How Much Are Credit Card Processing Fees Taking Out of Your Subscription Revenue?
Subscription revenue is the financial foundation of most newspapers and publishers. But every time a subscriber pays by credit card, payment processing costs take a small portion of that revenue.
For publications processing thousands of recurring transactions, credit card processing fees for publishers can add up to a significant annual expense. A fee that seems relatively small on an individual subscription payment can look very different when multiplied across monthly and annual renewals, print and digital subscriptions, and a large subscriber base.
That makes understanding payment costs an important part of protecting subscription margins.
For publishers looking to reduce those costs, the important question isn’t simply:
“What is our credit card processing rate?”
It’s:
“How much of our subscription revenue are we spending every year to accept credit cards, and what could we do to reduce the amount we absorb?”
Cash Discount, ACH and payment cost optimization are several strategies publishers can evaluate. But first, you need to understand what your current payment mix is costing you.
Why Credit Card Processing Costs Matter More at Scale
Publishers have a unique payment environment.
A publication might have tens of thousands of subscribers, with payments spread across:
- Monthly subscriptions
- Quarterly subscriptions
- Annual subscriptions
- Print subscriptions
- Digital subscriptions
- Print and digital bundles
- Automatic renewals
- Credit and debit cards
- ACH payments
When a large portion of subscribers pays by card, processing costs are continuously deducted from subscription revenue.
That makes payment acceptance more than an operational consideration. It can become a subscription profitability issue.
Your processing rate also isn’t necessarily the only factor determining what you pay. Actual costs can be affected by transaction characteristics, card mix, merchant pricing and other processing fees.
Understanding the true credit card processing fees for publishers requires looking beyond a quoted rate and examining the actual costs associated with processing subscription payments.
Before attempting to lower those costs, establish what your publication is actually spending today.
What Could Card Processing Costs Look Like for a Publisher?
Let’s look at a hypothetical publisher.
Important: The calculations below are illustrations only. They are not estimates of what a particular publisher will pay or save. Actual processing costs and Cash Discount results depend on a publisher’s rates, transaction characteristics, subscriber payment mix and other factors.
Assume the publisher has:
50,000 subscribers
with an average subscription payment of:
$15 per month
That represents:
50,000 × $15 = $750,000 in monthly subscription revenue
Over 12 months:
$750,000 × 12 = $9 million in annual subscription revenue
Now let’s assume, strictly for illustration, that 80% of that revenue is paid by card.
That would represent:
$7.2 million in annual card volume
For simplicity, assume the publisher’s effective card processing cost averaged 2.5% in this hypothetical scenario.
The calculation would be:
$7,200,000 × 2.5% = $180,000
In this example, the publisher would be spending approximately $180,000 annually processing subscription card payments.
Again, this is not a Payway quote or an estimate of what an individual publisher will pay. It simply demonstrates why seemingly small payment costs can become substantial when multiplied across a large recurring subscriber base.
What Happens as Subscription Volume Grows?
The same principle becomes more important as subscription revenue increases. If a publisher acquires more subscribers, increases subscription prices or converts more subscribers to automatic payments, payment volume can grow.
That’s good news for revenue.
But if most of that additional volume is processed on cards, payment processing costs can grow along with it. That means publishers shouldn’t necessarily wait until costs become a major budget issue to evaluate their payment strategy.
Understanding the relationship among:
subscription volume + payment mix + processing costs
can reveal opportunities that might otherwise be overlooked.
What If a Publisher Didn’t Have to Absorb All of Those Costs?
This is where Cash Discount can enter the discussion.
A properly structured Cash Discount Program establishes a standard price while offering customers a discount when they use an eligible cash-equivalent payment method, such as ACH or check. Payway’s Cash Discount Program is designed to support online businesses and recurring-payment models.
Cash Discount doesn’t lower the underlying interchange rate on a card transaction.
Instead, it gives businesses another way to address how much of their payment acceptance costs they ultimately absorb while providing an incentive for customers to choose eligible non-card payment methods.
That’s an important distinction for publishers evaluating payment cost-reduction strategies.
What Could the Financial Impact Look Like?
Return to our hypothetical publisher spending $180,000 annually to process card-based subscription revenue.
Suppose changes to the publisher’s payment strategy resulted in it absorbing less of those costs.
For illustration:
- A 25% reduction in the costs absorbed would equal $45,000 annually
- A 50% reduction would equal $90,000 annually
- A 75% reduction would equal $135,000 annually
These are mathematical scenarios, not projections of Cash Discount savings.
The actual financial impact would depend on what subscribers choose to do, the publisher’s Cash Discount structure, its current processing arrangement and the ultimate mix of card and non-card payments.
That’s exactly why publishers should analyze their own transaction data rather than rely on a generic savings percentage.
