Credit card processing costs can be a headache for any business owner. These seemingly small upcharges can chip away at a business’s bottom line quickly. This blog will highlight what credit card processing fees are and the important steps you can take to reduce these costs to help your business grow.
Credit Card Surcharges
When a merchant offers credit card payments, they have to pay a processing fee to the financial institution whenever a purchase is made. To circumvent this, a merchant has the option to compensate for this fee by adding their own fee (or surcharge) on top of the purchase at the point of sale. This helps the merchant offset acceptance costs which can range from 1.3% to 4% per transaction.
Essentially, this percentage-based surcharge fee shifts the cost of accepting a credit card from the merchant to the cardholder.
It’s important to note that the cardholder still has options to avoid this surcharge altogether and can use other payment methods such as cash, check or debit card. Should the customer decide to pay via credit card, these fees can be thought of as allowing the cardholder the convenience of using the credit card virtually anywhere, anytime.
Why Should a Merchant Surcharge?
When a merchant adds a surcharge, it achieves two goals for the business:
- It allows businesses to expand the kinds of payment methods available to the customer.
- It enables businesses to sustain revenues by offsetting the cost to the consumer.
Surcharge Options for Merchants
Merchants partnering with WPS have multiple surcharge plan options to choose from. One of our processing partners, Elavon (supported by our Converge platform), offers “zero-cost” credit card acceptance plans. These programs make the merchant’s cost of accepting credit cards virtually free. These plans include:
- Merchant Managed Surcharge Plans which allow the surcharge fees collected to be funded to a business’s DDA in a batched submission. This is reflected at the end of the billing period. A business can see the total surcharge fees collected and then funded over the course of the billing cycle.
- Acquirer Managed Surcharge Plans remove the surcharge fees collected prior to sending the funding file to a business’s DDA. No debit of the surcharge fees appears on your business account at the end of the billing cycle.
Overall, credit card surcharges allow your business to have a cost-effective way to accept credit card payments anywhere, anytime.
More Ways to Reduce Payment Processing Costs
It is important to stay on top of any changes in the payment processing industry to avoid fines and optimize your business. Optimizing your payment processing setup can help minimize unnecessary fees for your business, by checking your bank transfers for hidden fees regularly and cutting them out. When unwanted fees remain, it may be time to explore newer payment technologies that could have lower processing costs. In addition, negotiating deals with your payment processor can greatly reduce your processing costs.
Lastly, it may be worth offering cash discounts to your customers. Just reach out to our team for more information.
Let Westmoreland research trends and negotiate the best rates for you to help your business thrive.