Small business owners hate paying exorbitant credit card fees charged by merchant processing companies. They feel that they are between rock and a hard place when it comes to accepting credit cards. Refuse to accept them and they will lose customers. Accept them and they will lose money to those processors. No wonder Visa and Master Card companies are raking in billions of dollars in profit, while small business owners are hurting.
Is there anything small businesses can do to lower this cost rather than just give in to the demands of credit card processing companies? Although there is no way you can eliminate this cost entirely; there are few steps you can take to bring it down. Here are 5 proven techniques you can look into. Some of them are very straightforward and easy to do, while others require some effort on your part. Overall, they will still help you put few additional dollars in your pocket at the end of the day.
- Read the Credit Card statement. If there is one simple thing small business owners can do reduce the fees; it is to read and understand how you are being charged. The statement can be very confusing with many different categories and charges, but it is worth spending some time to understand what those categories mean. In fact, you can call your processing company and ask them to explain all the categories, and while you are at it, ask them if they can suggest ways to reduce the cost.
- Encourage lower cost transactions. As I mentioned earlier, the credit card companies have several categories of charges with varying rates. You will pay lower rate for pin based debit card transactions; while the fees are substantially higher for phone based transactions where you don’t physically see the credit card. You should favor the lower cost transactions with your customers. Again, call your processing companies to find out which types of transactions will result in lower cost.
- Benchmark fees you are paying. If you are paying more than 2% of credit card sales for the processing charges you should call your processing company and ask for concession. If you are paying more than 3%; it’s time to change the processing company right away. I don’t care what they say; but giving away 3% of sales to them is simply outrageous.
- Shop around. There are several avenues you can explore to see if you can get a better rate elsewhere. If you are part of a large franchise like Subway or McDonald’s they may have corporate level agreements that you can tap into. Otherwise, you can look into using Costco or Sam’s Club processors for your business. Another possibility is working with large processing companies directly rather than going through middle man.
- Explore new technology. Several companies have sprung up lately that promise to reduce credit card processing feeds by leveraging technology. Two of the most prominent ones are Square and PayPal. Both of these companies charge lower fees compared to standard processing companies with the added benefit of using advanced technology such as mobile payments. Rumors abound that Groupon is testing payment services that will allow merchants to accept credit cards from iPhones or iPads with much lower rates than charged by others.
Do you have any other suggestions?