The landscape for transaction processing is rapidly changing. New media, new currencies, new ways of processing transactions, and new technology for securing transactions are popping up every year. This in the wake of nearly 40 years’ worth of magnetic strips that had served our economy so well over the years. They’re still quite popular, but cards with “the chip” are much safer for your customers as they secure the information stored on credit cards from potential thieves. What else do you need to know? Read on.
Reducing the Risk of Fraud to the Customer Will Lower Your Transaction Costs
There are two very good reasons to invest in newer technologies and talk to a Valued Merchant Services rep about the latest features that secure individual transactions. The first reason is that your customers will feel safer and they’ll be more willing to frequent your establishment. The second is that it will decrease your transaction costs.
Following Processor Protocol
Different credit card processors will have their own protocol for processing credit card transactions. When swiping, it’s important to check the expiration date on the card, and enter in the street number from the billing address, zip code and the security code on the back of the card when prompted. Again, this could save you money on each transaction. For purchases in which the card is not present, there may be specific information the card processors need. If this information isn’t provided, it could result in a charge back.
You Can Negotiate with Credit Card Processors
In order to leverage credit card processors into reducing fees, it behooves even smaller businesses to be seen as a business that adds value to a credit card processor. This is generally measured in the number of transactions. The more business an establishment does, the larger the volume of transactions, which puts money in the pocket of the credit card processor, who is more likely to cut you a deal.
Larger Banks are the Ones Processing Credit Cards
The majority of credit card processors farm out the labor to larger acquirers, meaning a local, smaller bank / acquirer is acting as a middle man. You don’t have to cut ties with the smaller bank, but you will save money by having a larger processor handle your credit card transactions.
Consulting with an Expert
The majority of small business owners are not experts on credit card processing. It’s one of those things where it will seriously pay off to consult with an expert. There are many nuances to the trade that most vendors wouldn’t know unless they were involved directly with credit card processing themselves.
Knowing What’s Flexible
There’s basically two areas of the cost you pay that aren’t ever going to change. Those include interchange and assessments. The interchange fee is what card issuing banks collect and it’s basically fixed with potential increases/decreases levied every April and October. Assessments are fees that are charged by the card brands like Visa, MasterCard and Discover and they are basically the same across the board. Processing companies will charge a markup fee for their own services and this is where you can negotiate.
Interchange Pass Through Pricing
Vendors tend to get hung up on rates and fees, but as a vendor, you want to hone in on what the processing company’s markup is based on. There are generally two main pricing options. Those are tiered and interchange pass through. For many of smaller businesses, especially those that don’t do a high volume of credit card transactions, tiered is going to be the more expensive option.
Be Wary of Long Term Contracts
You want to be wary about getting locked into a long-term contract, and if you are, make sure it comes with some sort of leverage in terms of pricing. Long term contracts will often result in cancellation fees, and if you’re not sure you’re getting a good deal in the first place, then you want to shop around before marrying yourself to one credit card processing company.
Buy New and Stay Current
Mobile processing is becoming more and more popular because tech itself can be used with several different mobile devices. These include iPads, tablets, smartphones, and just about any other mobile device you can think of. You don’t want to get locked into paying exorbitant rates for a point of sale system that’s going to be obsolete in a few years. Interchangeable parts are always the best.
Monthly Discounting is Better than Daily Discounting
Daily discounting happens when a credit card processor takes charges day to day throughout the month. Monthly is when they add interest at the end of the month and it is going to give you better control over your cashflow.
The Bottom Line
Suffice it say, it can be overwhelming on the vendor side to deal with all these different nuances to the credit card processing trade. You need a team like Valued Merchant Services who you can trust.