Three ways to save on your merchant fees

| October 15, 2015

Three ways to save on your merchant fees

Merchant fees are a necessary evil of credit card processing. However, for those in the retail industry, these can make up a large chunk of annual change. According, “… credit card purchases may account for 65 to 100 percent of a company’s sales and thousands of dollars in processing fees each year.” So, instead of assuming it as another business cost, consider these three ways to lower your merchant fees.

Go mobile

Mobile is the newest trend is mobile credit card processing; and for good reason. While traditional methods are still valid and successful for many businesses, mobile has made itself out to be a much cheaper option. While the average transaction fees on a traditional processor can be as low as $.18, you are loaded with a slew of other fees.

Mobile on the other hand, has higher transaction fees, Square charges $2.75 per swipe, but other fees are non-existent; free downloadable app, free equipment and no monthly fees. However, to ensure that you’re actually saving you’ll want to consider your current and future purchasing volume.

  • With a significant amount of purchases, that high transaction fee can still get expensive. If you can negotiate some other contracted fees, it may be cheaper to go the traditional route in the end.

Know your terminology

Many entrepreneurs starting a small business get fooled by their merchant providers because they don’t know the terminology. Similar to making any important business decision, you want to be armed with the right knowledge before signing any contract or purchasing any equipment. There are two important fee terms to know and understand.

  • Interchange rate: The fee that credit card companies charge per transaction. This amount will vary depending on a number of aspects, and is regulated by the credit card networks.
  • Discount rate: When you are presented with your total fee amount from the merchant – this includes merchant fees, ISO fees, bank fees, and interchange rates – you will get a number called the discount rate. This is often not broken down; thus, many businesses believe it to be a flat fee that is non-negotiable.

Re-read the contract

When you’ve decided on the merchant that best fits your needs, you’ll often have to consider signing a contract. Though it’s best to have a professional look this through, it’s important that you know what to look for as well. There are opportunities to negotiate and save on fees if you know what to look for.

  • Reprogramming fees: It comes highly un-recommended to lease equipment – it can be a costly endeavor. However, many merchants will scare you with reprogramming fees if you choose to buy equipment elsewhere.  This is not necessary, don’t let it fool you.
  • Termination fees: Many companies would rather get a large chunk of change from you cancelling your service than build a long, harmonious business relationship. Whether you negotiate these terms/fees or move to another merchant, be on the lookout for it.
  • Interchange plus qualification: Up until recently, only large businesses, doing over $20,000 a month in transactions could qualify. Now, however, your small business may have the opportunity to avoid tiered pricing and get lower rates with this negotiable option. While not every provider has taken to this strategy, a number of online merchants offer it.

Merchant fees can be a costly price to pay for accepting credit cards. However, studies find that consumers typically spend 20 percent more with credit than cash, and so it makes the most business sense. Instead of suffering from outrageous fees, take the pricing into your own hands and make it cost effective for your business.