Unless you are a very high-end retailer, your profit margins are likely low. This makes cutting costs and saving money is an ongoing concern for your business. If you want to decrease credit card processing fees, take a look at these 5 tips! We hope you can find something that works for you.
Before you get started, please note, this article assumes a basic knowledge of credit card processing fees and how credit card processing works. If you are new to credit card processing, please read those blogs before you proceed!
1. Find the Right Merchant Services Provider for Your Retail Business
Most folks who are looking to decrease their credit card processing fees have already found a merchant services provider (MSP) and experienced just how costly they can get! If this is you, we have some advice for you further down the article, hang tight. This first section addresses retail business owners who have not yet found an MSP.
The easiest and most obvious way to decrease your credit card processing fees is to find the right merchant services provider for your retail business from the start! Every merchant services provider is different, offering different pricing models. Some pricing models work better than others depending on their level of transparency and your retail business’s sales volume, which we will talk about in the next section. Customer service is also an important consideration, as poor customer service could hurt your retail business in the future whenever an issue with your service arises.
To these ends, find a merchant services provider who values integrity of pricing and who has a proven history of strong customer service. In our research, the best merchant services providers are local, boasting a brick-and-mortar location in the area of your retail business. These MSPs are held accountable to your business community because they cannot hide behind miles of telephone lines when you are caught in a bind with their pricing or service.
2. Consider Credit Card Processing Pricing Models
More than anything else, the pricing model your merchant service provider adheres to will either harm or help your retail business. The four credit card processing industry pricing models are listed below. While some foster honesty, others let MSPs disguise the fees they pay themselves by combining them with fees taken by the credit card industry. Consider this as well as your retail business’s sales volume when researching credit card processing fees.
- Interchange-Plus – This is the most honest pricing model in the industry. Interchange-plus keeps MSP fees separate from industry fees. The MSP fee is a percentage of the transaction and it does not change depending on the transaction type. Most retail businesses do well with this pricing model.
- Subscription – The subscription model is also transparent. It requires a flat, monthly rate in addition to a per-transaction fee. This is best for high sales volumes.
- Tiered – Unlike the former two pricing models, tiered pricing allows MSPs to hide their fees. They will also categorize your retail business into groups like “qualified,” “mid-qualified,” and “non-qualified,” changing your fees at their discretion based on the types of transactions performed.
- Flat-Rate – Although it can be dishonest, flat-rate pricing can be good for low sales volume retail businesses. With this pricing model, there is no monthly fee but there are percentage and per-transaction fees.
Our expert recommendation for most retail businesses is the interchange-plus pricing model. As we mentioned, this is the most honest pricing model and it typically has the lowest credit card processing fees for our clients. If you would like to discuss pricing models with someone from our team, we would love to connect with you!
3. Don’t Settle on Rates That Won’t Work for You
Contrary to popular belief, credit card processing fees can be negotiated! Whether you are just now signing up with a merchant services provider or you have been processing credit cards for a long time, it is never too late to let them know that you would be happier with lower fees. In your negotiations, leverage your transaction volume. If you are a high volume retail business, you are a high-value business to your MSP, and they will not want to lose you. Here at Cornerstone, we are betting coffee, pizza, and adventure tours that we can beat your current MSP’s rates!
4. Require Credit Card Customers to Make a Minimum Purchase
A lot of people think it is illegal to require a minimum purchase of credit card users. That is simply not true. Furthermore, we recommend this practice to your retail business, even if you are using the interchange-plus pricing model. Using this model, we will never charge you a larger fee for credit card transactions, however, the fee set by your customer’s bank will be larger. This makes a minimum purchase helpful. You can legally set a minimum purchase at up to $10.
Surcharges are not legal in most states. They are allowed in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas, and Puerto Rico. Even in these places, however, the rules and regulations are often so complex that pursuing a surcharge is more hassle than it’s worth. For example, you cannot require a fee for most debit purchases. We generally recommend that you do not consider setting a surcharge as a retail business. You can set a discount for customers who pay cash if you would like!
5. If You Are High Risk for Fraud, Fix That
Merchant services providers do not like clients who are at high risk for fraud. For this reason, they will charge them higher fees. If you want to lower your risk (and your fees), never enter credit cards manually, but always swipe or insert them instead. If you have a chip reader, use this as often as you can, it is the most secure way to accept payments currently available on the market. Whenever you can, request security information such as your customer’s zip code or the CSC on the back of their card.
Time to get to work decreasing your credit card processing fees! If you would like to get started with a new merchant services provider or switch to an MSP who offers interchange-plus pricing, look us up! Our #1 value is customer service, and we are always striving to provide the best value to our retail clients.