Being able to process credit card payments is essential to any retail business, but you may wonder if credit card processing fees are affecting your profits more than they should. There are many competing processing services to choose from, but selecting the best one for you is not always easy because of confusing fee structures. Fortunately, there are a few ways to reduce your average processing fees. Checkout credit card processing fees florida
Understand How Tiered Merchant Accounts Work
At the heart of credit card transactions are the interchange fees set by the major brands, such as Visa and MasterCard. Between the different brands, there are hundreds of different categories for transactions, based on the nature of individual transactions, each with its own interchange fees, which consist of fixed transaction fees plus percentage fees.
You may wonder how you can be expected to predict costs with such complicated fee structures. To get round this, most processing services group interchange fees into three tiers:
Qualified, which is the base discounted rate
Mid-Qualified, an intermediate rate incurring a moderate surcharge
Non-Qualified, the highest rate
Unfortunately, this still does make comparisons easy for one simple reason: different processing services group the interchange fees into tiers differently. Some service providers may even use more than three tiers. This means a transaction may be classified as qualified with one provider and mid-qualified with another. If this occurs consistently, it can make a substantial difference to your processing costs.
So, how can you go about rectifying this? The first stage is to check your bills for a large number of mid- or non-qualified transactions. If the transactions are mostly qualified, you can probably rest easy. If, however, a large proportion of transactions are being charged at the more expensive rates, you will want to investigate further.
The first action you can take is to contact your current processing provider. Depending on the circumstances, it may be able to reorganize your tier structure to your benefit, switch you to a greater number of tiers, or give advice on how you can change your practices to get more transactions into the qualified tier.
Consider Interchange Plus
If paying too much for processing makes you cringe, the interchange plus model presents a much simpler and better-value option. Although this option was previously only available to established companies that consistently handled high volumes of credit card sales, increased competition has led to it becoming available to smaller companies and even new businesses without operating histories. The idea behind interchange plus is simple; you pay only two different rates above interchange:
A fixed transaction fee
A fixed percentage fee applied to the value of the transaction
You can see straight away that this is a much more transparent system, enabling you to accurately predict credit card processing markups and account for them when setting your profit margins. It also enables you to easily compare the rates of different providers, which is impractical with tiered fee structures.
Buy Equipment Instead of Leasing It
One way for credit card processing services to generate additional revenue is to lease the necessary equipment to their customers. Many businesses will choose this option, simply because it’s easy and avoids having to source and maintain the equipment themselves, but is it good value? The equipment itself is not particularly expensive these days, so leasing can cost considerably more in the medium-to-long term.
Clean Magnetic-Strip Readers
When you swipe a card, the equipment reads the data on the card. In order to get the lowest possible interchange rate, the card reader must be able to read all the data on the credit card. A partial read may still be authorized, but at a higher rate. It may also cause incidents where you need to key in details manually, so make sure you clean your credit card processing equipment regularly.