While cutting costs where possible can be beneficial to your business in the long run, there are some costs that are necessary to help you grow your business. Based on current consumers spending trends, being able to accept credit cards is one business expense you likely can’t avoid.
Even though there is a cost for being able to accept credit and debit card payments, you will likely increase your business’s sales and efficiency by making it easy for your customers to pay for their purchases the way they want. You can help save your business money before you even sign up with a processor by doing your research and shopping around for a payment provider armed with the knowledge of what to look for with regard to processing rates and fees. When purchasing a new car for yourself, or selecting office space to rent, you probably asked a lot of questions and reviewed multiple options – your approach to selecting your payment processor should be no different.
Understand the Pricing Structures
Understanding how your transaction fees are determined is often the first step in saving your business money on your processing statement, and ideally should be taken before you make a commitment to a processor. Different payment processors may offer different pricing structures that will affect how much you’re paying each month. The most common payment structures are interchange plus, flat rate, and tiered pricing, but not all pricing models are created equally, and sometimes simple doesn’t necessarily mean better. Generally, flat-rate pricing is the easiest to understand because it’s only one, simple rate to understand for all transactions. But the most cost-effective billing structure for a lot of businesses is actually interchange plus pricing (also known as cost+ pricing), but it can be a bit complicated on its face because this pricing model adjusts for the specific interchange fee associated with each transaction based on a variety of variables like card type and payment method. So even though it is a bit more difficult to understand at first, it can have significant savings for your business.
On the other hand, if your business sells very small ticket items like coffee or baked goods, or has a low monthly processing volume, then flat rate pricing might be a better option to avoid potential monthly fees and make it easy to know what your processing rate is. Don’t wait until after few months with a new processor to see if you’re getting a fair deal, do your research and dig into what exactly you’re being charged right from the start. Select the payment processor who offers a pricing structure that works best for your business and processing volume.
Get a Rate Comparison
Being able to compare what you are currently paying for processing with what a different payment processor may be able to offer can be a very helpful tool in comparing rates and determining which payment processor can offer your business the most cost-effective solution. Some payment processors, like Helcim, offer competitor rate comparisons to help simplify your comparison shopping and provide you with a tangible motivation to sign up or switch. While the assumption might be that all rate comparisons are offered in good faith and that they will accurately reflect what a payment processor will charge, this is unfortunately not always the case. It’s still very important to review your comparison carefully and question anything that you do not understand or that doesn’t seem to add up, and a good payment processor should always be happy to answer any question you might have.
It’s a good idea to see what kind of reputation the processor has by checking customer reviews because that will often tell you a lot about whether you should trust their comparison or not. If their pricing isn’t honest or transparent and you find people have complained about being misled or lied to, then it is unlikely that their rate comparison can be trusted. If you discover a pattern of dishonesty or misleading pricing, then that will be a good indication of what it would be like to do business with them, and it’s best to disregard their rate comparison and avoid them altogether. There are enough honest providers out there that no business should have to deal with questionable business practices.
Understand the Different Credit Card Processing Fees
There are a lot of different credit card processing fees that might apply to your statement each month, and different payment processors will display their fees differently (if they do at all!), so it’s important to review your statement each month. While credit card processing fees are often unavoidable, you should try to choose a payment processor who includes some of the fees in their monthly fee, waives certain fees, or at the very least accurately and transparently displays the fees on their website and statements. Be sure to ask about things like PCI compliance or non-compliance fees, cross border fees, NFS fees, as well as any terminal or equipment fees. Being aware of the fees you’re being charged or could be charged will make it easier for you to reconcile your costs each month and to spot a discrepancy if something does change.
Know What Your Options are for Equipment
We advise merchants to steer clear from any sort of equipment leases, as they often turn out to be a very bad deal for the merchant over the course of their contract. Too often, merchants will enter into a lengthy equipment lease or invest in a costly point-of-sale system only to later realize that they are paying way too much and are now locked in to a lengthy contract, or that their new hardware doesn’t integrate well with their other business software, or even just that there are more affordable options out there.
As with everything else we’re talking about, doing your research is paramount to avoiding costly mistakes when selecting equipment. Understand what kind of functionality you need for your business and find a solution that fits. Perhaps you can get away with a mobile reader, which is often much more affordable than a traditional terminal. Do your retail customers really require a printed receipt or could you get away with just e-mailing them if they want one? Are most of your transactions by card as opposed to cash? There are plenty of affordable options out there for setting up a fully-functional retail point-of-sale on your own tablet or phone, and you may not need to invest in a full-blown POS solution complete with a cash drawer, barcode scanner, and receipt printer.
Understand Volume Discounts
Some processors will reward increased processing by offering volume discounts if you process above a certain amount each month. It’s worth asking your processor about because while they might be able to offer discounted rates, they may only actually offer them to larger merchants or enterprise clients, while you may never even be made aware of them, even if you are eligible. Sometimes it can be helpful to point out discounted rates that other processors are offering to merchants with your approximate processing volume in order to get the conversation started with your processor.
All processors add their margin on top of the interchange rate, so it’s entirely up to them if they want to eat into their own margins in order to pass savings on to the merchants or not. But its worth mentioning that if a processor’s pricing isn’t transparent and you don’t know what their profit margin is in the first place, it is difficult to negotiate volume discounts honestly. Many processors advertise volume discounts but may have their own ways of calculating eligibility that isn’t always clear or fair to the merchant. For example, at Helcim, we post all the interchange rates and our margins clearly on our website, with our volume discounts clearly stated so that it is a very transparent understanding between us and our merchants.
Know How to Read Your Statement
Your payment processor is most likely sending you a monthly statement, and while it is tempting to look only at the total amount before tossing it aside, it’s important to review your statement and contact your payment processor if you have any questions about what you’re being charged. Knowing how to read your statement is one of the single most important steps to take to ensure you’re not being overcharged and that what you’re paying matches what you were expecting. Since credit card processing is always volume dependent, your totals will likely change from month to month. This opens the door for processors to take advantage of the fact that you’re not expecting absolute consistency from one statement to the next. Many processors use confusing statements to their advantage by burying hidden fees and incidental charges, often over an extended period of time so that you’re less likely to notice.
Do. Your. Research.
While paying for payment processing is unavoidable if you want to accept credit cards, by being a savvy consumer who does their homework, you can set yourself up to process affordably. Regularly checking your statement, asking questions when something doesn’t make sense, and shopping around for the best price will all allow you to be confident that you’re not overpaying for credit card processing.