Reducing merchant credit card fees can boost your profit margins. However, your strategy will depend on the transaction volume and industry and the number of customers. Follow these guidelines to cut the cost of processing credit cards.
Select a credit card processor with a surcharge program
A payment card surcharge, also known as a checkout fee occurs when businesses pass on the processing cost of credit cards (the interchange rate imposed by the card networks) to their customers. The surcharge cannot be added to debit card transactions, and you can’t apply it to transactions with customers who are from Connecticut, Massachusetts, or Puerto Rico.
The strictest rules must be adhered to and this includes notifying the network of cards (like Visa and Mastercard) at least 30 days prior to starting a surcharging program, as well as informing customers online or in-store at the point of sale, or in the form of a receipt. Small-scale businesses must also consider the advantages and disadvantages of charging for services, as it could affect the customer experience.
Surcharge programs that credit card processing companies offer include:
- Helcim Merchant accounts receive zero-cost fee processing through the Helcim Fee Saver Program.
- Square Small-sized businesses need to notify credit card companies and maintain conformity when they use Square.
- Stax Automated technology enables Stax to transfer the entire 100% of charges incurred by credit cards to the customer through Stax.
- Heartland Payments Small-scale companies can reduce the expense of accepting credit card payments through Heartland Payment’s surcharge on credit cards program.
- Elavon Choose merchant or acquirer-managed surcharge plans with merchant accounts through Elavon.
Verify addresses to lower credit card fees.
An address verification service (AVS) can be described as a method that is used in the checkout process. It ensures that the billing address of the cardholder is the same as the address the customer enters. AVS helps reduce chargebacks and fraud, particularly for large-ticket products and online transactions. Therefore, Visa offers a lower exchange rate to merchants who perform the AVS check.
Also read: How To Find The Best Credit Card
Offer a cash discount to customers
Contrary to surcharge programs cash discounts are an effective sales and marketing strategy. Smaller businesses raise the cost of products or services. These businesses “reward” clients who purchase in cash by reducing the price of items at the counter. If you wish, you may increase the price to customers who pay by check. The price that is displayed that appears it’s on the menu or the sales label represents the real cost. Customers who pay with cash will receive a lower cost.
This is a crucial distinction. It is important to note that the Truth in Lending Act defines a discount as “a reduction from the normal price.” On the other hand, a surcharge is “any method to increase the price for a cardholder that is not imposed on those who pay by cash, check or any other similar method.” Cash discounts can lower your transaction amount and boost cash transactions. However, it could make customers uncomfortable So, make sure you review the advantages and drawbacks prior to creating a program for cash discounts.
Always review your monthly statement
A lot of credit card processors raise costs or add charges to your account, including minimal processing fees or maintenance fees. Review your monthly statement to determine the total cost for processing credit card transactions. Sometimes, you are able to bargain on charges that aren’t related to processing or switch to a company that does not add additional processing charges.
Include a convenience or service fees
According to Fiserv businesses may cost customers the “privilege of purchasing an item or service with another payment method that’s not typical for a business.” For example, If your gym usually sells memberships by person, then you can offer customers the option of paying via phone using the use of a credit card. You can also charge the convenience fee. Visa, Mastercard, American Express, and Discover have regulations regarding the charges they charge, so you should read and comprehend their rules prior to implementing the convenience fee.
In addition, many small companies charge service fees in order to cover the costs not associated with payment processing. These charges may offset certain merchant credit card charges. They may be used to cover delivery costs and labor costs, fuel or packaging, or carryout costs, as well as other expenses for business.
Encourage ACH payments
Automated clearinghouse (ACH) payments are bank debit transactions that are direct also known as bank-to-bank electronic transfers. This method is more secure and efficient than checks that are physically mailed and does not result in interchange charges. The majority of merchant service providers offer affordable charges on ACH transactions, which range between 0% and 1.99 percent. Some have a flat rate. Encouragement of ACH payments is a great option for small companies with subscription or membership pricing models.
Follow credit card processing best practices
Simple things like not remembering to file your transactions at the time of day could raise the rates of interchange on these transactions. As time passes, these additional costs can add up. Establish good habits by learning how payment processors modify fees.
Reduce credit card processing fees, and your interchange rates:
- Settling transactions daily: Card associations often offer the lowest interchange charges for merchants who settle sales in 24 hours. So, it is recommended to make sure to send authorizations each night.
- Increasing card-present transactions: In-person transactions using the EMV (Europay, Mastercard, and Visa) terminal will reduce your expenses. Customers are able to swipe, insert, and dip cards.
- Entering card security information: Always enter the customer’s security and billing zip codes, and use it to pay online. The more details you can provide to you, the less interchange cost.
Increase your credit card processing volume
The old saying goes”If you’re unable to beat them then join them. The fact is credit card processing companies will give higher rates when your processing capacity rises. If your company is short of reaching the next tier and being qualified to receive reduced rates, then it may be worthwhile to encourage customers to use a credit card. On your side, it will give you negotiation ability, and you could utilize it as a competition tool in your marketing.
It is important to announce that your firm accepts mobile payments such as Samsung, Google, and Apple Pay. Add the PayPal as well as Venmo logo in your signature lines on emails. Inform customers via your social media pages or post notices in your store, and also add an image to your website. Let customers know that you’re trying to make it easy for them to pay and encourage them to use their preferred payment methods.
Also read: Top 5 Business Credit Bureaus and Reporting Companies
Negotiate with the merchant service provider or search for an alternative
Credit card processors who offer a flat rate such as Square or PayPal, will only agree on rates when your company is processing more than $250,000 per year. Payment processors that use tiered pricing models or interchange plus rates base fees on various variables, such as the volume of transactions as well as the number of years you’ve been in business, and your risk of fraud.
Prove your worth by showing sales projections. You may also solicit for them to meet rates and reduce
processing fees. Don’t be afraid of walking out if you’re paying too much (just be aware of early termination charges). Go back to the drawing table, and pick a company that offers an appropriate pricing structure for small-sized businesses.
Prevent fraud and reduce chargebacks
Fraudulent activities and chargeback costs can result in your business and merchant service providers’ money. The processor can put you in a high-risk group or even terminate your contract. Make sure that your business is not as risky and you could reduce the credit card processing fees.
- Enhance fraud detection and prevent chargebacks through:
- Conforming to Payment Card Industry Data Security Standards (PCI DSS).
- Instruction to employees on how to process credit cards on the phone or in person.
- Requiring customer signatures for delivered orders.
- Maintaining the history of transactions and receipts for customers.
- Writing A clear refund and return policy.
In conclusion, implementing these strategies can significantly reduce credit card processing fees. From negotiating rates to embracing technology, these steps empower businesses to optimize costs and enhance financial efficiency, fostering long-term success in the competitive landscape.