently, keyed-entry transactions carry significantly higher rates than swiped or dipped ones. While sometimes unavoidable, ensure you use a virtual terminal that utilises security checks to mitigate the risk and lower the rate as much as possible.

Final Thoughts

Payment processing often feels like a black box, but it shouldn’t be. The tax you pay on every transaction isn’t set in stone. By paying attention to details how you settle batches, what data you pass, and how you configure security, you can stop revenue leaks. You work too hard for your money to lose it on technicalities. Fix these mistakes, and you will see the difference in your bottom line immediately.