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Home » Blog » Fueling Savings: How Propane Merchants Can Reduce Credit Card Processing Fees

Fueling Savings: How Propane Merchants Can Reduce Credit Card Processing Fees

  • May 8, 2025

Introduction

For propane merchants, every dollar saved has a direct impact on profitability. High credit card processing fees not only reduce margins but also constrain cash flow—making it difficult to invest in equipment, inventory, or growth. By reducing these costs, propane businesses can improve daily operations, boost merchant cash flow, and streamline reconciliation. In this post, we outline actionable strategies to trim these fees while enhancing efficiency and ensuring transactions, batch settlements, and funding timelines work in your favor.

MSG Payment Systems has been at the forefront of helping propane focused software companies and merchants to streamline their payment processing. With over 25 years of deep experience in the propane industry, we understand the unique challenges faced by propane merchants and we know the ins and outs of finding efficiencies for just about every payment processing challenge. 

Credit card processing fees are no exception. Propane merchants often face uncertainty with what types of fees they’ll be hit with, and the best way to navigate them. While various aspects of this landscape change often (e.g. surcharging and PCI compliance), there are many best practices that can be applied regardless to reduce credit card processing fees and streamline operations for merchants.

Understanding Credit Card Processing Fees

Before taking steps to reduce fees, it’s crucial to understand the three main components of credit card processing costs:

1. Interchange Fees:
Set by the card networks and paid to the issuing banks, these fees can account for 75–90% of the total processing cost. They vary based on the card type and how the transaction is processed. Although non-negotiable, ensuring each transaction qualifies for the right category can optimize your fee structure.

2. Card Network Assessments:
Often referred to as dues or assessments, these are a small fixed percentage (roughly 0.14%) of the transaction charged by brands like Visa and Mastercard. They cover operating expenses and remain unchanged regardless of processor or merchant choices.

3. Processor’s Markup (Merchant Discount):
This is the fee added by your payment processor on top of the interchange and network fees. It’s best to find a processor that does competitive pricing right out of the gate – reducing negotiating and haggling.

By clearly analyzing your processing statements and separating these components, you can focus on adjustments like negotiating the processor’s markup and qualifying for lower interchange rates—both critical in achieving cost-effective transaction batch settlement and better merchant cash flow.

Industry-Specific Challenges for Propane Merchants

Propane merchants encounter unique challenges due to industry-specific transaction classifications. Propane sales are categorized differently by the major networks:

  • Visa groups propane dealers under MCC 5983 (Fuel Dealer/Emerging Market),

  • MasterCard, Discover, and American Express label them as MCC 4900 (Utilities)

Each classification has its own interchange rates—for instance, Visa may charge around 1.43% + $0.05 per transaction, while MasterCard might offer a rate as low as 0.00% + $0.45. However, a single merchant account can only use one MCC code. If your account is set to one category, transactions processed by the other card network may incur higher fees.

Some businesses manage this by maintaining two separate merchant accounts—one for each MCC—but this solution adds complexity, extra fees, and administrative burdens. A more effective approach is to partner with a payment provider that can support dual MCC configurations (which MSG does) or customize industry programs. For example, a knowledgeable partner could register your business to process transactions under both MCCs or use technology that dynamically routes transactions into the correct category. Such expertise ensures the lowest possible interchange rates are consistently applied, making reconciliation and rapid deposit methods much more efficient.

Optimizing Transaction Data: Level 2/3 Data and Tokenization

Advanced data optimization can further reduce fees by ensuring transactions qualify for the best available interchange rates:

  • Level 2/3 Data: Propane suppliers serving commercial or government clients often process large transactions using business or purchasing cards. By submitting additional data (such as sales tax, customer codes, invoice numbers, and line-item details), you qualify for enhanced interchange rates. In some cases, providing Level 3 data can lower processing costs by 30–40%. This optimization is particularly beneficial on high-value invoices, often seen in commercial propane deliveries, where incorporating Level 3 data may unlock special “Large Ticket” programs that reduce rates significantly. It’s important to note that the data for the transactions needs to be handled perfectly, or a transaction downgrade may occur, resulting in significantly higher fees.

 

  • Tokenization: Replacing sensitive card data with secure tokens not only improves the security of recurring payments (like auto-pay programs) but also reduces the compliance burden associated with storing card numbers. While tokenization itself doesn’t alter interchange rates, it minimizes potential PCI DSS exposure and helps streamline batch settlement, leading to faster deposits and improved cash flow. A secure token-based system ensures that even if data is compromised, the actual card information remains protected, thereby lowering costs related to data breaches and compliance audits.

Together, enhanced data submission and tokenization are pivotal in achieving optimal faster deposits, aligning with a business banking strategy that favors speed and security.

Choosing the Right Pricing Model: Interchange Pass-Thru vs. Flat-Rate

The pricing model you select for processing fees can both have an impact on costs and how you forecast:

  • Interchange Pass-Thru: This model transparently passes the exact interchange and network fees plus a fixed markup to the merchant. It is generally the most cost-efficient option since it reflects the true cost of each transaction. Propane merchants benefit from the transparency and lower fees associated with interchange pass-through pricing—especially when special rates (such as utility or Level 3 discounts) are applied. Detailed statements, though less simple at first glance, simplify the process of reconciling transaction batches.

