Trying to find out where you cut costs on your processing fees? Understanding what a specific company is charging you on a monthly basis to accept credit and debit cards can be confusing. In this article, we’ll break down what individual processing charges you’ll see on your statement and where you can save the most money on your processing fees.
One of the realities of using a payment machine to process a debit or credit card is the processing fees, as they are unavoidable no matter what processing solution your business uses. This leads to every business owner’s question: what are the cheapest ways to accept credit card payments? Fees are standard from all credit card issuers, payment card networks, and merchant providers, whether you use payment machines, online shopping carts, or mobile card readers.
The good news is there are several ways you can minimize fees and score higher profits for your business. In this article, we’ll take a look at some of the best practical strategies business owners use.
Cheapest Ways To Accept Credit Card Payments
The Basics Of Credit Card Fees
Whenever you take a credit card payment using a payment machine (i.e., a terminal, mobile card reader, or online system), you are charged three fees:
- Interchange Fees
- Assessment Fees
- Processing Fees
An interchange fee is attached to risk and reward. If it’s keyed in, it’s considered “risky.” Whereas, if the card has rewards, the card issuer will pass those hard costs onto the merchant through their interchange fees.
An assessment fee is attached from the payment network, such as VISA, MasterCard, and American Express, usually a small percentage mixed in with the interchange fee. Both fees come directly from the credit card issuers and are considered “hard costs.”
A processing fee (also called a discount) is given to the merchant services provider for accepting and routing payments from the terminal to the issuer, network, and your bank. The processor fee is typically a percentage fee, plus a cost per transaction.
Whenever your business accepts an order, the total cost per credit transaction will vary based on the card type. The cheapest credit card companies are typically VISA and MasterCard, followed by Discover and American Express. Discover and American Express are usually more expensive to process because they have high rewards for their cardholders. Again, those rewards are passed onto the merchants by the credit card issuer.
You won’t be able to avoid or change the issuer’s payment card network’s fees unless you stop accepting certain credit cards, and limiting payment options can get in the way of a sale. That being said you can lower the price-per-transaction by focusing on the processing fee.
What To Look Out For With Processing Fees
Unlike credit card issuers and networks, the processing fees are added by your merchant service provider and can be negotiated.
Now, you won’t be able to eliminate them. Processing credit cards and debit cards is a service and involve costs to the person providing the service, such as technology, support, and facilitating transitions for your business. There should be a small bit added in addition to interchange and assessment fees to cover their expenses and pay their staff, as most processors offer support.
Unfortunately, there are several less-than-reputable credit merchant companies out there who are ready to take advantage of you. They excel at hiding processing fees that have a way of working their way into your bill.
Take time to carefully review the processing fees before accepting any contracts to ensure you get the cheapest deals.
Negotiating A Fair Processing Fee
One way to score price breaks from merchant companies is through understanding the fee options they offer.
Most providers offer several choices like tiered pricing, flat-rate pricing, and interchange-plus pricing. These options are available for most payment methods like payment machines, mobile credit card processing, and online ordering. Companies offering interchange-plus and companies providing online reporting are often trustworthy credit processors because their fees are clear, and the companies don’t feel a need to hide their fees.
However, every business is different. Depending on the type of cards your customers frequently use may change what processing fee structure, you’ll get the most value from as a business.
How To Understand The Types Of Transaction Fees
The method of accepting payments also affects costs. For instance, if you are an online company or take phone orders, you take card-not-present transactions. These are high-risk transactions, so merchant providers sometimes issue a higher fee. If you take a large number of online orders or process recurring online payments, these fees can add up. Inversely, direct transactions in brick-and-mortar stores traditionally save money when customers pay via debit cards.
Knowing the type of fees issued for each transaction can score you some nice savings, so be sure to negotiate with providers on the types of card transactions your business processes the most.
Using A Bank Vs. A Merchant Provider
When it comes to the type of businesses that provide processing services, usually there are two types of businesses. Mainly, a bank or a merchant service provider. Traditionally in the industry, banks aren’t the cheapest option. There is typically a limit to their merchant servicing capabilities, which require them to enlist third-party companies. At this point, they simply move you over to them while accepting a portion of the processing fees. This means there’s an additional party expecting to receive a cut of your processing fees.
Merchant service providers don’t hand you off to third parties. They work directly with you to provide all kinds of processing services, such as using a payment gateway, offer PCI compliant support for added security, backed with fraud protection. They are directly responsible for accepting payments and maintaining smooth and secure credit card processing. And they offer hardware like payment machines, mobile credit card processing, online payment processing, and back-end support to make payment processing easier.
Use An Established Merchant Processor
Reputable merchant providers take time to build strong relationships with banking services to ensure safe, reliable, and timely credit card processing. It helps boost their reliability and reputation in the industry.
Read reviews from other businesses in your industry and see how their experience has been working with any merchant service provider to ensure they are offering real value.
Take A Closers Look At Multi-Year Contracts
Although many processors will offer “lower fees” if you sign a long-term processing agreement, run away. Many processors hide a large number of fees that will haunt you later. And if you terminate the contract, you may face a hefty fine. Keep a close eye on those terms and conditions. The more reputable the credit card processor is, the more transparent the fees are, and they will not lock you into a contract for credit card processing.
Understanding The Right Terminal For Your Business
You can avoid high credit card fees and save even further with certain terminals. Traditional terminals used to be thousands of dollars, but now you can score payment machines for quite a bit less. You can also take advantage of mobile credit card processing through a phone, tablet, or online shopping cart, minimizing upfront costs significantly. In several cases, you can choose a specific terminal option for a lower fee, and can buy or rent the terminals, whichever is best for your budget.
Finding A Cheap Way To Accept Credit Cards
Going forward, your business should be better informed about the various types of fees you can expect to see on your processing statements and how to find affordable and fair processing options.
Here at BNG, we believe in being clear about costs, and our long history in credit card processing has resulted in a strong reputation in the industry. We have the banking institutions, hardware, software, and advanced customer support to complete transactions safely and keep your business moving.
In addition to offering payment machine processing, we offer mobile credit card processing through tablets, phones, laptops, and even specialty terminals such as table-side terminals in restaurants – all with easy-to-use interfaces. You can take orders manually or online, keep an eye on stock and employee performance, and maintain immediate profit and loss statistics, all backed with expert customer service.
Contact us to find out more about our fees and contracts and how we can work with you to structure our fees to benefit you the most.