Are you struggling to find ways to reduce the credit card processing fees your business pays? If so, you are like many other owners who wonder whether there’s any relief from the amounts deducted from your sales to pay card companies. The expense is not small. Ranging from 1.5 up to 3.5 percent in most cases, the fees eat in to an entrepreneur’s profit margin. Plus, you stand to lose customers if you simply raise your general price schedule to offset the card processing fees.
The good news is this: There are realistic, effective techniques for cutting your merchant fees. Millions of retailers, entrepreneurs, e-sellers, and companies of all sizes use these methods every day because they work. Even better than that, they’re not drastic strategies, nor are they illegal or shady in any way. So, you can find at least some relief from card processing fees. The first thing to do, however, is understand the way the system is set up and to learn about the types of fees and fee structures that are in place.
How Card Processing Companies Get Their Cut
There’s certainly nothing wrong with credit card companies wanting to receive fees from merchants who accept their cards. It’s only right. The problem arises when all the different fees are not spelled out for merchants, who often give up trying to decipher legal agreements, monthly statements, and emails from card companies. The mathematics alone can be highly complex, as can the changing landscape of the system when new card features and fresh technology are introduced.
If you are a merchant who has wanted a clearer breakdown of the fees you pay, or a small business owner who wants some guidance about how to minimize fees, it’s essential to know about the three main types of fees and about how chip-readers compare with keyed-in transactions. Here’s a summary of each point:
- Flat Flat-rate fees are among the highest, but are the easiest to understand. Typically, the processing company charges you around three percent plus a per-transaction amount of about 10 cents. While high, the flat fees are relatively transparent and some merchants prefer them for that reason.
- Tiered Try reading the tiered-pricing details on your processor’s contract sometime. It’s nearly indecipherable. This model includes charges for the basic interchange fee, a processor markup, a so-called bundle price, and more. The expense for merchants is less with tiered pricing than with flat-rate, but unless you do a high volume of sales, there’s no real advantage to it.
- I-Plus With interchange-plus, or “i-plus,” you’re basically paying the wholesale interchange fee based on the card issuer’s base rate plus a fixed markup to the processing company. Of the three methods, i-plus is the best deal for merchants but not all card issuers offer it.
- Chip vs Keyed Keying in transactions, or letting customers use swipe-style card payment will end up costing you more than EMV (chip-style) cards. Why? Two reasons: card companies prefer that you use chips and the entire industry is slowly phasing out swipe-style cards.
It’s also worth noting that chip-cards are much more fraud-resistant than the older “swipe” versions that only contained a magnetic strip. So there are actually two reasons for merchants to incentivize use of chip-cards: less fraud and lower fees.
Just from scanning through the above listing, you can see that it’s usually to a merchant’s benefit to opt for i-plus price structures when given a choice. As well, it makes sense to use chip-reader machines and discourage customers from using the older magnetic-strip cards.
One problem most merchants face is that many card companies don’t offer i-plus pricing, but only tiered or flat-rate models. In that case, you’re sort of stuck with what you’ve got unless you change merchants/processors, and employ some of the methods discussed below.
Four Techniques For Reducing Merchant Card Fees
The card processing universe is a large, complex place with dozens of players offering different deals to merchants who agree to sign up with them. Even if you’re locked into a one or two-year contract with your current service provider, there are four ways to bring total processing fees down.
Fortunately, it’s possible to use all four at the same time as long as you’re diligent and stay attentive to customer feedback and monthly statements from the card company. It’s all about keeping an eye on fees so you can reduce or eliminate as many as possible.
- Eliminate “Other” Fees There are all sorts of one-time charges for setting up accounts, maintaining them, and if you meet or don’t meet monthly sales levels or other parameters. It’s possible to cut out a few of these extra costs by owning your own payment terminal instead of renting one, for example. Examine the one-time charges on your statement and take action to avoid extra fees.
- Negotiate Has your monthly transaction amount risen since you signed on with your current processor? Or, is your contract period about to end? If so, you’re in a good position to ask your processing service provider for a better deal. This tactic works with personal phone and cable service, so why not try it with card processors. It works.
- Encourage Cash, Debit, and EMV Chip Use If you can offer cash and debit-card discounts, you’re on your way to lowering card fees. Likewise, installing chip-only card readers is a fast way to convert your customers away from the more costly swipe method. Swiped credit cards come with the most fees, so whatever you can do to get customers to use chips, cash, or debit will have a direct effect on your monthly fees.
- Settle Within 24 Hours If you’re subject to the interchange-plus pricing model, it’s possible to save significantly by settling all your company’s card transactions within 24 hours. You’ll enjoy lower fees and the small daily savings add up fast.
If none of those strategies suits your needs, you can always simply change processing companies. It’s possible that just by shopping around you can locate a processor who charges lower overall rates. In the vast majority of situations, you’ll be better off going with an I-Plus pricing model rather than tiered or flat.
The only problem with making a change is that your new provider/processor can raise its rates at any time. Then, you’ll be stuck back in the same boat you were in before.
Start Lowering Your Fees Today
One of the main truths about reducing credit card fees is that the sooner you begin making a concerted effort to lower them, the better. Another piece of the puzzle is making sure you optimize and modernize all the technology related to the customer end of the payment process. That means modern card readers, among other things.
At Metro Payment Technologies, we’ve been helping large and small merchants get their card fees under control with a wide array of products and services. The merchants we work with use our payment terminals, e-commerce solutions, gateways, point-of-sale systems, wireless terminals and other products that help keep expenses as low as they can possibly be.
In addition, we provide our clients with a full array of merchant-friendly services like chargeback and retrieval handling, payroll service, customer support, PCI compliance, merchant cash advances, and many more. There’s no reason to pay high card processing fees when you have the ability and technology to pay lower ones. If you’d like to find out how we can help you rein in card fees and other costs of doing business, simple check out our website or give us a call at our convenience. Our number is 800-771-3719, and we’ll be happy to answer any questions you have.