When a retail business needs to to purchase or upgrade a credit card processing system, it can be a confusing, intimidating process. Before you throw up your hands and accept what seems like the best deal, it’s important to look deeper into the details.
“Nobody wants to walk away knowing they paid too much, unsure how it happened,” says Becky Goldberg, business development manager at Horizon Community Bank.
Interested in Part One of this series on credit cards? Read it here: What is merchant card processing?
Having potential new providers review several months of past statements can float undisclosed fees to the surface, especially when it comes to sliding scale fees and tiered pricing. These can heavily inflate the cost of credit card processing services and should be compared as part of the total cost of doing business with any processor.
Three areas of sliding fees are most common: type of card, size of the transaction and how the transaction enters the system.
Type of card
It’s common for a credit card processor to have a sliding scale fee based on the type of card used.
Debit cards, travel reward cards, cash back cards, American Express, Discover, government cards, each of these may influence the per-transaction fee charged to the retailer. A basic Visa card may process at a different rate than a rewards Visa, for example.
When comparing different credit card processing agreements, it’s important to break out sliding scale fees influenced by individual transactions.
“If you don’t ask about them, it’s easy to base a decision on incomplete information,” Goldberg adds.
Size of transaction
The size of an individual transaction can also impact the per-transaction fee.
A dollar store with a high volume of small purchases averaging less than twenty dollars will often pay a higher per-transaction percentage than a furniture store averaging $1,500 per purchase. Because it costs the processor the same amount of effort to process any transaction, regardless of the dollar amount, small transactions carry the brunt of that fee with a larger per-transaction cost.
How the transaction enters the system
When a purchase is made, how that credit card transaction enters the processor’s system can influence the per-transaction cost, too.
Was it swiped or manually entered at the retail storefront? An online purchase? Did that online purchase require multiple PIN attempts? A business can pay completely different fees on the same product purchase, depending on how and where the sale was processed.
Ask for an analysis
With so many variables at play, any business shopping rates for their credit card processing should obtain several different quotes, including an analysis of their transaction history from each one. This allows a more customized quote that estimates expected fees based on their specific business.
It’s also helpful to include a bank in the mix, if you’re only looking at card reader services. The difference in merchant card services can be substantial.
If you have questions about credit card processing or would like to consider a quote from Horizon Community Bank, Becky Goldberg can be reached at (928) 854-3000 or firstname.lastname@example.org.