As a business owner and consumer, “I hardly ever carry cash” is probably something you hear (or say) frequently. Everywhere you make a purchase today — whether it’s a shopping mall, grocery store, restaurant, outdoor festival, or even a parking meter — chances are you can use a credit card to make the payment. Most vendors, regardless of business size or purchase amount, accept credit cards now. If you don’t, you may be losing out on making a sale.
But making purchases as convenient as possible for your customers certainly doesn’t come without a cost to your business. As a merchant, each time you accept a credit card payment for your goods and services, you also accept the associated credit card swipe fees.
What is a credit card swipe fee, anyway?
Each time customers swipe a card on your processing system, or insert it into the chip reader, or enter all the necessary information to make an online purchase, they’re essentially “swiping” their credit card through your merchant account. Every time this happens, the banks and credit card companies take their designated fees right off the top, as a convenience for processing payments for your products or services.
These services are free to the consumer but can be costly to the small business owner.
In fact, for businesses, swipe fees are often the largest operating costs associated with merchant accounts.
How much does each swipe fee cost your business?
Swipe fees, or transaction fees, vary by credit card and can be as low as 1.5% or as high as 5% of the overall purchase amount. Each swipe fee contains money that goes to the bank that issued the customer’s credit card (the interchange fee), and money that goes to the particular credit card company (the assessment fee). The swipe fee also includes the costs of moving money from the customer’s account to the merchant’s, along with any necessary security measures meant to protect sensitive customer data.
As a merchant covering these processing fees for your customers, depending on your credit standing and the number of fraudulent charges you’ve historically experienced, you’re assessed the corresponding swipe fee. If you have a risky credit history as a result of too many chargebacks or lack of established credit, the banks may charge a higher swipe fee per transaction to mitigate that risk. Remember, swipe fees are just one part of the many credit card processing fees your business is responsible for.
Is there a way to reduce swipe fee costs?
Although swipe fees and all the other merchant account processing fees are inevitable, there are several things you can do to minimize your business’s credit card processing fees. One way to keep them at a reasonable rate is to ensure all your merchant accounts are as safe and secure as possible. Be sure you’re technology is up to date and you are PCI compliant. PCI compliance means all your processing systems meet the highest standards of protecting customer data.
When you’re not compliant, it can cost your company a fortune in additional fees, and you run the risk of losing your merchant accounts. When your accounts are secure and your technology is up to date, you’ll be able to more effectively minimize chargebacks and fraudulent activity, which ultimately puts you in good standing with the credit card processing companies, and therefore, reduces fees.
Partner with a pro. In addition to swipe fees, there are a number of hidden fees you may not even realize you’re paying every month for every transaction. These fees can add up fast if you don’t know how to manage them, or you simply don’t have the time to closely examine all your merchant accounts while running a business. That’s where we come in. The pros at Merchant Broker are experts in the financial industry and can help you recover hidden costs from swipe fees and numerous other processing fees. Give us call or email us so you can start benefiting from lower fees and a higher bottom line.