Every second person has a debit or credit with themselves, keeping cash seems to be an old school thing and thus every payment is done using cards. So, a merchant, regardless of what business they are running, needs to keep such machines that can help customers pay through their cards. However, when payment is done via cards, there is a processing fee that the merchant needs to pay for any credit or debit card sale.
This fee is also known as the merchant discount rate which is predetermined by the service provider of the merchant. The fee comprises of three elements:
- Service fees
- Interchange fees
- Markup by the payment processor
Furthermore, not only the service provider has the effect here, the card issuer is also one of the key factors that determines what the fee will be. For every complete transaction or purchase, the card issues will charge the merchant with a fee or commission for accepting the card, which is typically a certain percentage with a small flat fee.
Moreover, the payment processor here is the institution (financial) that is responsible to safely and securely process and complete the transaction. Generally, the processors partner with brands and companies that work directly with consumers and merchants to facilitate this. As the card issuer charges a small amount as free, the processor is also another party that charges a percentage of the transaction with a flat fee after each purchase. But, how to offset credit card processing fee? Well, if you want to know, this post is for you. Read on and get to know about some of the best ways to offset credit card processing fees.
Best Ways Offset on Credit Card Processing Fees
If you are a merchant and want to get away with such hefty fees, here are some tips for you to follow and enjoy a more healthy bottom line.
Allow a certain Minimum for Credit Purchasing
Owners of business can make changes to the limit of spending by the consumer to be liable for a credit card transaction. In simple words, you can set a minimum of $10 that a consumer must meet before they handover their card to you. They have to shop at least $10. This is a great way that will make the customers either turn to cash or spend more. No matter what they choose, you will get the benefit as it will assist you in offsetting the processing fee.
This tip is simple yet effective. All a business needs is to express properly and make sure the customers are aware of it before they start picking things.
Do Not Lease a Credit Card Terminal , Buy It
A business owner has the option to rent payment processing terminals instead of totally purchasing them. Although, it can prove to be a tempting option as the business owner in the long run will be paying more than its price. So, it is better to buy one instead of renting it. Such terminals cost within the range of $100 to $600 on average, depending on the design and functionality.
Negotiate with the Payment Processor
Negotiating is a major part of the business that can help you save a lot. In cases, when you are working with a processor for a long time, you should now consider negotiating as a great option when the payment processor has some leverage for bargaining purposes.
Understand Transaction Types
Every transaction is not the same and as per the type, you will have to bear the fee. Some transactions may cost more as compared to others, so knowing the types of transaction can help you offset the fees. Generally,
- Transactions made with debit cards cost less as compared to credit ones.
- Manually typed in transactions typically cost more as compared to swiped card transactions.
- Swiped card transactions can cost more than EMV transactions.
A business can incentivize the consumer to make the payment using one type of transaction and not the other. For instance, you can show that the price of certain things is lesser when paid using cash over credit card. You can steer customers towards a certain method by displaying a signage showing the merchant’s preference.
Settling the transactions as soon as possible is crucial. Some of the startups and small businesses put off settling for a couple of days, which leads to an increase in the rate of card processing. If the settlement is done within 24 hours after the transaction is made, the business will experience the most affordable interchange rates.
So, these are some of the ways that any business can follow to offset credit card processing fees and get the most out of every transaction made. We hope, this post helped you in getting the answer you were looking for.