Credit card processing costs can be a significant expense for businesses, especially for small and medium-sized enterprises. However, by implementing effective strategies, businesses can reduce these costs and optimize their payment processing operations. In this post, we will explore valuable tips and techniques to help you minimize credit card processing costs without compromising on the quality of service or customer experience.
What is the credit card processing fee?
Payment service providers charge store owners a payment processing fee to process their customers’ payments. This fee covers the costs of the card issuer, card network, and payment processor. The amount of fees charged depends on various factors such as the type of business, B2B (business to business) businesses, high-risk level businesses, and the type of transaction.
- Payment processors apply different credit card processing rates for different business types based on their registered Merchant Category Code (MCC).
- B2B companies, such as large-volume or government suppliers, can get Level 2 and Level 3 processing for lower credit card processing rates. This specific discount is not valid for businesses that operate through traditional eCommerce or physical terminals.
- If payment processors classify your business as high-risk level due to the nature of your products and services, or high chargeback history, you’ll have to open a dedicated account for high-risk sellers, which will add up to your credit card processing fees.
Card-present transactions, which involve swiping or hovering NFC (Near-field communication) at POS (point of sale) terminals, usually have lower processing fees compared to card-not-present transactions such as online or telephone orders. The level of risk associated with the transaction is directly proportional to the processing fees charged.
Tips to Reduce Credit Card Processing Costs
Choose the appropriate pricing models
Payment service providers typically provide three primary pricing plans: flat rate or blended pricing, interchange-plus or cost-plus pricing, and subscription or membership pricing. Choosing the appropriate pricing model depends on factors such as business growth, transaction type, and volume. There is no one-size-fits-all solution, and the best option varies depending on individual circumstances.
Discuss with credit card processors about reducing the markup fee
As stated earlier, interchange and assessment fees are non-negotiable. However, the markup fee set by your merchant account provider is open to negotiation. Typically, a higher transaction volume will result in a lower rate.
To improve your chances of getting a better deal, position yourself as a high-volume, value-added merchant. To do this, provide your projected sales for the upcoming years and highlight your annual growth. Payment processors may offer a discount if your volume is substantial enough to negotiate with their suppliers.
Ensure that your merchant account and terminal are correctly established
The cost of credit card processing fees for your business depends on various factors. Incorrect business information and an improper account setup may lead to an increase in credit card processing fees. To avoid this, it is essential to set up your account correctly from the beginning.
This involves selecting the appropriate business and transaction type, setting a minimum credit card amount to avoid high transaction fees, and adding a credit card surcharge for customers to pay the processing fee.
Obtain payment processing services from your Point of Sale (POS) provider
If you’re looking to cut down on credit card processing expenses for your small business, it’s worth considering partnering with a provider that offers both credit card processing and POS solutions. By doing so, you can streamline your payment processing and avoid incurring extra costs such as integration fees or fraud prevention fees.
Additionally, if your business qualifies for discounts on credit card processing, you can reduce your overall fees while enjoying seamless integration.
In Conclusion,
Reducing credit card processing costs is an essential aspect of running a successful business. By implementing the tips and strategies discussed in this post, you can effectively lower your expenses and increase your profitability. Remember to negotiate rates with your payment processor, optimize transaction processes, and explore alternative payment solutions.
If you have further questions or need assistance with credit card processing, don’t hesitate to contact us. Our team is here to help you navigate the complexities of payment processing and find the most cost-effective solutions for your business. Contact us today to start saving on credit card processing costs and improving your bottom line.
ConnectPOS is a all-in-one point of sale solution tailored to meet your eCommerce POS needs, streamline business operations, boost sales, and enhance customer experience in diverse industries. We offer custom POS with features, pricing, and plans to suit your unique business requirements.
