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Keeping Payment Fees Low for Small Business

Are all interchange fees the same

The best part of business is getting paid, but getting paid isn’t always as easy or simple as it should be. In addition to figuring out the logistics of how to get paid, you may have to pay multiple vendors different payment processing fees. Those fees can add up fast. But you have options that can help keep things simple while lowering your fees. Read on to learn more.

Integrated vs. non-integrated payment processors

Both online and offline card payments require a series of important steps to complete. The ability to accept cards online requires both a merchant account and a payment gateway. A merchant account is kind of like a bank account used to aggregate payments from credit cards, debit cards, and sometimes ACH payments. A payment gateway is a system used to process payments, generally online, that feeds into the merchant account.

Thanks to the magic of online business, you can sign up for a two-in-one package to accept payments online. For a percentage fee, flat fee, or combination of the two you can process all of your payments for automatic deposit in a digital wallet or straight to your bank account. This is exactly what payments are all about!

Providers that do not integrate all parts still exist. You can work with a payment gateway that requires an outside merchant account, or pick a merchant account first and look for compatible gateways. But if you can get the two in one, nice, integrated package, it is much easier to use and manage. Even better, getting two in one gives you better control and information about the fees you pay for your payment processing service.

Choose your vendors wisely

Now that you know what type of payment processing vendors you may need, it’s time to pick your favorite. As we already discussed, getting your payment processing from one vendor is easier than two, but it can also save you money.

Consider it like this, if you have two vendors for payment processing, you pay fees to two companies. If you pay fees to two companies, they both need to charge enough to stay in business. That’s two sets of businesses reaching into your company’s profit margin instead of one.

While it is possible to get a better deal with two vendors, it is twice the work and much less transparent. For that reason, going with an integrated vendor that gives you clear pricing is a great way to keep payment fees low.

Shop around for fees before making a commitment

Once you have limited down the type of payment processor you want, it’s time to look at the rates. Payment processors typically charge in one of two billing methods:

  • Flat percentage fee for every payment
  • Flat percentage fee plus monthly recurring fee

There is no right or wrong here, just what makes the most sense for your business. In most cases, the providers with a monthly recurring fee charge a lower percentage fee for payments processed. There is a tipping point in dollars processed where one makes sense over the other. You just have to do the simple math for your business to compare.

For my business, an integrated flat fee payment provider worked best. I don’t process enough payments per month to justify a monthly recurring charge. But when I have an occasional credit card payment come through, I know I have it handled.

Fees are a part of doing business, but don’t let them eat your profits

When you are in business, you can expect to pay fees here and there. That’s just part of running a business. But if you work hard to manage those fees, only sign agreements you understand, and do some due diligence before choosing your vendors, you won’t go wrong.

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Personal Finance Expert
Eric Rosenberg is a personal finance expert. He received an MBA in Finance from the University of Denver in 2010. Since graduating he has been blogging about financial tips and tricks to help people understand money better. He is a debt master, insurance expert and currently writes for most of the top financial publications on the planet.

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