It’s inevitable, most businesses are going to have to accept credit cards. It’s easier for the consumer and not taking credit can ultimately hurt your bottom line. However, do you know if you are overpaying on credit card processing fees? Understanding something about how such fees work and what in actuality you will end up paying is definitely worth your time to find out. You absolutely should shop around for a payment provider. Before doing so, do your homework, comprehend the process and be sure to ask the right questions. This is a brief overview to give you some insight into credit card processing fees and how to avoid overpaying on them.
First off, you certainly want to know precisely how the pricing structure works. Depending on the payment processor, you might see a few different pricing structures in terms of what gets charged as far as per transaction fee. There is popular flat-rate pricing. This is by far the easiest to comprehend because you’re dealing strictly with one rate for all transactions across the board.
There is also cost + pricing. While this may be a bit more complicated, it generally tends to be a more cost-effective pricing structure. So essentially the fee charged will vary based upon a few factors to include the type of card, as well as payment method.
You want to take some time and determine what model will work best for your specific business/industry. If you tend to have low monthly volume, you’re probably going to be best off with flat-rate pricing for instance.
Finding the Lowest Processing Rate
One thing you want to do definitely is shop around rates. However, don’t necessarily just go with the lowest bidder. You want to make sure that the credit card processing company you use is also a reputable one. You can check out reviews, get referrals from other business owners—again, it’s about digging in and doing a little research so that you’re getting the best deal and a company that you can actually trust.
What Are Your Equipment Options
Some processing companies will offer equipment leases. In general, it’s best to stay away from such leases if you can. The problem becomes when you enter into a lengthy contract as far as an equipment lease goes. Soon you might discover that you’re not, in fact, getting the best deal; however, you are locked into that contract. And generally speaking, there are usually more affordable equipment options out there versus what the processing company is going to do for you.
Many smaller businesses are going with mobile readers for their card transactions. As long as customers are okay with an emailed receipt versus a printed one, this could be a very cost-effective way to go.
There are processors out there who will give you a discount if you process over a certain amount per month. This tends to be geared toward larger companies who do huge monthly volumes, but it is certainly worth asking. The other thing you may want to do if you’re currently in a contract is to find other processors out there offering such discounts and use it to renegotiate your terms.
The processors add their margin to the rate charged. So they could potentially trim this down some and thus pass the savings on to the merchant. Negotiating can be difficult if you don’t know what their profit margin is. The best processors will be transparent about all such details. If you’re unsure, again, ask. Be upfront with the processing company regarding your concerns moving forward with them.
What About Surcharges?
The question of charging credit card surcharges can be a tricky one. These can, however, help to offset the cost of the processing. If you do charge customers a surcharge in conjunction with them using a card, there are certain rules and regulations that you will need to follow. All of the major credit card companies require you to state clearly at the point of sale that there is, in fact, a surcharge applied. The receipt needs to show this as well. Surcharges cannot be added to transactions using a debit card—even if they are opting to use it as credit.
Do You Need to Accept Credit and Debit Cards?
One solution would be simply to not accept credit cards and thus avoid paying processing fees altogether. And while this may make it far less convenient for the customer, there are some businesses and industries in which this could potentially be an option.
At First Union Lending, we work with small businesses all the time, who are dealing with credit card processing fees. During slower sales seasons these can start to add up and take their toll. If you need cash to get by, or you have a project in the works and need additional capital, we can certainly help!
Our lending experts are standing by to assist small business owners to find the right business loan to start, grow, or expand their company. Your business loan could be approved as soon as the same day, and applying won’t affect your credit.