5 Ways to Cut Costs on Credit Card Processing

One frequently overlooked business expense is credit card processing. Owners tend to grab the first offer they receive. Since it is typically only a small percentage of each sale, many business owners do not think twice about how much it costs them each month. If you’re still using the same credit card processing company you started out with and have never thought about reducing the expense, consider these 5 tips to cut the cost.

1: Buy instead of leasing
Many payment processors will offer you the ability to rent a credit card machine to accept your payments. Business owners fall into the trap of leasing credit card terminals because they are under the belief that the equipment is a lot more expensive than it actually is. It’s true that some of the higher end models can cost thousands of dollars, but there are plenty of high quality terminals that can be purchased for around $300.
When you compare the one-time cost of $300 to monthly rental payments of up to $50 in some cases, buying your own machine makes a lot more sense.

2: Don’t get tied into long term contracts
When you’re researching different payment processing companies, look for ones that offer contracts without an annual commitment. Payment processors like to get customers to sign up for long term contracts because it locks you in at a certain rate and the only way to get out is to pay a hefty cancellation charge.
Because business needs can change at any time, it’s important to give yourself some freedom to adjust as your business grows or shrinks. One very dangerous clause you should look for in long term contracts is a “liquidated damage” clause. What this does is allow your payment processor to collect the revenue they would have gotten from you for the completion of your contract if you decide to cancel early. Avoid all of this by choosing a payment processing company that allows you to cancel at any time.

3: Don’t overlook Interchange Fees
Many larger companies such as Wal-Mart and Best Buy are well versed on interchange fees. However, small business owners are often left in the dark when it comes to this fairly complex topic. Payment processors are well aware that the topic can be confusing and if you’re not careful, they can use it to take advantage of you.

Interchange fees are charged by credit card companies, and the amounts are set by Visa and MasterCard. The money goes to credit card networks and banks, and then gets passed to the consumer through those tempting credit card rewards programs you get emails and letters about. You can get discounted interchange fees based on a multitude of factors including how a customer pays, what type of card is used, and the amount of risk involved. However, if you’re not aware of this, don’t expect the payment processor to clue you in.

The solution to not getting gypped is to look for payment processors who offer an interchange plus model. With this pricing model, you get to pay the set interchange rate for each transaction plus a little more for markup.

4: Negotiate fees
You may not know it, but most of the fees charged by payment processing companies are negotiable. Remember, the payment processing company has their best interest in mind, and some sales agents may try to tack on extra fees to boost their commission. As a consumer, you have the right and ability to negotiate the terms of the contract, including fees.
Ask your sales agent to explain any fees they plan on charging, and get as many of them waived as possible. Consumers are not the only ones who can dispute fees. Blindly accepting fees just because you’re told to will cost you a lot of money unnecessarily.

5: Consider mobile payments
If a majority of your business is handled remotely or you only accept a small amount of credit card payments each month, it might be in your best interest to explore mobile payment options. You can get credit card readers that plug into your mobile phone or tablet and allow you to accept credit cards at minimal costs. Due to the growing popularity of mobile computing, more online credit card processing companies are starting to offer this service.

With mobile payments, you don’t have to worry about buying expensive equipment, getting into long term contracts, or monthly fees. Mobile payments simply require you to pay a small fee per transaction.

By: Eran Feinstein founder of 3G Direct Pay Limited.