How To Avoid Processing Fees

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Credit card processing is an occupational hazard for many business owners, as it is inconvenient, unclear, and costly. While card processing is unquestionably one of the costs of doing business, it doesn't have to be as expensive or as perplexing as you might think.

A processing fee is assessed every time a merchant accepts a credit card payment through online payment gateway. That isn't to say your company shouldn't accept cards; on the contrary, allowing customers to pay with debit and credit cards allows them to purchase your products quickly and easily. More customers, more convenience. In an increasingly cashless and contactless world, it is critical for any merchant to be able to process credit card payments, including those considered businesses that may have difficulty being authorized.

However, just because you must pay some credit card processing fees does not imply that you must pay all credit card processing fees, some of which are unnecessary and avoidable. Understanding credit card processing fees is difficult, and determining whether you are being overcharged can be difficult. So, before you can ...
... determine which costs to cut, you must first understand what to look for on your monthly statement.

Avoid extra costs

Fees
Transactional fees are the only ones that must be paid in card processing. These are determined by credit card companies and include interchange rates and cents per transaction, as well as a payment processing markup. Many providers, however, charge recurring and one-time fees to use their processing services.

Recurring charges, which merchants are frequently unaware of or do not understand, generate additional revenue for processors and are not required for credit card payments. Keep an eye out for minimum monthly fees, statement fees, batch fees, next-day funding fees, annual fees, IRS report fees, and other similar charges.

But that isn't all. Setup, terminal, PCI compliance, address verification, payment gateway, chargeback and retrieval, reprogramming, and, worst of all, early termination can all result in one-time fees for merchants. Some of these fees are avoidable or negotiable, so it's worth investigating your options.

Pricing
Pricing options vary by payment provider, including percentage markup, flat rate, tiered, and subscription-based models.
For percentage markup, processors add an additional percentage charge to each transaction's interchange. While it's difficult to predict exactly how much you'll pay each month because interchange varies by card type, the more you swipe, the more you'll pay in markups. Instead of charging a variable extra percentage on top of interchange, a flat rate applies to all cards equally. This is dependable, but it can be costly, especially if you process a lot of low-interchange cards for which the flat rate represents a significant markup.

Tiered pricing assigns different cards to tiers and charges them at the appropriate level. Despite labels like "qualified" and "non-qualified," they are determined by the provider, who can place popular cards in the most expensive tiers or charge extra for ambiguous online services at its discretion. Subscription-based pricing provides merchants with the direct cost of interchange in exchange for a flat membership fee. You're getting the best monthly interchange rates, so you can process as many transactions as you want.

Technology
Online invoicing systems automate time-consuming and fallible manual processes, increasing the efficiency and accuracy of invoicing. EMV smart terminals, particularly those equipped with NFC technology, enable you to accept chip cards and contactless mobile wallet payments and are essential for brick-and-mortar businesses where customers physically purchase products. Mobile payment solutions are an absolute must for mobile businesses.

Every company should have an online store to expand their reach. The best online payment gateway powered online shopping cart is a simple and effective way to process sales and improve your e-commerce performance. Point-of-Sale solutions, which are ideal for restaurants and retail businesses, come with a wide range of features and capabilities. In addition, with the right merchant services provider, a payment-processing API is an excellent online credit card solution for businesses seeking greater customization.

Compliance
If your company accepts credit cards, you must ensure that your customers' personal information is kept safe and secure during transactions. Merchants must do two things to protect their customers and avoid financial risks associated with noncompliance.

The first step is to comply with Payment Card Industry standards by filling out an annual questionnaire. If you are not PCI compliant, credit card companies may charge your company a fee that is unrelated to your merchant processing fees. The second goal is to maintain EMV compliance. All merchants that took credit cards had to be capable of taking chip cards too, and now businesses that aren’t EMV-compliant assume liability for any fraudulent activity resulting from transactions using their terminals.

Chargebacks
When payments fail, businesses lose money. Chargebacks occur when a customer disputes a charge, usually for a lost or stolen card. They are intended to protect consumers from fraud. If the chargeback is approved, the bank refunds the customer's funds, and your company is responsible for the cost.

To avoid chargeback and retrieval penalties, merchants should follow appropriate card processing procedures; use an online processor with transparent payment protocols and good security standards; stay EMV compliant with a chip reader; use clear contracts that reduce misunderstanding over service provision and payment; provide first-class customer service to resolve issues before escalation; and train your employees to look for signs of suspicion.