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Accepting credit cards is no longer really a question of “if”, it is a question of “how much?” I have personally helped hundreds of small business clients save over $1,000 per year on their merchant services. Our company has helped thousands of business owners and I believe that just reading this short post and applying it should generate an additional $1,000 in profits each year for your company.
Here are the steps to saving money on your merchant services.
Step #1 – Stop trying to understand your merchant statement and simply figure out your “Effective Rate.”
Your effective rate is your total fees divided by your total processing volume. There are a variety of fee structures out there and none of them are particularly good or bad, the only thing that really matters is this: What percentage of your total processing volume are you paying in fees? Make sure you include equipment costs, if you have annual fees, divide those by 12 and include them in this monthly calculation, etc.
Step #2 – Identify things you are paying for that you shouldn’t be paying for. The top two that come to my mind are PCI Non-Compliance Fees and Terminal Rental or Lease Fees.
- In order to be PCI Compliant, you as a small business owner, with a standard credit card terminal, are required to complete a self assessment questionnaire. This questionnaire can be taken for free on the PCI DSS website. However, many processors charge high yearly fees to complete this or even worse”Non-Compliance Fees” when you don’t complete the SAQ (Self Assessment Questionnaire) Our company focuses on helping our clients become PCI Compliant and insuring them against any negative liability if a breach does happen.
- As far as equipment goes, you should NOT be paying for equipment. Your investment should be going towards a touch screen point of sale system. Standard credit card terminals come free with about half of the processors out there, Transaction Expert being one of them. If you need a new credit card terminal, don’t buy one and please do not sign a long term lease, just get a free one from your next processing company.
- Lastly, you shouldn’t be locked into a long term contract. Things change in business and unfortunately, I have seen many small business owners save a little money on their credit card processing services only to pay a $295 “early termination fee” when they cancelled the service after 24 months.
Step #3 – If you are an average small business processing between $5,000 and $15,000 each month with an average ticket size of $20 to $100 you should be paying an effective rate of 2% to 2.5%. Anything over that probably means there is room for some savings.
Let’s break this down.
You process $10,000 per month in credit cards and you are paying $400 in fees plus a $30 per month terminal rental. So your total fees are $430 / $10,000 which means you have an effective rate of 4.3% or in other words, $4.30 out of every $100 your process is ending up at the credit card processing company.
If you switch to a more competitive processor, your effective rate should drop to at least 2.5% meaning your total fees would be $250 with free equipment. This would give you monthly savings of $180 or yearly increased profits of $2,160.
Not bad for taking 10 minutes to read a post, right?
Are you paying too much for your credit card processing / merchant services or do you have a question about how the fees really work? Ask me a question in the comments below and I promise to get right back to you! You can also complete the form to the right to have one of our local experts come to your business and take a look at your statement to figure out your effective rate.
Have a great week,
James Shepherd
