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Tips for reducing credit card processing costs

Tips for reducing credit card processing costs

As a business owner, your priority is to maximize profits. You can do this through competitive pricing, advanced marketing, and by saving money and reducing overhead wherever possible. And, when it comes to saving money, one of the smartest things you can do is look for ways to reduce credit card processing costs.

Shop around

Some companies will try to lure you in with the promise of unbelievably low rates. But don't be fooled by rate numbers alone. Unreliable service and hidden fees can actually cost you more in the long run. You could also be charged fees for ending your contract early – which means the company might make even more money if you're dissatisfied with their service.

Look for processing solutions that save you time and money by streamlining your business. When your reporting systems are integrated and automated, you spend less time duplicating data and reduce the risk of making costly manual errors.

Look for processing solutions that save you time and money by streamlining your business.

Understand where your money goes

When obtaining quotes from merchants, understanding the contract lingo is essential for evaluating what kinds of fees you'll be charged and how frequently those charges will occur. And, you should also consider what information you want to collect from the transactions. 

  • Qualified rates: This is the rate you'll pay on a transaction that's processed in an approved manner. It's the lowest rate your card processing company will charge and it's usually the fee you'll be quoted when you inquire about rates.
  • Mid-qualified rates: These rates are a little higher and are incurred when your transaction doesn't meet all of the approved criteria. For example, a card that is keyed in manually instead of being swiped might be charged at this rate.
  • Non-qualified rates: If a transaction doesn't meet qualified or mid-qualified criteria, it will be charged at an even higher, non-qualified rate. If information for authorization is missing or verification isn't performed, you could end up paying the non-qualified rate.
  • Downgrade: If your transactions do not consistently meet qualified rate requirements, you may be subject to a downgrade – an across the board rate increase for the payments you process.
  • Interchange fees: These fees might be for your biggest card processing expense. Interchange fees include money paid to the issuing bank, and they come out of a merchant's gross sale amounts.
  • Chargebacks: When customers dispute transactions, the amount is refunded to the acquiring bank and you may be charged a fee in the process, actually losing money on a transaction. Fees and policies vary; so get the details before you choose a card processing company.

Additional considerations

Some credit cards will cost more to process. So it's up to you to decide which credit card brands you will accept. On the one hand, you may save money by refusing cards with higher rates, but you might also be missing out on sales by turning away customers who wish to use those cards.

Finally, remember that debit cards and credit cards are processed differently and incur different fees. Understanding your card processing company's fee structure will help you determine the most cost effective way to complete transactions on cards that maybe be run as debit or credit.

 

Alyssa Gregory is a small business consultant, writer, speaker and collaborator who has been helping start and grow small businesses for 13 years. She is the founder of the Small Business Bonfire, a free social, educational and collaborative community for small business owners, and author of the Connect Startup Toolboxes currently available on U.S. Bank Connect.

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