In today’s financial landscape, understanding how to minimise credit card fees can be a game-changer for businesses when it comes to saving money. By implementing smart strategies and being aware of potential charges, you can keep your credit card fees in check and maximise your savings.
By reducing credit card processing fees, businesses can also be better positioned to incentivise customers with attractive credit card shopping offers.
Let’s look at some ways to cut down on processing fees to boost profitability. We will also examine the options open to you when it comes to negotiating with your credit card company or financial institution.
What are Credit Card Processing Fees?
In simple terms, Credit card processing fees are charged by banks, and merchants must pay it every time, as a percentage of the purchase value made with a credit card. Understanding their impact is crucial, especially for businesses processing numerous credit card payments daily, as the cumulative fees can be substantial.
In many cases, the processing fee is charged upon the payments received by a retail store. So if you have a large and growing business with many customers paying you with credit cards, you will rake up significant credit card fees that would be part of your overhead expenses. Added to other operational costs, your profitability will be impacted – thus the need to reduce credit card processing costs.
Before considering the techniques for minimising credit card fees, let’s look at the factors that determine the fees.
Factors Upon Which Credit Card Fees are Based
The average credit card processing fee ranges from 1.3% to 3.5% on every transaction. This will depend on some factors like the payment company through which you’re enabling the transaction, the type of credit card being used, and the merchant category..
– High-risk business
If the products you sell or the services you provide are considered high-risk, your credit card fees will be higher. Certain types of businesses are regarded as high-risk because of the products they sell and are highly regulated by government agencies. They may attract high credit card fees.
– The Type of Credit Card Transaction
Credit cards that can be swiped or used at Point of Sale (POS) terminals as contactless cards attract lower processing fees compared to other types of cards. So if you have high credit card processing fees, you can let your card issuer know the type of cards you accept to negotiate a lower one.
How to Reduce Credit Card Fees
– Negotiate with your issuer
When looking to reduce credit card fees, the first way is to negotiate with your card issuer. Reach out to them and inquire about potential fee reductions or waivers. By demonstrating a positive payment history, you may be able to secure better terms, ultimately saving you money on credit card fees.
– Eliminate risk of fraud
If you can eliminate the chances of credit card fraud in your business, you can convince your issuer to reduce processing fees. For instance, you can make your customers swipe cards instead of entering card numbers. You can also ask your customers to verify their billing addresses when prompted to do so.
Also Read: How your OneCard keeps you safe from fraud
– Configure transaction processing efficiently
Ensure that all information regarding your business is correct and updated. When your business structure and payment terminals are configured perfectly, the credit card processing fees will be much lower. It is also better to process credit card payments each day than weekly, financial experts revealed.
– Choose the correct pricing model
When setting up credit card processing with your payment processor, be sure to sign up for the exact business model you operate. Let them know your business type, expansion potentials, volume of sales, and risk types. When your business model is properly represented, the card processing fees will be much lower.
Credit card fees are the charges made on each payment made out to your business with credit cards. They are business expenses that cannot be avoided, but they can be minimised. This guide shows how to reduce credit card processing fees to boost business profits.