 

  • Flat-Rate Pricing: Flat-rate pricing offers propane businesses a straightforward solution. With one consistent rate applied to every transaction, you enjoy transparency and ease of reconciliation, eliminating the need to track fluctuating interchange rates or decipher intricate fee categorizations. This predictability simplifies your budgeting and cash flow management, making it a seamless option for businesses that want to focus on growth without worrying about ever-changing processing costs.

Implementing Surcharging to Offset Fees

Another tactic for reducing processing costs is surcharging—adding a small fee to credit card transactions that passes some or all the processing fee onto the customer. Key considerations include:

  • Credit Cards Only:
    Surcharges must be applied only to credit card transactions—not to debit or prepaid card payments. This ensures compliance with regulations and card network rules.

  • Compliance with Caps:
    Under federal law and network policies, surcharges are capped at 3% or may be restricted by the actual processing cost.

  • State-by-State Regulations:
    Surcharging is subject to state laws. Some states such as Connecticut, Massachusetts, and Maine prohibit credit card surcharges, while others have specific requirements for disclosure and fee application. It is essential to verify the rules as you implement surcharging.

  • Transparency and Customer Experience:
    Full disclosure is required; Merchants must provide at least a 30 day notice to card brands and their acquirer of their intent to surcharge, and offer alternative payment options. This approach balances cost recovery with customer satisfaction.

When implemented correctly, a surcharging strategy can help recover the cost of processing fees without compromising transparency or compliance, all while supporting smoother reconciliation of daily transaction batches. However, it’s always critical to confirm with your acquirer and the card brands you work with for the most accurate information on regulations and how to properly handle these fees at the time of implementation. 

Faster Funding & Batch Settlement for Improved Cash Flow

A prompt funding timeline is critical for maintaining robust merchant cash flow. Traditional funding typically takes two to three business days after submitting a batch of transactions. In contrast, modern processors offer next day funding, and sometimes even same day funding, whereby deposits are made in your bank account by the following day or the same day.

Key benefits include:

  • Quicker Access to Funds:
    With next day or same day deposits, cash from sales is rapidly converted into working capital—essential for routine expenses such as fuel, supplier payments, and payroll.

  • Simplified Reconciliation:
    Daily deposits that match the previous day’s batch make it easier to verify that each transaction has been processed and funded correctly. This streamlined approach minimizes errors and enhances overall financial management.

  • Enhanced Liquidity:
    Rapid deposits improve your liquidity and allow you to take advantage of early-pay discounts or respond to urgent cash needs, thereby supporting operational stability during peak periods.

By ensuring that transactions are batched promptly and deposits made on time, propane merchants can achieve a clear and predictable funding timeline that bolsters both banking deposit processes and overall business banking operations.

Security & PCI Compliance: Protecting Your Bottom Line

Maintaining PCI DSS compliance is not only about protecting cardholder data—it’s a cost-saving strategy. Non-compliance or a data breach could result in fines, legal fees, and significant financial losses.

Best practices include:

  • Utilizing PCI-Compliant Systems:
    Select technology  that meets industry standards for encryption and security. Automated tools can help manage compliance and reduce the number of manual audits required.
  • Leveraging Tokenization:
    Tokenizing payment data reduces risk exposure and the costs associated with PCI compliance. If tokens are used, even a breach will not expose actual card details.
  • Regular Security Audits:
    Proactive monitoring and frequent audits not only protect your customers but also prevent unexpected charges related to fraud or non-compliance.

In addition to saving money on processing fees, these measures help ensure that your transaction data remains secure, thereby contributing indirectly to lower overall expenses through reduced risks.

Conclusion

Reducing credit card processing fees for propane merchants is achievable by adopting multiple strategies simultaneously. Focus on understanding your fee structure and opt for interchange pass-through pricing to take advantage of lower special rates available under your correct MCC classification. Leverage advanced data like Level 2/3 details on commercial transactions, and integrate tokenization to enhance security and simplify compliance.

Consider surcharging on credit card transactions where legally permissible, allowing you to pass some fees directly back to the customer while maintaining transparency. Most importantly, improve your cash flow by employing efficient batch settlement practices and ensuring a rapid deposit process. A consistent next day funding timeline not only shortens your cash conversion cycle but also simplifies daily reconciliation and enhances merchant cash flow.

By implementing these measures, propane merchants can lower their effective processing rates—resulting in enhanced rapid deposit capabilities, better business banking practices, and improved overall margins. A knowledgeable payments partner can further streamline this process by offering dual MCC configurations, advanced data capture, and robust security solutions.

Don’t let excessive processing fees drain your profits. Contact a trusted provider to analyze your fee structure and start optimizing your payment processing strategy today. Fuel your savings while ensuring that every transaction moves your business forward.

Get Started Today

If you’re ready to take your propane business to the next level with faster deposits, optimized reconciliation, and robust cash flow solutions, it’s time to see what MSG Payment Systems can do for you. Reach out today for a free consultation or cost analysis, and learn how our tailored solutions can help you cut processing fees, streamline transaction batches, and secure your funding timeline. Contact MSG Payment Systems now and start fueling your savings while driving your business forward.

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