Processing your business payments matters more than it may seem from the outside. There are ways to save money by choosing the right processing option for your credit and debit cards.
Card payments involve origination fees, late payment fees, application fees, and maintenance charges. It would be a good idea to seek advice from experts like a P3 merchant processing auditor. A lot of businesses prefer accepting cards over cash payments.
Fees You Incur From Card Payments
Card payments involve the following fees.
Interchange Fees: This is a percentage of each transaction. As a business owner, you will deal with multiple interchange fees, and how your payment processor handles the fee will determine how many you spend and how much you save. The differences in interchange fees could impact your savings.
Fees Charged by Credit Card Providers and Debit Card Providers: Card providers charge an assessment fee for their services. Generally, they charge a dollar or so for every transaction.
Additional Fees: Your card providers may also charge additional fees for setups, changes, cancellations, etc.
How to Save on Card Processing
Service providers offer different fee bundles. Some providers use an interchange-plus model, while others use a tiered pricing system. Interchange plus uses a flat fee percentage based on assessment fee and processing fee, where a tiered pricing system assesses and bundles different rates. Based on what type of fee bundle you choose, there are different strategies to save money.
Fixing the Optimal Fee Structure
If you sell on a large scale basis or deal with huge payments, the interchange plus system may be best for you. This system uses the flat fee structure to increase the fee based on the payment size. You will only have to be concerned about the number of transactions. Understanding the purchase behavior of your customer can also help. You could enquire with your customers on what payment mechanism they use and what works best for them.
Negotiate With Your Provider
If you are familiar with your provider and plan on working with them long-term, you could consider negotiating the fees. The provider may be willing to work out a good deal with you for client retention purposes. Your provider will not want to lose a valuable client over a small fee negotiation.
Using Debit Cards Will Help Save Money
Debit cards are subject to fewer fees which makes their processing cheaper than the processing of credit cards. You could consider asking your customers to use debit cards whenever they can while processing payment for your business. Debit cards fall under lower qualified rates.
Inserting the Card Instead of Typing Numbers
This may come as a surprise, but if a provider uses a tiered pricing system, the provider will likely charge for each error in card processing. If the card is inserted into the machine, there are fewer errors because of the automation. Manually typing out details could lead to more errors. Chip readers are accurate and may help you save money.
Hold a Minimum Limit for Card Transactions.
Integrate cash payments into your payment processing structure. It may be good to allow card payments only if the payment amount is more than a minimum sum of money. It does not make sense to pay a hefty service fee for a transaction that may be smaller than the fee charged. Unless the transaction fee is only a tiny percentage of the actual payment, it is unwise to choose card payment options.
The Method of Payment Processing You Choose Could Have a Considerable Effect on Your Savings.
The liabilities of your business are not just related to your business loans and creditors. Even details like payment processing fees can impact the way you spend and save. Working with an experienced audit team like a P3 merchant processing auditor can help you eliminate unnecessary payments related to your debit and credit cards and maximize your savings.