How to Save Money on Payment Processing
Are credit card processing fees cutting into your profit margin? Here are some tips to help your business save money.
Every time a customer pays for services or products with a credit card, the merchant has to pay a card processing fee. While the fee can often be negligible on a single transaction, the cost can add up with many purchases. According to the payment industry newsletter The Nilson Report, the weighted average processing fees for American Express, Mastercard, Visa, and Discover credit cards were between 2.09 to 2.33 percent in 2017.
Breaking Down Credit Card Processing Fees
Several different costs make up credit card processing fees:
Interchange fee: This is usually the highest cost associated with processing, collected by credit card issuers. The interchange fee is a percentage of the transaction, combined with an additional fixed amount. The fee can vary based on the card network, type (including business or rewards credit cards), payment processing method (card swiping or manual entry), and business type.
Service or assessment fee: This fee is paid straight to the credit card network (for example, Visa or Mastercard). This fee is smaller, and rates are usually lower for debit cards than credit cards. This can also sometimes include other fees, like foreign transaction fees.
Payment processor’s markup: The credit card processor also profits from payment processing by charging a small fee.
How can you save money on payment processing for your business?
Shop around for the best processor
It’s always wise to do some comparison shopping before you commit to any significant purchase. You should do your research and see which processors offer the best deal for your business. Before choosing a card processor, ask a lot of questions: what is the total rate with all fees included? Do you charge fees for cancelation or applications? While some processors may offer a lower rate, they might actually charge more in hidden fees.
Set minimum credit card sales
Especially for smaller businesses with small transactions, you can save more money by setting a minimum for credit card sales. With low price purchases, you can end up spending more than you can afford on processing fees. You can enforce your policy by setting up a sign at your shop by the register, so customers will know when making a purchase.
No Fee Payment Processing
At Denefits, we give businesses back their power of choice with payment processing. We offer No Fee Payment Processing, so you can choose to share or pass on the transaction fee with the customer, and save more money for your business. There are no hidden fees or confusing terms with our payment processing solution.