Understanding The Process To Reduce Credit Card Processing Fees
A credit card is a valuable financial tool for a business if used in the proper way. It can serve as an emergency loan whenever you have no money in cash to settle for unnecessary events or situations. These cards make things affordable and comfortable for users. In fact, it can bring you places too. It includes consumer protection that makes every transaction more convenient and safer too.
Of course, people must understand that everything that goes with these cards isn’t free. Those cardholders who have monthly balances are being charged with interest for borrowing money. Though there are some fees that might not charge you, it will depend on how you manage the use of your card.
It might not be important to a small business. With many things they have in mind, a credit card processor is not their priority. They can handle the fee but every small percentage processors that take place every transaction can add up. When they combine all these transaction fees with the other fees like assessment and authorization cost, the bill might get high. And that’s something anyone can’t handle, especially with a startup business.
Here are some ways to lessen the processing fees for your credit card.
Try to negotiate with your credit card processing agencies.
The best way to negotiate with your card processing agent is by leveling the transaction volume of your business. The more you sell, the better transactions you can perform and the more value it can add up to the processor itself. This means to say that the more value you can give them, the more negotiating power to lessen their rate in different areas. As a result, they can also lower their interchange rates for you if they see that it’s worthwhile and beneficial for them too.
Lower the risk of getting credit card fraud.
The higher the security risk you do as a vendor or business, the higher the credit card processing fees you’ll pay. There are 2 primary ways to lower the risk of getting your card fraud. One is to swipe your cards and second, to enter the security information of your card. Jeffrey Gehrs recommends it as one of the most successful card system companies in the country.
According to Gehrs, swipe as many cards as you can. This is because the rate for cards like MasterCard and Visa gets higher when the cards are being entered based on fraud risk. But with the birth of new technology like wireless cell phones, there is no excuse to not swipe your cards. No business is not doing this system.
A vendor or business can also lessen the risk of getting card fraud by giving security information to protect cardholders. This validates their purchases. One best way is to enter the billing’s security code and ZIP code when allowed to.
Use an AVS or Address Verification Service.
This is one way also to lessen the risk of credit card fraud. This system verifies the user’s billing address with the issuers. This serves as a fraud-fighting tool that is beneficial in the eCommerce industry and includes chargebacks.
Set up your terminal and account in a proper way.
There are times that a simple mistake can result in higher payment processors. One best way to avoid this is to set up your account in the proper way possible. In case that you are not setting it up the right way like you provide the incorrect business name, there will be a risk of getting a higher rate.
The way you set up your terminal can affect your expenses too. Make it a habit to process your transaction within 24 hours because it can lessen the number of every transaction too.
Consult a credit card expert.
Give yourself a detailed understanding of the processing rate. It would be possible if you ask or consult a credit card’s expertise. Consult an advocate to gain knowledge on various credit card myths. This is one best way to tighten relationships also between you and your payment processors and convince them to give you lower interchange rates payment. Learning tips and advice from the expert can help small businesses gain an edge with sellers or vendors.
Can you negotiate credit card processing fees?
The only thing you can negotiate with the processing rate is markup credit. This includes transaction expenses, the interchange rate for the processors, and monthly expenses too. All other expenses associated with the gateways, software, and equipment are also part of the markup. These are expenses a processor can take control of. This is the only part of your expense that you can change.
What is the average fee for credit card processing?
What aligned in your fees depends on different factors. You have to consider the industry you belong to, the card’s type, ways you accept cards if it’s through PIN or signature debit, and more. The pay will also depend if you have a membership for the wholesale process. If this is the situation, you can pay 40 percent less. So that’s a big reduction in the amount of expense. But to give you a starting point on the average fee, here’s the rough estimate.
The average cost for one retail business where the cards are being swiped is 1.95 percent to 2 percent for brands like Visa, Discover, and Mastercard. While for cards not presenting businesses like online stores, the average cost is 2.30 percent to 2.50 percent.
This is to remind you that all these costs and percentages are only general averages. Your business may get less or higher costs. Rest assured that when you get a higher cost, that doesn’t mean that you’re already dealing with a bad deal. It means that it’s worthy enough to dig deeper out of it.
Why are credit card processing fees so high?
Entrepreneurs understand that expenses are not that cheap. Over time, a lot of them hate the idea of credit itself because it’s charging them for something they can’t make a profit with. Yet, there are valid reasons why it’s expensive and not free to accept a credit card’s option. But for your knowledge, here are the reasons why these expenses are getting so high for them.
Unfortunately, there are still people who commit fraud to the expense of someone’s cards. It’s sad because people can get away with it. It’s bad for the business too. Since people have vendor accounts, they are still going to pay for fraud with an increase in costs or expenses. It’s a good thing that companies today try to help cardholders and can lessen this incident of bad credit. They are helping their cardholders to keep the cost down.
If you are with a company or a business, your customer will understand that they have a lot of people to work with. This becomes an advantage for the client because they can get their questions right away with ease. Yet, this comes at a cost because a vendor account provider needs to pass on the expense to other customers who demand many services.
Some people when they lash out cards don’t take notice of how much going on with all the credit transactions. But if the consumer knows, they would realize that it takes many software and equipment to run cards. This can cost a lot of money every month. That’s why a small business often gets a break in providing a merchant account to consumers. They know that when they continue, they will pay an expense in higher transaction pay monthly.
Indeed, there are many reasons why it’s expensive to accept credit cards. But with a better understanding of the process, businesses will not have any problem justifying the cost. At the end of it, it will be worth it for any business.
There are different types of processing fees. All companies have different rates. It depends on online transactions, in-person transactions, and card-present transactions. Aside from this, you also have to understand the different kinds of expense structures. This includes interchange rates, flat-rate, tiered pricing, and cost-plus.
Here are the criteria to determine the cheapest processing companies today.
- The monthly credit expenses.
- The transaction processing expenses.
- Interchange rate.
- Percentage of expenses or fees.
- Least processing requirements and fees.
- Cancellation expenses, annual expenses, and contract terms.
- Hardware fee.
- Ease of credit use.
- Point-on-sale features.
- The general transparency on fees.
Based on these criteria given above, the result for the cheapest credit card processing for small business is PayPal. It’s the most affordable and available choice for many businesses that get an average sale of under 20 dollars. In fact many states in the US like in New York consider this as an easy payment system for all their online transactions. They don’t need monthly expenses and other application processes with the use of Paypal.