In today’s market, consumers are using less cash and relying more on credit cards for their transactions.
According to the Federal Reserve, credit card payments registered the highest growth rate by number (10.2%) among the core payment types from 2015 to 2016.
With more and more customers choosing plastic over cash, as a business owner, failing to accept credit cards isn’t in your best interest.
But if you aren’t careful, your business’ processing fees can quickly add up. According to the U.S. Small Business Administration, typical merchant account companies can charge up to 5% on all of a company’s earnings from credit card sales, which can include the following fees:
While credit card fees are inevitable, with proper planning, you can reduce these fees and save up to hundreds of dollars every month.
Use our 5 tips below to help you cut some unnecessary costs from your credit card processing fees.
Sometimes small mistakes can lead to higher credit card processing fees.
Because the type of business, type of transactions, and frequency of transactions impacts your fee structure, it’s important that your account is set up properly from the beginning.
You should also thoroughly research your options to ensure you choose a structure that caters to your business and your consumer’s buying habits.
If your business sells big-ticket items, choosing an interchange plus pricing system may help you save money compared to a flat fee payment processor. If your customers frequently use business credit cards, you’ll want to rule out the tiered pricing system, to avoid that expensive, non-qualified rate.
The higher the security risk you pose as a merchant, the higher your processing fees will be. Reduce your risk of credit card fraud by choosing to swipe/insert credit cards over manually entering the information.
Credit cards’ microchips and magnetic strips have built-in security features, while manual transactions are more susceptible to fraud and human error. In fact, some banks charge more when card information is input manually.
If you have to input the information manually, be sure to provide the security information that protects the cardholder and validates the purchase, for example, the billing zip code and security zip code. This can help reduce the risk of fraud, which helps reduce your fees.
If your business handles small transactions, you may want to think about setting a credit card minimum for your customers, especially if your business uses the interchange plus pricing or the tiered pricing system. Setting a minimum can help reduce your credit card processing volume, which can keep your processing bill down. It’s important to not set the minimum too high though; you don’t want to deter your customers at their point of purchase!
It is essential that you set up your terminal correctly. Many businesses are unaware that they are paying expensive processing fees because they are allowing their transactions to stack up throughout the week. When you wait multiple days to process transactions, the volume appears higher for that period, causing a spike in the processing rate. Getting into the habit of doing your batch processing at the end of each day helps lower the number of transactions per period. This will help you secure a better rate.
Understanding all of the different variables that go into credit card processing rates can be tough, especially for business owners who are juggling multiple other roles. Speaking with an expert can help guide you through your payment processing options and ensure that your account is set up correctly.
Most experts would recommend negotiating lower rates with your payment processor, especially if you’ve been working with them for an extended period of time and you’ve increased sales. Your provider isn’t going to want to lose business to a company that is on the rise!
There are several factors to consider when it comes to your credit card processing. While credit card processing fees are unavoidable, following the tips above can help save your business money.