For business owners, credit card processing is an occupational hazard, and for many, an irritating, unclear and expensive one. While card processing is quite literally one of the costs of doing business, it doesn’t have to be as high a cost, or as confounding an experience, as you might think.
Any time a merchant accepts a credit card payment, they are charged a processing fee. That isn’t to say your business should not take cards; on the contrary, allowing customers to pay with debit and credit cards enables them to buy your products simply and easily. More convenience, more customers. In an increasingly cash-free and contactless world, it’s essential that any merchant be able to process credit card payments, even those considered businesses that may run into problems being authorized, like hemp-derived CBD shops.
But just because you have to pay some credit card processing fees doesn’t mean you have to pay all credit card processing fees, some of which are additional and avoidable. Understanding credit card processing fees is difficult and it can be confusing to figure out if you’re being overcharged. So, before you know which costs you can cut, you need to know what to look for on your monthly statement.
Avoid extra costs
The only fees actually required in card processing are transactional. Determined by the credit card companies, these include interchange rates and cents per transaction, a payment processing markup. However, many providers also impose recurring and one-off fees to use their processing services.
Recurring charges, which merchants are often unaware of or don’t understand, produce extra profit for processors and are not mandatory for credit card payments. Be on the lookout for minimum monthly fees, statement fees, batch fees, next-day funding fees, annual fees, IRS report fees and others.
But that’s not all. Merchants can also incur one-off fees for seemingly any number of ordinary things, like setup, terminal, PCI compliance, address verification, payment gateway, chargeback and retrieval, reprogramming and, worst of all, early termination. Some of these fees are avoidable, or at least negotiable, and it’s worth exploring your options.
Different payment providers offer different pricing, such as percentage markup, flat rate, tiered and subscription-based models.
For percentage markup, processors add an additional percentage charge onto the interchange for each transaction. While it’s hard to predict exactly what you’ll be forking out every month, because interchange varies by card type, the more you swipe, the more you’ll pay in markups. Flat rate, rather than charging some variable extra percentage on top of interchange, applies equally to every card. This is reliable, but it can get expensive, particularly if you’re processing a lot of low-interchange cards where the flat rate represents a significant markup.
Tiered pricing assigns various cards to tiers and charges at whatever their designated level. Despite labels like “qualified” and “non-qualified,” they are established by the provider, which can arbitrarily put popular cards in the most expensive tiers or charge extra for ambiguous online services. Subscription-based pricing offers merchants the direct cost of interchange for a flat membership. You’re getting the lowest interchange rates for a monthly payment, so you can process as many transactions as you want.
Online invoicing systems automate the time-consuming and fallible manual processes, making invoicing more efficient and accurate. EMV smart terminals, especially with NFC technology-enabled readers, allow you to accept chip cards and contactless mobile wallet payments and are essential for brick-and-mortar businesses where customers physically purchase products. For on-the-move, portable businesses, mobile payment solutions like Text 2 Pay are an absolute must.
Every business should have an online store to expand its reach. An online shopping cart, powered by a payment gateway, is an easy and effective way to process sales and boost your e-commerce performance. Point-of-Sale solutions, ideal for restaurant and retail businesses, offer a variety of features and capabilities. And, with the right merchant services provider, a payment-processing API is a great online credit card solution for companies looking for more customization.
If your business accepts credit cards, you are responsible for making sure your customer’s personal information is safe and secure during transactions. There are two important things merchants must do to protect their customers and avoid financial risks associated with noncompliance.
The first is to abide by the Payment Card Industry standards by completing an annual questionnaire. If you are not PCI compliant, your business could be charged a fee by the credit card companies, unrelated to your merchant processing fees. The second is to remain EMV compliant. As of 2015, all merchants that took credit cards had to be capable of taking chip cards too, and now businesses that aren’t EMV-compliant assume liability for any fraudulent activity resulting from transactions using their terminals.
Businesses lose money when payments go bad. Chargebacks, intended to safeguard consumers against fraud, happen when a customer disputes a charge, usually for a lost or stolen card. If the chargeback is approved, the bank issues a fund reversal to the customer, and your business is responsible for the cost.
To avoid the risk of incurring chargeback and retrieval penalties, merchants should follow appropriate card processing procedures; use an online processor with transparent payment protocols and good security standards; remain EMV compliant with a chip reader; utilize clear contracts that reduce misunderstanding over service provision and payment; deliver first-class customer service to resolve issues before escalation; and train your employees to watch for signs of suspicious activity and try to prevent fraud before it happens.
How FLEX Payment Solutions can help
All payment solutions providers have costs for their services, but some of those costs are avoidable. Business owners shouldn’t have to settle for a processor that charges too much, so you need to know what’s out there.
This is especially important in industries such as hemp-derived CBD and Native American businesses. These merchants often face legal restrictions and limited options, which leads some processing companies to take advantage of them with higher fees and complex contracts. FLEX provides a customizable and fully compliant suite of payment methods, including credit and debit card processing, as well as ACH, eCheck 21 and text payment solutions.
With a unique regulations background and special banking relationships, FLEX offers full transparency, 100-percent compliance and unprecedented customer service, striving to deliver the flexible processing solutions you need to operate efficiently, keep costs low and grow your CBD or other legal business.