I’ve got some good news and some bad news for you — the bad is that if you accept payments, credit card processing fees are unavoidable.
Those fees may not seem like much in the beginning, but overtime those costs will eventually start eating into your profits. And, that’s not ever good for your bottom line.
Now, for the good news. You have the ability to reduce those overhead payment processing fees by taking the following steps:
Understand processing fees and costs.
As long as you accept payments at your business, you’re going to pay for everything from setup to processing fees. There’s just no way around that. However, providers have different pricing models and different fees. For example, some providers may charge you a monthly service fee or early termination fee.
Additionally, when you process credit cards, you may be charged a higher processing fee based on factors like your industry, the type of transaction, the type of card being used, and your processing volume.
Knowing this information in advance allows you to shop around for providers that will not charge you unnecessary fees, as well as gives you a chance to encourage your customers to use debit cards. Processing fees are lower with debit cards since there’s less risk involved due to the the fact that the customer is typically present during the transaction.
Reduce the risk of credit card fraud.
I alluded to this above, but the higher the security risk that you pose, the higher your processing fees are going to be. To reduce your chances of credit card fraud, either accept as many in-person payments as possible or ask for customers to enter their CVV or zip code. It may be a minor inconvenience to your customers, but it will validate the transaction. This, in turn, this prevents costly chargebacks, as well.
It’s also suggested that you conduct an audit of your online payment system so that you can identify any possible vulnerabilities, along with asking your providers what security measures that have in place to combat fraud.
Cut-out the middlemen.
One of the simplest ways to reduce payment processing fees is by going directly to source. Let me explain. If you’re using your local bank to process your payments they’re most likely outsourcing that task to a third-party since they don’t have the resources to process payments in-house.
While you can’t blame these smaller banks, they have to charge more to process payments in order to pay their expenses, if you want to save money either work with banks that process payments in-house or with companies that only process payments.
Properly set-up your merchant account and terminal.
When you’re ready to start accepting payments you may be required to set-up a merchant account. A simple mistake, like not selecting the right merchant account based on the type of business you operate, type of transactions, and frequency of transactions will result in your having to pay higher processing fees.
Besides properly setting-up your merchant account, also make sure that you set-up your payment terminal correctly. This includes not paying for terminal features that you’ll never use, using software instead of a terminal, and processing transactions within 24 hours. This will decrease the number of transactions for that period and in-turn will reduce processing fees.
Negotiate with processors.
You can lower your processing rates by proving that you’re valuable to them. How so? By leveraging your transaction volume.
The more that you sell, the more transactions you process, which in turn adds more value to processor. In other words, if you want to reduce your overhead, start processing more payments and negotiate new terms with your provider.
Most processors give you the option of receiving statements via snail mail or email. By opting to go paperless you’re reducing the time and resources it will take to manage, file, and print these documents.
Furthermore, if you email receipts to customers instead of printing them out, your business is going to eliminate the cost of paper and ink cartridges. This doesn’t just doesn’t help you reduce overhead costs, it eliminates these unnecessary expenses.
Hire a credit card processing expert.
Don’t be ashamed to admit that you’re not an expert when it comes to processing payments. That’s why hiring a credit card processing expert can clue you in on insider information. Pretty much every credit card processor purchases their rates directly from Visa, MasterCard and Discover for the exact same price. This means that every credit card processor has the ability to resell these rates at the exact same price to various businesses. If you’re aware of this, along with the connections that these experts have gained over the years, you can obtain lower rates for your business.
The bottom line.
Even though processing fees are unavoidable, there are ways for you to reduce this expense by being aware of the processing fees and expenses you may be charged, reducing the risk of fraud, cutting out the middlemen, properly setting up your account and terminal, negotiating a more favorable rate with your provider, going paperless, and asking an expert for advice.
Taking these steps will ensure that accepting payments will go smoothly, improve your bottom line and help you to negotiate a better rate.