5 Ways to Cut Transaction Fees While Still Getting Paid
Getting paid is the most important part of doing business. Whether you run a small local boutique, a service-based B2B agency, or an online ecommerce site, you’ll need to set up a way for customers to pay conveniently. Often this is done through credit card payments, although increasingly businesses and consumers are relying heavily on more advanced methods like contactless and peer-to-peer payments.
Unfortunately, those newer payment methods often come with fees that can cut into a business’s bottom line. Unlike cash, which moves from consumer to business without an intermediary, credit card transactions go through processing companies and banks, usually bringing fees in the two to three percent range. It’s important to find ways to keep those fees as low as possible. Here are a few things you can do.
Don’t Lease Equipment
It may seem like a more affordable option when you’re starting out, but equipment leases add up over the course of a year. If you have already leased your equipment, search for lower prices on compatible terminals and purchase one outright as soon as you can get out of your lease agreement. If you’re shopping around for a new provider, you may find that some even provide the equipment for free to new customers. Just make sure you aren’t paying higher fees as a result, since the equipment usually costs only hundreds of dollars.
The first thing you should do is gain a full understanding of the amount you’re currently paying in fees. Combine that with a thorough review of the contract you currently have with your payment processing provider. If your contract expires soon, leverage that to renegotiate your agreement. You can not only ask for lower transaction fees, but you can ask for any monthly, annual, or administrative fees to be waived or reduced.
There are so many payment-processing providers on the market, you’ll easily be able to find a competitor that offers lower rates than you’re currently paying. Even if you aren’t at the end of your contract, some companies will pay any cancellation fees with your current provider to entice you to switch. Learn the difference between interchange and tiered pricing and choose the option that is best for your transaction volumes.
Reduce Risk Factors
Without realizing it, you may be charged higher fees due to your risk factors.Some types of businesses automatically fall into that category, including airlines, debt collectors, travel agencies, and multi-level marketers. If you have bad business or personal credit, you may find your fees reflect it. You’ll also often pay higher fees for “card not present” transactions, which simply means that when you swipe the card, the fees are lower than when you enter the numbers manually. But you can potentially lower those fees by discussing the types of transactions you’ll primarily process and making sure you’re set up with the right account to accommodate that.
Even if you’re a low-risk business, you may lose your processing service or see your rates increase if you have ongoing fraudulent transactions. If your payment processing provider doesn’t use a service like Authorize.net, consider using it to serve as your payment gateway. If your business is brick-and-mortar, train your employees to detect and stop fraud in its tracks, including matching the signature on the back of the card to the signature on receipts. Look for suspicious behavior, such as obvious attempts to distract the clerk. For online transactions, require address verification to make sure the address matches the address on file at the card’s issuing bank.
Credit card transaction fees can add up over the course of the year. If businesses can find ways to reduce those costs, even in small ways, they can often see significant savings. Once business owners fully understand all of the fees they’re being charged, they can then identify ways to make those changes, as well as be on the lookout for providers that will offer cost savings.