Could ACH Change the Equation?
Potentially. For an online Cash Discount Program, ACH is particularly relevant because it’s an electronic alternative to card payments.
Nacha, which governs the ACH Network, identifies ACH as well suited for scheduled and recurring payments, which makes it particularly relevant for newspapers and publishers with subscription-based revenue. Read Nacha’s ACH Payments Fact Sheet more for information.
A publisher could continue accepting cards from subscribers who prefer them while giving subscribers an incentive to consider ACH through a Cash Discount Program.
The objective isn’t necessarily to eliminate cards.
It’s to look at the publisher’s overall payment mix and ask:
Are we using the most cost-effective combination of payment methods for our subscription business?
Cash Discount Isn’t the Only Way Publishers Can Address Processing Costs
Publishers should also avoid assuming Cash Discount is automatically the best strategy.
Reducing credit card processing fees for publishers doesn’t necessarily depend on a single strategy. Cash Discount may be one option, but ACH adoption, processing pricing and interchange optimization can also affect the overall cost of accepting subscription payments.
Depending on your transaction profile, opportunities to manage costs could include:
- Encouraging additional ACH adoption
- Evaluating current merchant pricing
- Reviewing cost-plus or interchange-plus pricing
- Performing interchange optimization
- Reviewing commercial and corporate card costs where relevant
- Implementing a Cash Discount Program
Several strategies may also work together.
For example, a publisher might optimize card acceptance while simultaneously increasing the percentage of recurring subscriptions paid through ACH.
The starting point is the same:
Know what you’re paying today.
What About Surcharging?
Publishers researching Cash Discount frequently encounter another strategy: credit card surcharging.
They aren’t the same.
With Cash Discount, customers receive a lower price when they use an eligible payment method. A surcharge instead adds a fee to eligible credit card transactions. The two approaches also have different considerations and requirements.
If you’re evaluating the two approaches, read Cash Discount vs. Surcharge: Which Option Is Best for Reducing Credit Card Processing Fees? for a more detailed comparison.
The Number That Matters Is Your Number
To answer that question, you need to evaluate your actual:
- Annual processing volume
- Subscriber count
- Average transaction amount
- Billing frequency
- Card and ACH mix
- Card types
- Processing rates
- Additional processing fees
- Recurring billing environment
Once you know those numbers, you can begin evaluating which payment cost-reduction strategies provide the greatest opportunity.
Find Out What Payment Processing Is Really Costing Your Publication
You don’t need to guess.
Payway can perform a complimentary cost analysis to evaluate your current payment processing expenses and identify potential opportunities to reduce the amount your publication spends accepting subscription payments.
If Cash Discount makes sense, we’ll help you understand the opportunity. If another payment strategy deserves consideration, your actual transaction data can help identify that as well.
Already considering Cash Discount? Learn more in The Complete Guide to Payway’s Cash Discount Program. Payway’s program is specifically designed to accommodate businesses with recurring-payment models.
Frequently Asked Questions
How much do credit card processing fees cost publishers?
There isn’t one processing cost that applies to every publisher. Total costs depend on factors such as card volume, card types, transaction characteristics, processing arrangement and other fees. Publishers should analyze their actual processing statements and transaction data to determine their effective cost.
How can newspapers reduce credit card processing costs?
Potential strategies can include reviewing merchant pricing, interchange optimization, increasing ACH adoption and evaluating Cash Discount or other payment cost-management programs. The appropriate combination depends on the publisher’s transaction profile.
Does Cash Discount lower credit card processing rates?
No. Cash Discount doesn’t directly lower the underlying interchange rate. It uses a pricing strategy that offers a discount for eligible non-card payment methods and can reduce the amount of processing costs the business ultimately absorbs.
Can publishers use Cash Discount for recurring subscriptions?
Yes. Payway’s Cash Discount Program is designed for recurring-payment businesses and can apply pricing according to payment method within recurring payment processes. [payway.com]
Can ACH help publishers lower subscription payment costs?
ACH offers publishers an alternative to processing subscription payments through card networks. It is also well suited to scheduled and recurring payment environments, according to .
Is Cash Discount the same as a credit card surcharge?
No. Cash Discount provides a lower price for eligible payment methods, while a surcharge adds a fee to eligible credit card transactions. Read Payway’s Cash Discount vs. Surcharge article for the complete comparison.
How can I determine how much my publication could save?
The best starting point is an analysis of your actual payment data and processing statements. Payway can evaluate factors such as processing volume, payment mix and current costs to help identify potential opportunities for savings.
Related Resources
Understanding Cash Discount Programs
Cash Discount vs. Surcharge: Which Option Is Best for Reducing Credit Card Processing Fees?
The Complete Guide to Payway’s Cash Discount Program
Boost Your Business with Recurring ACH Payments