Minimizing The Credit Card Processing Expenditure

Minimizing The Credit Card Processing Expenditure

At first glance, the impact of the credit card transaction fee could appear negligible for business owners, and they generally elect to ignore this aspect. However, as any expert in the financial field can tell you, those couple of extra cents you spend on each purchase eventually add up.

At the end of the fiscal year, you’ll notice that the total processing expenditure, added to the other typical fees like statements, gateways and minimums is genuinely immense. In fact, you don’t even have to wait until then to find out just how much money you’re losing; just check your monthly processing bill. Here are a few tricks to minimize the costs.

Bargaining with the credit card processing company

It’s worth noting that, in order to have any hope of convincing your credit card processor to reduce the fees, your company requires a certain volume of transactions. The leverage offered by the transaction volume stems from the number of processing fees you can be charged. If you can argue that lowering your transaction fee could help you offer your clients better deals and increase your number of sales, then the processor may be willing to negotiate because he wins based on volume.

Minimize the liability of credit card frauds

Liability is one of the main reasons why credit card processors charge merchants different – I.E. higher – rates. Experts recommend implementing a POS payment system that reduces the risk. Preferred methods comprise of swiping the card or NFC enabled device, and requesting extra security codes. A further step you can take in this direction is to validate transactions upon the client entering security details.

Bypass the middleman

If your credit card processor is a small local bank, then we have some bad news: they’re not the ones processing your credit card transactions. In reality, while you pay them for the service and they charge a commission for it, these small financial entities are outsourcing the process to the big boys like Wells Fargo, Fifth Third or the Bank of America. Furthermore, in most cases the overhead expenses of these banks come out from the clients’ pockets. The markup resulted from it is huge, and that will reflect on your credit card statement bill. To save costs, take your business to one of the major banks.

Hire an expert to negotiate on your behalf

The outcome of negotiating the fees with your processor relies heavily on your understanding of the complex nature of the business, and to be frank you need to have worked in the industry for a long time to catch all the subtleties. For instance, did you know that basically every single processing service receives the rates from giants like Discover, Visa or MasterCard at exactly the same value? The logical conclusion is that every single client should, in theory at least, be eligible for the same rates.

Therefore, a much better solution consists of hiring an expert to handle the discussions. Many of these services have a policy that entails splitting the savings with the client or, if they fail to reduce the processing fees, charge absolutely nothing for their work.