This Simple Trick Can Save You Thousands on merchant services
For any business accepting credit or debit cards, merchant services are a necessary evil. The fees associated with processing transactions can eat into your profits, sometimes significantly. Many business owners simply accept these fees as unavoidable, believing they’re at the mercy of the processing companies. However, there’s a simple, often overlooked trick that can potentially save you thousands of dollars annually: negotiate your rates and understand your processing statement.
This isn’t about some magical loophole or shady tactic. It’s about being proactive, informed, and willing to advocate for your business. Let’s break down how this simple trick works:
1. Understanding Your Current Rates and Fees:
Before you can negotiate, you need to know what you’re paying. This means deciphering your merchant services statement. These statements can be dense and filled with jargon, making it difficult to understand exactly where your money is going. Here’s a breakdown of common fees to look out for:
- Interchange Fees: These are fees charged by the card-issuing banks (like Visa, Mastercard, etc.). They’re non-negotiable but represent a significant portion of your overall costs. Interchange fees vary based on factors like card type (credit vs. debit, rewards card vs. standard card), how the card is presented (swiped, keyed-in, online), and your business type.
- Assessment Fees: These are fees charged by the card networks (Visa, Mastercard, Discover, American Express) to the processing companies. Like interchange fees, these are generally non-negotiable.
- Processor Markup: This is where the processing company adds their profit margin. This is the area where you have the most negotiating power. Processor markup can include:
- Transaction Fees: A fixed fee charged for each transaction (e.g., $0.10 per transaction).
- Percentage Fees: A percentage of each transaction value (e.g., 0.25% per transaction).
- Monthly Fees: A fixed monthly fee for account maintenance, gateway access, etc.
- PCI Compliance Fees: Fees related to ensuring your business meets Payment Card Industry (PCI) security standards.
- Statement Fees: Fees for generating and delivering your monthly statement.
- Early Termination Fees: Fees charged if you cancel your contract before the agreed-upon term.
2. Benchmarking Your Rates:
Once you understand your current rates, it’s time to see how they compare to industry standards. Researching average rates for businesses similar to yours can give you a strong bargaining position. Consider factors like your industry, average transaction size, and processing volume.
There are several online resources and tools that can help you benchmark your rates. Contacting multiple merchant services providers and requesting quotes is also crucial. Don’t be afraid to shop around and compare offers. Look at companies such as https://paymentcloudinc.com/ for options.
3. Negotiating with Your Existing Provider:
Equipped with your newfound knowledge of your current rates and market benchmarks, contact your merchant services provider. Be polite but firm. Here’s how to approach the negotiation:
- Highlight Your Value: Emphasize your history as a loyal customer and your processing volume.
- Present Your Research: Show that you’ve done your homework and know what rates other providers are offering.
- Be Specific: Clearly state what rates you are seeking to achieve. Don’t just say “lower my fees.” For example, “I’d like to reduce my percentage fee by 0.1%.”
- Be Prepared to Walk Away: The threat of switching providers can be a powerful motivator.
Often, simply asking for a better rate is enough to prompt a reduction. Your provider likely values retaining your business and may be willing to lower their markup to keep you.
4. Understanding Pricing Models:
merchant services providers offer different pricing models. Understanding these models is critical for effective negotiation:
- Interchange Plus Pricing: This model charges you the actual interchange fees plus a fixed markup (e.g., Interchange + 0.25% + $0.10). This is generally considered the most transparent and cost-effective model.
- Tiered Pricing: This model groups transactions into different “tiers” based on factors like card type and how the card is presented. Each tier has a different rate, often obscuring the actual interchange costs. This model is often less transparent and can lead to higher fees.
- Flat-Rate Pricing: This model charges a fixed percentage and transaction fee for all transactions, regardless of card type or processing method. This is the simplest model but can be more expensive for businesses with a high volume of lower-cost transactions.
Negotiate for Interchange Plus pricing whenever possible, as it offers the most transparency and control over your costs.
5. Exploring Alternatives and Payment Gateways:
Don’t limit yourself to traditional merchant services providers. Explore alternative payment solutions and gateways like Authorize.net. These solutions may offer more competitive rates or features tailored to your specific needs. A payment gateway allows your website to process credit card payments, securely.
FAQs
-
Q: Is it really worth the effort to negotiate?
- A: Absolutely! Even a small reduction in your rates can translate into significant savings over time, especially if you process a large volume of transactions.
-
Q: What if my provider won’t negotiate?
- A: Don’t be afraid to switch providers. There are many options available, and you can likely find a better deal elsewhere.
-
Q: What’s the best time to negotiate my rates?
- A: You can negotiate your rates at any time, but it’s often most effective when your contract is up for renewal or when you’re experiencing significant growth in your processing volume.
-
Q: What are PCI compliance fees?
- A: PCI compliance fees are charged to ensure your business meets Payment Card Industry Data Security Standards (PCI DSS), which are designed to protect cardholder data. These fees can vary depending on your business size and processing methods.
-
Q: What if I don’t understand my merchant services statement?
- A: Ask your provider to explain it to you in detail. If they’re unwilling to do so, consider finding a more transparent provider.
Conclusion
Negotiating your merchant services rates and understanding your processing statement is a simple yet powerful trick that can save your business thousands of dollars. By being informed, proactive, and willing to advocate for your business, you can significantly reduce your processing costs and improve your bottom line. Don’t be afraid to shop around, compare offers, and negotiate for the best possible deal.
If you’re feeling overwhelmed or unsure where to start, consider reaching out to experts who can guide you through the process. Contact Payminate.com today for help with getting the best merchant processing solutions for your business. They can help you understand your current rates, compare offers from multiple providers, and negotiate on your behalf, ensuring you get the most competitive rates and save money on your merchant services.