Proven Strategies for Reducing Credit Card Processing Costs
Credit card processing costs are the fees you pay to your bank or payment service provider for accepting credit cards. This fee is usually based on a percentage of each transaction and can be a substantial part of your business expenses. But you can save money without sacrificing customer satisfaction by understanding how credit card processing costs work and taking some basic steps to reduce them.
The biggest factor in your processing costs is the interchange rate, which Visa or MasterCard sets. Interchange rates are based on several factors, including the processing network used (Visa and MasterCard each have their own networks), merchant category code (MCC), and the customer’s card type.
Credit card processing fees can be well worth it if you’re selling a high-priced product such as computers, cars, or jets. But if you have a small business that only sells products like beer, hot dogs, and T-shirts, there is no reason to be paying credit card processing fees at all! This blog will show why this is the case and how to lower your credit card processing costs.
Review the rates that you pay
You first need to make sure you are using a processor that offers the best rates possible. Find out how much they charge and compare it with other providers. There is no reason to change if they charge a fairly standard rate. However, it might be worth switching companies if they have negotiated special rates or better deals with banks.
Make sure you are getting all the discounts your processor offers. Some processors offer discounted rates based on volume, while others may cut rates if you increase your volume over time. These discounts can add up quickly and help bring down your overall costs.
Optimizing payments
When choosing a debit or credit card processing company, look for one that offers multiple payment methods with different pricing structures.
For example, suppose you have an ecommerce site and accept payments from customers shopping online. In that case, you might want to consider a merchant account that offers a flat-rate pricing structure instead of one that charges more per transaction, depending on how much it costs to process each transaction. This can help keep costs down while still allowing flexible payment options for your customers — and charging more per transaction will only drive them away.
Some providers even offer rewards programs where they’ll pay you back for processing specific types of transactions (e.g., mobile payments) or give you discounts for signing up with them in the first place. Take advantage of these benefits as much as possible to minimize costs and keep more money in your pocket each month.
Negotiate with your credit card processor
This is the most obvious way to reduce the price of processing. You can call up your current processor and ask for a lower rate or better terms. If you’re in a favorable position, you might be able to get a better deal than if you were applying for a new service from scratch.
It’s not uncommon for businesses to negotiate their credit card processing fees. This can be done during the initial contract negotiation or at any time during the term of the agreement. If you don’t think you got a good deal when you signed up, now is the time to ask for lower fees.
Conduct research on third-party services like Square, PayPal, and Stripe
These best credit card processing companies for small business offer low-cost processing solutions that may be more convenient for small businesses than working directly with banks. However, these services are not free — they usually charge fees higher than those charged by banks but lower than those charged by traditional merchant acquirers. Compare their rates carefully before deciding whether they’re worth using.
Stay clear of chargebacks
Chargebacks occur when customers dispute a charge on their credit card statement, usually because they haven’t received something they paid for or the defective product or service. The card issuer charges the merchant bank for the amount of the sale and may also charge an additional fee. In some cases, that fee can be as high as $25 per item charged back.
The best way to avoid chargebacks is to make sure your business has a solid return policy in place and that you follow it consistently. Customers who receive their products or services as promised won’t have to open the dispute.
Remember to not rent or lease your credit card terminal
Many small businesses start using a rental or leasing program to avoid an upfront cost for their equipment. But many merchants don’t realize that by doing so, they are locked in at a higher rate than if they purchased their own terminal outright.
It’s also important to know that if you decide to go this route, there can be restrictions on moving terminals between stores or locations, meaning that if you get rid of one location, you might have to stick with the same processor even though your business has changed dramatically.
If you’re like most business owners, you’re looking to reduce your credit card processing costs today. You’ve seen how much money merchants save yearly from lowering their rates, and you want to do the same. And with so many options available, it’s hard to know where to start. The good news is we’ve compiled this list of six simple ways to save money on processing costs that can help lead you in the right direction.
