Credit card payments have widely been accepted as a method of paying for goods and services. But while this might be convenient for the buyer, credit or debit cards don’t favor business owners because they reduce their profit margin. As an entrepreneur, this is the last thing you want as profit maximization if your primary goal but the expensive credit card processing costs become a stumbling block.
At first, the credit card processing fees might not appear to be that much. However, this figure quickly increases after considering small percentages charged after numerous transactions. Therefore, it’s up to you as the business owner to think of ways to help you save money on merchant fees. If you’re in search of such information, look no further.
What are merchant fees?
If your business accepts credit card payments, you’ll be required to pay merchant fees related to credit card processing. The merchant fee, which also includes PayPal fees, is usually a tiny percentage of the amount of money paid for a good or service. In some cases, it can comprise the pre-payment cost. Vendors enforce merchant fees because they’re expected by the credit card companies, for instance, MasterCard or Visa, to maintain their merchant account by making annual payments.
How can you save money on merchant fees?
There are different ways you can reduce how much money you’re paying on credit card processing fees and these include;
1. Negotiate lower rates
An effective technique of saving money on your merchant fees is by negotiating with the payment processor for a lower rate. The only way you stand a chance of your request being granted is to prove to the vendor that your business adds value to them, and this only happens when you show evidence of processing over $50k every month.
If you make such huge sales, the credit card processor will be more inclined to listen to your request for lower rates because they don’t want to lose you to a rival. As a result, they’ll provide you with lower rates below the list price. After all, they know your high sales, which may increase as your business grows in the future, equates to more transactions, and this means more money for them.
2. Get PCI Compliant
Cybercrime has become a real menace in today’s tech-driven society. Because of this, card processors require merchants to adhere to the Payment Card Industry (PCI) Data Security Standard to safeguard crucial credit card information. Being PCI compliant means securely processing, handling, and disposing of confidential data about the cardholder. Before being acknowledged as PCI compliant, there are several things you must do, such as;
- Pass the PCI security scan
- Accept to quarterly compliance reviews
- Complete SAQ self-assessment questionnaire
Credit card processors give you 60 to 90 days to get the PCI Certification program which costs between $90 and $160 per annum. Although this might look expensive, it’s cheaper than how much you’d be expected to pay for non-compliance. Many a time, you’ll be expected to pay $20 each month, which is the average non-compliance fee without counting the annual program fee.
In the unfortunate event, any one of your client’s credit data gets compromised, you’ll be charged by PCI providers a fine that can reach up to $100,000. Therefore, it’s best to be PCI compliant to avoid spending more on merchant fees than what’s required.
3. Swipe whenever possible
Card-issuing banks and merchants view face-to-face transactions as less risky than those conducted over the phone or online. Because of this, the interchange rate is a lot lower. Therefore, you should encourage your customers to physically come to your store and swipe their cards when purchasing. This way, the subsequent credit card processing fee will be much lower.
It’s also helpful to remember that swiping is also better than key-entered transactions because of its lower margin of error. Because of this, you save on merchant fees if your customers opt to swipe when making payments instead of manually keying in their card. Swiping your card also ensures you remain EMV compliant, which is harder to challenge, thereby providing the merchant with better protection against charge backs.
4. Hire an expert
As a business owner, you most likely aren’t well versed with the intricate details of credit card processing. And this is understandable because you have many matters in your hands at any given time. Therefore, it’s best to hand over the duty of finding ways to save money on merchant fees to an expert. With their knowledge and experience, professionals are better placed to negotiate for lower rates from the processor.
Another advantage of hiring an expert is detecting unreasonably high fees the processor charges you. This skill takes years to perfect because processors are notorious for inflating or adding hidden charges to raise your merchant fees. But once these fees are identified, you get to save money on the sum of money you pay on credit card processing.
With the guidance of an expert, you’ll also be able to pick a trustworthy processor. They do this by carefully examining the processor’s PCI compliance process. In addition, they assess the products and services put in place to prevent fraud, thereby saving your business from possible fines costing hundreds of thousands due to poor cyber security protocols.
5. Go for the flat monthly fee
Another way to save on your credit card processing fees is by opting for a flat monthly fee. This fixed-rate system is cheaper than a tiered pricing system because it doesn’t have any hidden costs which increase your credit card processing fee. With the tiered pricing, the processor decides the rate you’ll be charged, and often they’ll go for the most expensive option.
Takeaway
As a business owner, you’ll often have a lot on your plate at any given time, and it’s easy to overlook merchant fees. However, it’s best to avoid making such a mistake as these fees can quickly add together and eventually become a substantial figure. This not only eats into your profit margin but becomes quite challenging to pay. Luckily, this article has discussed ways you can implement to help you save money on merchant fees.
