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Proven strategies to reduce credit card processing costs
Credit card processing fees are the fees you pay your bank or payment service provider for accepting credit cards. This fee is usually based on a percentage of each transaction and can be a significant part of your business expenses. But you can save money without sacrificing customer satisfaction by understanding how credit card processing fees work and taking some basic steps to reduce them.
The biggest factor in your processing costs is the exchange rate that Visa or MasterCard sets. Exchange rates are based on several factors, including the processing network used (Visa and MasterCard have their own networks), merchant category code (MCC), and customer card type.
Credit card processing fees may be worth it if you’re selling a high-priced product like computers, cars, or airplanes. But if you have a small business that only sells products like beer, hot dogs, and t-shirts, there’s no reason to pay credit card processing fees at all! This blog will show why that is and how to reduce your credit card processing costs.
Review the rates you pay
First you need to make sure you are using a processor that offers the best possible prices. Find out how much they charge and compare it to other providers. No reason to change if they charge a fairly standard rate. However, it may be worth switching companies if they have negotiated special rates or better deals with the banks.
Make sure you get all the discounts your processor offers. Some processors offer discounted rates based on volume, while others may lower rates if you increase your volume over time. These discounts can add up quickly and help lower your overall costs.
Optimization of payments
When choosing a debit or credit card processing company, look for one that offers multiple payment methods with different pricing structures.
For example, suppose you have an e-commerce site and accept payments from customers shopping online. In that case, you might want to consider a merchant account that offers a fixed pricing structure instead of one that charges more per transaction, depending on how much it costs to process each transaction. This can help keep costs down while allowing flexible payment options for your customers — and charging more per transaction will only turn them away.
Some providers even offer rewards programs where they’ll give you cash back for processing specific types of transactions (eg mobile payments) or give you discounts for signing up with them in the first place. Take advantage of these benefits as much as possible to minimize costs and keep more money in your pocket each month.
Negotiate with your credit card processor
This is the most obvious way to reduce the processing cost. You can call your current processor and ask for a lower price or better terms. If you are in a favorable position, you may be able to get a better deal than if you were applying for a new service from scratch.
It’s not uncommon for businesses to negotiate credit card processing fees. This can be done during the initial negotiation of the contract or at any time during the term of the agreement. If you don’t think you got a good deal when you signed up, now is the time to ask for lower fees.
Research third-party services like Square, PayPal, and Stripe
These best credit card processing companies for small business offer low-cost processing solutions that may be more convenient for small businesses than working directly with banks. However, these services are not free—they typically charge fees higher than those charged by banks, but lower than those charged by traditional merchant-buyers. Compare their rates carefully before deciding whether it’s worth using them.
Stay away from cancellations
Chargebacks occur when customers dispute a charge on their credit card statement, usually because they didn’t receive what they paid for or a defective product or service. The card issuer charges the merchant bank for the amount of the sale and may also charge a surcharge. In some cases, this fee can be as high as $25 per returned item.
The best way to avoid chargebacks is to make sure your business has a solid return policy and that you follow it consistently. Customers who receive their products or services as promised will not need to open a dispute.
Remember not to rent or lease your credit card terminal
Many small businesses are starting to use rental or leasing program to avoid upfront costs for their equipment. But many merchants don’t realize that by doing this, they are locked into a higher price than if they bought their own terminal outright.
It’s also important to know that if you decide to go this route, there may be restrictions on moving terminals between stores or locations, meaning that if you get rid of one location, you may have to stick with the same processor , even though your business has changed dramatically.
If you’re like most business owners, you want to reduce your credit card processing costs today. You’ve seen how much money merchants save annually by lowering their rates, and you want to do the same. And with so many options available, it’s hard to know where to start. The good news is that we’ve compiled this list of six easy ways to save money on processing fees that can help get you headed in the right direction.