5 Tips to Save on Credit Card Processing

–Featuring Lou Honick

Accepting credit cards is a part of being in business today. Today, a majority of consumers don’t carry cash – they rely on paying with their debit or credit card. If your business can’t accept credit cards, you could lose a big portion of your potential sales. This applies to brick-and-mortar stores as well as small businesses that ‘pop up’ or sell at farmer’s markets.

Some businesses avoid accepting credit cards because of the fees. Those fees eat at your profits, so many business owners assume they are better off not accepting them. What if there were ways to save on those fees, though?

What if you could get the lowest rate credit card processing available today and bring in more sales?

It’s possible using these simple tips.

Negotiate Lower Rates

Let’s start with the toughest tip first. Negotiating rates – no one likes to do it, but if it could save you thousands of dollars, you’d make it happen, right?

You can negotiate rates upon signing up with a new provider or even with an existing contract. Look at your fees and see what you pay each year. Many business owners don’t look at the breakdown and just assume it’s a cost of doing business. While that’s true, there are ways to save if you do your homework.

What’s the worst the processor can say? If they say ‘no,’ then you make your move from there, whether you keep things as is or you change processors. Each processor charges different fees and values different things. For example, some processors value loyalty and will negotiate just to keep your business. Others prefer new business and will give the lowest rates to new customers.

We recommend checking your credit card processing fees annually. Pull all your statements and determine where you spend the most money. Are you processing manual transactions too often, are your transactions falling into a higher tier that costs more money?

Categorizing your expenses helps you determine where to negotiate with the processor. You never know when they’ll either agree or at least meet you halfway – don’t forget to negotiate!

Use an Address Verification System

If you accept card not present transactions, the chances of fraud increase, which may mean higher processing fees. The Address Verification System helps lower those fees, though. Here’s how.

When you accept a credit card payment over the phone, you’re taking the word of the buyer that the card belongs to them. Without proof, though, the risk of theft is high. Many credit card processors downgrade these transactions to ‘nonqualified’ transactions which means higher processing fees to make up for the risk.

When you use AVS, though, it reduces the risk of theft, which leaves your transaction as qualified. Even though there’s a small fee for AVS, it rarely comes close to the nonqualified credit card processing fee. Not only does the AVS system lower your fees, but it also reassures you that the transaction is valid.

Pass the Fee to your Customer

It’s now legal to pass the credit card processing fees onto your customers in most states. If you do, you must clearly display the fee for all customers to see before they check out. Customers also should know they have the option to avoid the fee by paying with other methods (cash or check). The surcharge you pass onto the customer can’t exceed the fee you pay or 4%, whichever is lower. Every bit helps lower the costs of accepting credit cards, though so passing the fee along to consumers is a great point that more businesses are using.

Set a Minimum Purchase Amount

You may also only allow credit card purchases for certain purchase amounts. The minimum amount may be up to $10, but it must be the same across all cards. For example, if you accept Visa, MasterCard, and Discover, the $10 minimum purchase must be the same for all cards.

This is beneficial in stores where there are a lot of low purchase amounts. The credit card processing fees can eat up your profits, in this case. If your business typically has large purchase totals, though, and only the occasional low total, it may be best to avoid this tactic as some consumers don’t like it.

Don’t Enter Credit Cards Manually

Credit card processors take a risk when processing credit card transactions in person. When you accept credit cards over the phone or online, the customer enters the information themselves. There’s no way for you to verify their identity because they aren’t in front of you.

Because of this higher risk, credit card processors often charge higher amounts compared to swiped credit cards.

Accepting credit cards is crucial if you want to stay in business. Whether you operate a brick-and-mortar store or you work online, credit card payments are necessary. Even though it adds to your business’s costs, you must budget for them.

Think of it this way, you’ll increase sales when you accept credit cards. Yes, some of the money made from the sales will cover credit card expenses, but if you didn’t accept credit cards, you wouldn’t have those sales at all.

Do your best to negotiate the best credit card processing rates and put precautions in place to decrease your risk of theft or fraud. With the right precautions in place, such as the Address Verification System, avoiding manual credit card transactions, and passing the fees onto the customer, you’ll put more money in your pocket and be better able to serve your customers.

Author Bio:

Lou Honick is the CEO of Host Merchant Services. Prior to founding Host Merchant Services in 2010, Lou was the founder of and received numerous awards including SBA Young Entrepreneur of the Year, Inc Magazine 30 under 30, and multiple listings on the Inc 500. As a serial entrepreneur, all of his companies have operated on a singular devotion to outstanding customer service and support. Lou is a respected expert on the topics of customer service, payments and fintech, Internet technology, and entrepreneurship.


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