Have you noticed more retailers starting to charge a credit card processing fee? That’s because businesses are starting to recognize the fact that the costs of accepting credit cards from customers are a lot more than is obvious at first glance.
While credit cards are a great convenience for your clients, it’s worth understanding what they cost you. While you want to accommodate your customers’ payment preferences, it pays to be smart about the impact it’s having on your bottom line. And credit cards carry a number of hidden costs that aren’t immediately clear.
When you think that the credit card company, the card issuer and the processor all want a cut of the per-transaction fee, it’s no wonder that the costs start to add up. And you’re the one footing the bill.
What fees and rates should you consider?
Small business advisor, Bizfluent, breaks down the various charges and sheds some light on how they contribute to the total costs.
Credit card companies charge a base flat fee for all transactions that go through their cards. The fee varies depending on if it’s a debit or credit transaction, as well as the value of the transaction.
The credit card issuer charges interchange fees and they are the largest part of the total per-transaction costs. These vary according to:
- If it was a credit or debit transaction
- Type of business placing the charge
- Credit card network (Discover, Visa, Mastercard and American Express)
- If the card was presented in person, or charged over the internet or phone.
Interchange fees are broken down into a flat fee and a percentage of the total sale and are added to the assessment fee. The combination of these two fees is known as the discount rate.
Processor markup rates
Credit card transactions don’t go straight through to the credit card issuer. Instead, they are processed by a third party, who charges fees that are added to the discount rate. Depending on the credit card company, fees can vary from as little as 1.4 percent through to 3.5 percent, although the actual figures change regularly.
Processors may charge other fees over and above their transaction fees, including a card reader lease fee, monthly processing fees, compliance fees, customer service fees, cancellation fees and more.
What are the top three tips for choosing your provider?
Here are three tips when considering which payment processing provider to choose:
Reward cards don’t reward you.
Many issuers offer cards that lure consumers with loyalty points and cash back rewards. However, it’s worth knowing that your practice pays for these points or cash-back rewards – not the credit card company. This means that not only are you paying all the above processing charges, but also one to three percent in additional fees for points and cash back to your customer. Although these percentages are small, they very quickly add up to impact your bottom line.
Check the fine print with rewards rates.
If a credit card provider asks to compare your current rates and better them, they are likely not including fees, rewards, and points within their comparison. They are known to do a cost comparison that excludes the rewards rate, so it appears at face value that you can save a lot of money. When you get your first statement and realize the savings aren’t there, you’re locked into a long-term contract and it’s too late.
Get smart on the best way to transact.
Accepting payments by debit card is the best way to save card processing fees. This is because they are the most secure payment method and cost the least to process. The rates are lower than credit cards and there are no reward points or percentages to factor in. Also beware of offers of free card processing equipment, as well as reduced cost comparisons. Experience has shown these numbers are often fudged.
You know us as a reliable and trustworthy practice management solutions partner. We also provide a fair and accurate rate comparison, so you know the rate you’re quoted is the rate you will pay. Also, our payment processing services integrate directly with your AVImark and ImproMed software. This can shorten checkout times by 75% and save you hours of reconciliation time.
Are you ready to save time and money and protect your business from the shock of hidden credit card fees? Our Payment Processing Solutions can help.