When you got into business, it all seemed so simple: sell awesome products and/or services and get paid by customers. Unfortunately, payment processing is far more complex than most business owners assume. In today’s hectic mobile market, cash is no longer king so you must offer customers a variety of payment processing options, often with hidden fees and contracts attached. Credit and debit card processing is big business, but unfortunately not for you. Monthly processing fees represent one of the largest expenses to any retail or service business.
If you aren’t careful, you might end up with a huge payment processing headache, so keep these three things in mind.
Understand the Fees
Understanding what types of fees to expect and how much they will cost will go a long way to determining if you are paying too much to your credit card processor. Typically, there are four types of fees your processor will assess in return for servicing your credit and debit transactions:
- Monthly Statement Fee: These average between $5 and $10 monthly. They cover general customer service overhead (e.g. taking your phone calls, mailing paper statements, etc) that the processor passes back to its customers.
- Monthly Minimum Fee: This $25-$50 fee comes into play if you have only a few or no credit card transactions in a month. Processors add this fee to your bill because you haven’t used their processing services enough. Maybe you own a seasonal business, let’s say a pumpkin patch, where your customers are charging pumpkins to their credit and debit cards like crazy in October but then your patch is closed in January. If you process zero credit cards in January, beware of this charge, but don’t hesitate to call your processor and ask it be removed. A credible processor won’t hesitate to keep you happy.
- Interchange Fee: This fee has two parts: a percent of the sale price by the card issuer (e.g. Visa or Mastercard) and a flat fee correlated to the risk rating of the transaction. So, if a credit card is used and a sale price is $100, the total price might be $102.45 ($100 * 2.4% + $.05).As for risk, let’s say your customer uses a pre-paid debit card to transact merchandise in your store, the underlying funds are guaranteed to be there so it will have the lowest interchange fees. If an employee of a small business uses a corporate card, the underlying funds have a higher chance of default and therefore the fee will be higher.Overall, total interchange fees will come in between $.10% – 3.1% of a credit or debit card transaction, give or take.
- Processor Fee: This is where your credit processor gets paid a percentage of each transaction. The processor sets these fees and you have the choice to work with one processor over another to get the best deal. Usually, processor fees are between .10% – .40% of credit and debit card transactions. If you are paying more than this, it might be time to find a new payment processing partner.
Know Your Contract
It all may have started with a glossy piece of mail you received from your processor, touting an amazing deal, but often the truth is in the fine print. One area of fine print is transaction limits. Will your processor limit the size and frequency of your credit and debit card transactions? Many will. Another area of contractual concern is language that gives the processor the ability to change any of the agreed upon services – at any time. Just when you think you have all of the research done and are thrilled with the deal you are getting, it could change.
Be certain you understand all of the legal jargon, hidden fees, and any monthly minimums before you commit.
How Committed are You?
Often, start-up costs drown a business so it’s easy to want to lease a credit card terminal for tens of dollars monthly rather than pay the hundreds of dollars to purchase it outright. But business owner beware because if you are in business for many months or many years, you will end up paying far more money for your terminal that if you had shelled out the cash up-front. It’s also important to understand your terminal lease agreement fully. There could be some hidden costs associated with breaking the lease term sooner than expected.
It is crucial to find a credit card processing partner, one that will add value to your growing business rather than drain your profit margins. Wholesale Payments Direct takes pride in transparency so please do not hesitate to contact us to discuss our cutting-edge payment solutions.