There are 5 different ways to ensure you lower your interchange and overall processing fees.
1. Negotiate with credit card processors
This is the most available and reasonable step to lower your processing fees. First of all, your processing fees are 100% based on interchange, and your markup. If your processing is above 0.10% and $0.10, then you seriously need to negotiate that with them. When you look at the markup, you need to ask youself the question, "Does my rep deserve/earn the markup which they wrote my account at?" Meaning, they wrote you at a particular pricing stance, and is that stance justified by the level of service they provide to you? If not, make sure they omit the Early Termination Fee in your Merchant Processing Application.
2. Reduce risk of credit card fraud
The higher security risk you pose as a merchant, the higher your credit card processing fees will be. You have two primary ways of reducing the risk for credit card fraud: swiping credit cards and entering security information.
"Swipe as many cards as you can," Gehrs said. That's because the rates set by the card brands like Visa and MasterCard are higher when the cards are keyed in based on fraud risk, he explained. "With new technology like cell phone swipers offered by full merchant-service providers and micro-processors like Square, there are few excuses to not be swiping the majority of your cards."
Merchants can also lower the risk of fraud by providing security information that protects the cardholder and validates the purchase. An effective way is to always enter the billing zip code and security zip code when prompted, Gehrs recommended.
"This seems like a small nuisance, but bypassing this step could cost your business over 1 percent of each sale," he said. "Similar to keying in sales, foregoing this process means a higher rate due to fraud risk." The funny thing, is that the majority of small business would rather pay the 2.95% to use the Square device. In the end, if they claw money back, they hold it for 6 months (minimum per the policy). Then, I get calls to help. Sorry. You can help yourself, you processed the card by yourself with your Square.
3. Go straight to the source
Did you know the banks you deal with don't actually process any of your payments?
Did you know that your brokers are actually 2-steps closer to processing your payments than you banks or reps are? Let me explain. As a broker, I am direct with Tsys, First Data, Global, North American, and even First American. This allows me to pass on my buy rate to my merchants and include a mark-up which I call a service fee. I blatantly call it a service fee as I will service you account 100%, and on site. If your rep, bank or broker isn't doing that -- dump their ass. Does PayPay come on site and assist you? Doubt it. Does Square help you ensure your money is deposited next day? Never that.
4. Properly set up your account and terminal
Full discloser of your business and it's processing is 100% the best way to ensure you will never get charge backs or other unwarranted fees. If you do not disclose information to you rep/broker, you may be at risk of getting chargebacks.
5. Ask a credit card processing expert
Most small business owners know next to nothing about credit card processing. Get a better understanding and have an advocate by your side by consulting a credit card processing expert. Not only can these professionals help debunk credit card processing myths, but their knowledge and relationship with processors can also help you get lower rates for your business.
"Here is the secret that merchants are always shocked to find out: Regardless of their size or amount of volume, virtually all credit card processors buy their rates directly from Visa, MasterCard and Discover for the exact same price," said Robert Livingstone, president of IdealCost.com, a credit card processing consulting company. "Therefore, all credit card processors have the capability to resell these rates at the exact same price to different businesses."
Knowing insider information like this can help small business gain an edge with vendors, for instance, as leverage to attract lower rates.
Curtis DeCora is the Chief Executive Officer with Optimize Business Solutions and also a Senior Account Executive with Integra Business. The experience and expertise is backed by 8 years of B2B sales, starting 44 small businesses, and helping clients save an average of $9,381/year.