How to Save Money on merchant services Without Sacrificing Quality
Accepting credit and debit cards has become a non-negotiable necessity for virtually any business in today’s market. Customers expect it, and refusing to offer this payment option can severely limit your sales potential. However, the cost of merchant services can feel like a significant burden, especially for small to medium-sized enterprises (SMEs). The good news is that you can save money on merchant services without sacrificing the security, reliability, and customer experience you need. This article will delve into strategies to help you negotiate better rates, understand the different fee structures, and ultimately find a cost-effective solution that fits your business needs.
1. Understand Your Current Rates and Fees
Before you can save money, you need to understand where your money is currently going. Request a detailed breakdown of your current merchant services agreement. Pay close attention to these key areas:
- Interchange Fees: These are fees set by card networks (Visa, Mastercard, Discover, American Express) and represent the largest portion of your processing costs. They vary based on card type, transaction volume, and the way the card is processed (e.g., swiped, keyed in, or online).
- Assessment Fees: These fees are also charged by card networks and cover things like marketing, fraud prevention, and other network operating costs.
- Processor Markup: This is the profit margin your merchant services provider charges on top of the interchange and assessment fees. This is where you have the most room for negotiation.
- Transaction Fees: A flat fee charged per transaction, typically a few cents.
- Monthly Fees: These can include account maintenance fees, gateway fees (for online transactions, more on that later), PCI compliance fees, and statement fees.
- Chargeback Fees: Fees incurred when a customer disputes a transaction.
- Termination Fees: Penalties charged for ending your contract early. Read the fine print carefully.
Understanding each of these components will give you a clear picture of what you’re paying and where you can potentially cut costs.
2. Explore Different Pricing Models
Merchant service providers offer various pricing models, each with its own advantages and disadvantages. Understanding these models is crucial for choosing the one that best suits your business.
- Interchange Plus Pricing: This model is generally considered the most transparent. You pay the actual interchange fees, assessment fees, and a fixed markup percentage plus a small transaction fee to the provider. It’s often the most cost-effective for businesses with higher processing volumes and a mix of card types.
- Tiered Pricing: This model categorizes transactions into different “tiers” (e.g., qualified, mid-qualified, non-qualified) based on card type and how the transaction is processed. While it might seem simple, it can be opaque and lead to higher costs if a large portion of your transactions are categorized into the higher-priced tiers.
- Flat-Rate Pricing: Popularized by companies like Square and PayPal, this model charges a fixed percentage on all transactions, regardless of card type or processing method. It’s easy to understand and predict costs, but it’s often the most expensive option for businesses with higher volumes or a significant number of premium cards.
- Subscription Pricing: This model charges a fixed monthly fee for access to merchant services and a low per-transaction fee. It can be a good option for businesses with consistently high processing volumes, as it provides predictable costs.
Carefully analyze your transaction data to determine which pricing model would result in the lowest overall cost for your specific business.
3. Negotiate with Your Provider (or Find a New One)
Once you understand your current fees and the different pricing models, it’s time to negotiate. Use the information you’ve gathered to:
- Ask for a Lower Markup: This is the area where you have the most leverage. Explain that you’ve researched the market and are aware of competitive rates.
- Inquire About Volume Discounts: If your processing volume has increased, ask for a discount based on your higher volume.
- Eliminate Unnecessary Fees: Review your monthly statement for fees you don’t understand or feel are unnecessary. Challenge these charges.
- Be Prepared to Switch: If your current provider is unwilling to negotiate, be prepared to switch to a new provider. Competition is fierce in the merchant services industry, and there are many providers eager to earn your business.
4. Optimize Your Processing Methods
The way you process transactions can impact your interchange fees. Here are some tips:
- Encourage Card Swipes or EMV Chip Reads: These methods are considered more secure and typically result in lower interchange rates than keyed-in transactions.
- Address Verification Service (AVS): Use AVS to verify the billing address of online transactions. This can help reduce fraud and chargebacks. You can setup an account with services like Authorize.net.
- Prompt Settlement: Settle your transactions daily to avoid downgrades in interchange rates.
- PCI Compliance: Maintain PCI DSS compliance to avoid non-compliance fees and protect your business from data breaches.
5. Consider Using a payment gateway for Online Transactions
If you process transactions online, using a payment gateway can streamline the process and potentially reduce costs. A payment gateway securely transmits transaction data between your website and your merchant account. Look for a gateway that offers competitive rates, robust security features, and seamless integration with your website platform. Many merchant service providers offer their own payment gateways, but you can also choose a third-party gateway like Authorize.net, depending on your needs.
6. Shop Around and Compare Quotes
Don’t settle for the first merchant service provider you find. Shop around and compare quotes from multiple providers. Be sure to compare apples to apples, focusing on the total cost of processing rather than just the individual rates. Look for providers that offer transparent pricing, responsive customer support, and a strong track record. You can find resources for comparison at PaymentCloudInc.com.
FAQs
- What is PCI DSS compliance?
- PCI DSS (Payment Card Industry Data Security Standard) is a set of security standards designed to protect cardholder data. Compliance is required for all businesses that accept credit and debit cards.
- What is a chargeback?
- A chargeback is a transaction dispute initiated by a customer with their card issuer. Chargebacks can result in fees for the merchant.
- How can I reduce the risk of chargebacks?
- Use AVS, require signatures for large purchases, provide clear product descriptions and return policies, and respond promptly to customer inquiries.
- What is a merchant account?
- A merchant account is a type of bank account that allows you to accept credit and debit card payments.
- What documents do I need to apply for a merchant account?
- Typically, you’ll need your business license, tax ID number, bank account information, and information about your business’s processing volume.
Conclusion
Saving money on merchant services requires diligence, research, and a willingness to negotiate. By understanding your current fees, exploring different pricing models, optimizing your processing methods, and shopping around for the best rates, you can significantly reduce your processing costs without sacrificing the quality of service. Remember to prioritize security and reliability when making your decision.
If you’re feeling overwhelmed by the complexity of merchant services, consider reaching out to experts who can guide you through the process. Payminate.com specializes in helping businesses find the best merchant processing solutions to suit their specific needs. Contact Payminate.com today for a free consultation and discover how they can help you save money on merchant services.