It’s the bane of small business transactions: the dreaded credit card processing fee.
Reducing fees can improve your bottom line, but your strategy depends on transaction volume, industry, and customer base.
Choose a credit card processor with a surcharge program. A payment card surcharge or checkout fee is when a business passes the credit card processing cost (the interchange rate charged by card networks) to customers. It can’t be added to prepaid cards or debit card transactions, nor can you apply it to payments by customers from Connecticut, Massachusetts, or Puerto Rico. Strict rules must be followed, including notifying the card networks (like Visa and Mastercard) at least 30 days before beginning a surcharging program and informing consumers online and in-store at the point of sale and on the receipt. Small businesses should also weigh the pros and cons of surcharging, as it could impact your customer experience. Credit card processing companies offering surcharge programs include Helcim, Square, Stax, Heartland Payments, and Elavon.
Verify addresses for lower credit card fees. An address verification service (AVS) is a system used during the checkout process. It confirms that the cardholder’s billing address matches the one the customer enters. AVS reduces fraud and chargebacks, especially for big-ticket items and e-commerce transactions. Visa offers a lower interchange rate to merchants who conduct an AVS check.
Give a cash discount to customers. Unlike a surcharge program, a cash discount is a marketing and sales technique. Small businesses increase the prices of goods or services, then “reward” customers who pay with cash by discounting the items at the register. If desired, you can extend the discount to those paying by check. The posted price, whether on the menu or sales tag, is the actual cost, and customers paying by cash receive a lower price. This is an important distinction. The Truth in Lending Act defines a discount as “a reduction made from the regular price.” In contrast, a surcharge is “any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means.” Cash discounts may reduce your card processing transaction volume and increase cash payments. However, it can be off-putting to customers, so review the benefits and drawbacks before introducing a cash discount program.
Always examine your monthly statement. Many credit card processors increase fees or add charges to your account, like minimum processing or maintenance fees. Look over your monthly invoice to see the total costs of processing credit cards. Sometimes you can negotiate charges unrelated to processing–or decide to switch to a provider who doesn’t tack on additional non-processing fees.
The Emporia Area Chamber of Commerce offers many resources to help you start, run, and grow your business–including our annual Leadership Emporia Academy, monthly Group Lunches, Ribbon Cuttings, Business After Hours events, Legislative Dialogues, and more. Stop by the Trusler Business Center at 719 Commercial St., call 620-342-1600, or visit our website at www.emporiakschamber.org to learn more.
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“Let’s Talk Business” is a weekly column of the Emporia Area Chamber of Commerce and Visit Emporia. The mission of the Chamber is to be proactive in creating an environment for business and community success, guided by the vision that positive attitudes promote positive actions. Contact us at 620-342-1600 or chamber@emporiakschamber.org and visit our website at www.emporiakschamber.org.