When it comes to accepting credit cards as payment, small businesses are “damned if they do, and damned if they don’t” – as in, they stand to lose income no matter which decision they make. Since approximately 35% of people preferred credit to any other type of payment in 2014, small businesses could miss out on sales if they refuse to accept credit cards altogether. But since typical merchant account companies charge up to 5% for each transaction, the costs of accepting credit can add up fast.
So, what’s a business to do? By and large, most businesses – and even small ones – grin and bear it. Better yet, they build the cost of accepting credit into the retail price of everything they sell.
Four Tips to Help You Save On Credit Card Processing Fees
But there are additional ways businesses can save on credit card processing, and they aren’t that hard to implement, either. If you’re a business owner who’s tired of paying huge credit card processing fees, here are a few tips that can minimize your pain:
Tip #1: Set a firm minimum for consumers who use credit.
To reduce the damage caused by credit card processing fees, some merchants up the ante in terms of how much their customers must spend. In other words, they set a minimum for each transaction they process with credit, say $10.
When faced with a purchase minimum to use credit, consumers can either turn to cash or spend more – both options that benefit your business. If customers opt for cash, you’ll avoid credit card processing fees altogether. But if they spend a bit more so they can use credit, the extra revenue can help offset credit card processing fees.
To implement this strategy, all you have to do is post your new rule prominently by the cash register and inform your employees of the change. Then, follow up to make sure they follow through. It’s as simple as that.
- Related: 21 Best Small Business Apps
Tip #2: Shop around before you choose a credit card processing company.
Credit card processing companies have to compete to attract (and keep) clients just like everyone else. As a result, credit card processing fees can vary depending on the company you choose. One might offer a lower rate to lure in new customers, while another might charge more for the exact same thing. Either way, it pays to shop around to find the best deal – especially when we’re talking about a difference of a percentage point or more of your credit sales.
One small business owner we interviewed in 2015 said she switched from her old credit card processing service to Square, and praised their straightforward fees. “One month I looked at my bank account and [my credit card processor] had taken $2,500 out of my account just for fees,” said Coffee Break Cafe owner Jen Ormond. “And I was like, I’m paying more in credit card fees than I am for rent. So I literally went to Apple that day and I bought the [Square] swiper, and it’s the best thing I’ve ever done.”
To find a few processing firms for comparison’s sake, check with other businesses in your area and ask who they use. A simple search of the Better Business Bureau (BBB) may also turn up companies in your area while letting you check their credentials along the way. You can check out the Simple Dollar’s guide to credit card processing services as well.
Before you sign up to use anyone’s service, make sure you understand their fee structure and how it works. Saving a percentage point or even half a percentage point on credit sales can be huge for your bottom line, but failing to conduct due diligence can be costly.
- Related: Best Credit Card Processing Service
Tip #3: Buy your own credit card terminal instead of leasing one.
When you sign up with a credit card processing company, you’ll find some firms also rent the equipment as well. While that might sound convenient, you should know that renting a POS system is much like renting anything else – as in, you’ll pay a lot more over time than if you had just bought the equipment outright.
A quick search of an office supply store shows that credit card terminals run anywhere from $100 to $600. Depending on how much you’re asked to pay to rent one, purchasing your own processor could easily pay for itself in a short amount of time.
Tip #4: Make sure your employees aren’t entering credit information manually.
Because credit card information entered manually can mean a higher incidence of fraud, credit card processing firms charge more for these transactions. Because of this, you’ll want to go out of your way to make sure each credit transaction is processed through your POS system by either a swipe or the “dip” of a chip-enabled credit card.
To make this step happen, you should train your employees and cashiers to avoid entering card information manually at all costs. And if possible, you can also try to limit credit purchases made over the phone.
Even if the additional charge for entering credit manually is only a half percentage point more, those fees can cut into your profits dramatically over many months and years.
If you’re a business owner who is struggling to come to terms with their credit card processing fees, there are a handful of ways to lessen the burden without alienating your customers. Remember, small fees can make a huge difference to your bottom line over the long haul. Credit card processing fees may be unavoidable, but you can reduce them with a few simple steps.
- Credit Card Processing Guide for Small Businesses
- Best Credit Card Processing Service
- Best Business Credit Cards of 2016
- Credit Card Processing Explained and Mobile Readers Reviewed
- Best Small Business Loans for 2016
How much do you pay in credit card processing fees? Have you tried any of these strategies to reduce your fees over time?
The post How Small Businesses Can Save On Credit Card Processing Fees appeared first on The Simple Dollar.