Credit Cards - Revenue at a Cost

Are the Fees Eating Your Profit?

“The cashless society is coming: American consumers now carry more than 750 million credit cards.”  Last night I worked a charity event for Toys for Tots to help underprivileged kids have presents under the tree.  It was amazing how many pillars of the community did not carry cash, only credit cards. 

Credit cards are a fact of life and business.  We use them for purchasing convenience, expense tracking records, airline miles and deferring payments.  If your business is not accepting credit cards, you are losing sales.  Sales increase with credit card transactions but those transactions also come with costs. It’s like gambling in Vegas, the odds are in favor of the house.  Credit Card processors are in business to make money, but so are you.

Know the Costs BEFORE You Sign the Contract

Promises – Salesmen promise low discount rates, free credit card mobile or online processing terminals, no set-up fees and low administrative fees.  Deciphering the contract complexity equals reading the 2700 page ObamaCare law and still not understanding what will happen. 

Reality - The low rates only apply to standard “qualified” transactions where an ordinary credit card is swiped with the customer present and signing the sales slip.  If the purchaser uses a government, rewards, corporate, debit or international card, the discount rate (merchant processing fee) will be significantly higher.  Instead of the anticipated two percent fee, it could be five percent or more.  Rewards cards such as airline miles or cash back, debit cards or corporate cards are more the majority, than the exception. 

Fees – What Fees?

Insist on seeing a full fee schedule but expect the salesman to tell you, “Don’t worry about those higher fees, they rarely apply.”  Plan your budget expecting the higher fees to apply on a majority of the transactions.

Volume – You receive a lower discount rate for higher monthly volume and larger transactions, but you receive a “low volume” fee and a “low transaction” fee if you fall short of the estimates. 

Transaction fees vary from a few cents to 43 cents per charge.  Until the Dodd-Frank Wall Street reform bill of 2010 set limits, processors were charging 43 cents per debit card transaction.  Phone orders, mobile orders and internet transactions add fees for keying in credit card numbers instead of swiping the card, “mobile add-on fees” and “payment gateway fees.”  (Transactions entered on your mobile device can range from 1.7 percent to 3.7 percent in addition to the add-on mobile fee and transaction fee.  Charging from a mobile location can add significant costs.)

Interchange-plus pricing or tiered payment fee structures are significantly different.  With interchange-plus pricing your statement reflects the charge from Master Charge or Visa plus the amount the processor added.  With tiered pricing, you pay different fees for different types of transactions and it is easier to overcharge or hide fees.

Beware of the annual, monthly, regulatory, compliance and statement add-on fees in addition to the discount percentage, transaction fees and volume fees.

Online shopping cart fees can be challenging to set up as well as pay.  In my case, Wordpress (website) software must coordinate with Go-Daddy  (web hosting company) with QuickBooksPro (accounting program) with Quick Shopping Cart (credit card processor) and with my bank account.  All of this set-up and coordination takes time and fees.  Ask questions of each entity to be certain that they all work and play well together BEFORE you start paying fees or signing contracts.   

Terminals to process transactions can be online, mobile or equipment to be leased or purchased for the place of business.  Leasing terminals can be $139 per month or purchasing terminals can add up to $200 to $350. 

Contracts may be long term with expensive early termination fees or liquidated damages where the merchant will be charged for the estimated amount of the full contract. 

Support would ideally be 24 - 7 – 365 with an English speaking customer service representative.  Low rates do not compensate for no-service when you need help. 

Speaking of time, how long is the time frame from moment of charge to seeing the money in your bank account?  This can be done in a day but may take up to a week. 

Good News With all of the headaches and fees of credit card transactions, credit and debit card transactions accounted for 98.1 percent of all spending in 2010.   Businesses cannot afford to ignore this payment preference. 

Even more good news is that businesses are not charged to purchase with their credit cards, unless they have an annual fee card.  Money saved by awareness of credit card fees can save businesses thousands of dollars a year.  These savings represent money which can be invested into marketing materials to generate more revenue.  PrintPlace.com accepts credit cards and provides videos and live customer service support to assist businesses in making wise marketing decisions.  Variety of products, customer service, convenience of purchasing and payment all with high value makes PrintPlace.com the ideal place for printed marketing materials.