How to Reduce Credit-Card Processing Costs

by Christopher Null

3 min read

When you start accepting credit cards in your business you’ll pay fees for everything from setup and application to processing and customer service. But no two providers charge the same fees for the same services. That’s why it’s so important to find the right merchant service provider and merchant account for your business.

What to Keep in Mind as You Shop for a Provider

As with any B2B service provider, merchant service providers that process credit card payments run the gamut from full service at high prices to fewer services and lower pricing. Here are some things to keep in mind as you comparison shop for service providers. Don’t be fooled by low pricing alone. A rock-bottom rate isn’t worth unreliable service.

  • Choosing an integrated payments solution can save you time and money by reducing duplicate data entry and errors.
  • Understand all the fees involved and read the fine print before signing any vendor contract or application.
  • Learn about the different types of processing rates and find out whether the provider charges for terminating your contract.
  • Choose a provider that will work with you to help grow your business.

Before You Set Up Your Merchant Account

When it comes time to set up your merchant account, you’ll want to choose the account type that’s most appropriate for your type and volume of business to get the best rates and service. Each account type has its own rate and qualification requirements.

Before you select an account, do your research. Asking the right questions about costs today can save you time and money later. For example, some providers charge a nonrefundable application fee. Look for a provider that doesn’t charge this fee, or ask if it can be waived.

While you’re comparison shopping, also ask providers:

  • What are your nonqualified rates? (These may or may not be published.)
  • What are your monthly fees?
  • What are your monthly minimums?
  • Are there any contracts or cancellation fees?
  • Do they charge extra when you contact customer service?

The biggest upfront costs are setup, equipment, and software. A variety of terminals are available at a range of prices depending on their printing and connection functionality. Here are some money-saving tips regarding terminals for credit-card processing:

  • Don’t pay extra for terminal functions you’ll never use.
  • Use processing software instead of a terminal if all your business is done online and over the phone.
  • Ask the provider if it can reprogram your existing terminal.
  • Be cautious about leasing a terminal to lower your monthly costs. High cancellation fees and long-term contracts will likely cost you more in the long run.

Most of your costs to accept credit cards will take the form of transaction-processing fees and charges based on whether you qualify for your best rate (called a “discount rate”) or not.

In addition to the varying rates, there are fees to be aware of, too, including interchange fees and chargebacks.

Not All Cards Are Created Equal

Certain credit cards cost more to process than others. It’s up to you to choose what works best for your business. To help offset the cost of processing more expensive card types, make sure your transactions meet as many of the qualifying requirements as possible.

Debit cards have grown in popularity. They often serve as both a check and a debit card. Deciding whether to process a charge as online or offline can make a difference in your rates, so keep the following in mind:

  • Online transactions get processed through the credit card interchange and are charged at an online (nonqualified) rate.
  • Offline transactions get processed through the debit network and are charged a flat per-transaction fee.
  • You can reduce your costs by processing low-cost items at the offline rate and larger items at the online rate.

Track Your Costs to Determine Business Value

If you accept credit and debit cards, you’ll have to pay fees. Your best defense against hidden costs and unnecessary downgrades is to keep accurate records of your processing costs. Audit your records regularly to build your own benchmarks and evaluate the cost-effectiveness of your business rules and practices. Based on this data, you can continue to optimize the way you do business. Just remember that accepting credit cards should help — not hurt — your bottom line.

If you are ready to explore further, QuickBooks Payments offers payment solutions that allow you to process credit/debit card payments on mobile phones or tablets, as well as accept ACH bank transfers and e-checks.

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