When was the last time the majority of your customers paid cash for your products or services? In a world where credit card use surpasses cash payments, the banks are, well… laughing all the way to the bank as they rake in credit card swipe fees.
For merchants, this means you may be forced to increase your prices, witness a decline in profits, or perhaps both. What can merchants do to protect yourself and increase your bottom line in this credit card ruled era?
Credit cards offer irresistible consumer incentives. Banks know exactly how to lure consumers into the wonderful world of credit card incentives. Marketed as “rewards” or “cashback programs” for consumers, they are designed to push people towards a cashless society where using your credit card will get you everything from airline miles to hotel points, gift cards, and cashback just for buying gas or groceries.
“Rewards that never expire” or “no annual fees” or “longest 0% APR on purchases” reel consumers in without regret. Lending institutions make it easy for anyone and everyone to get a credit card, with almost complete disregard for the consumer’s financial status. In fact, banks are doing such a fantastic job with their credit card conversion plan, that today, Since 2017, more than 171 million Americans have access to credit cards backed by major banking institutions. This is the highest number of people with credit cards since 2005. And with this many credit-card-carrying consumers, that also means the most outstanding debt in U.S. history.
Americans are now officially more than $1 trillion in debt!
Canadians could be trouble, too, with consumer credit card debt nearly doubling over the past 30 years as a result of lower interest rates. Flexible payment terms and other incentives encourage consumers to spend money more freely. Banks profit. Merchants and customers pay the price. As you can conclude from the popularity of credit card (over)use, banks are profiting from all of this increased laissez-faire spending.
Typically, banks made most of their profits from overdraft fees, but not as of late. Because of such an increase in credit card use, credit card interchange fees have more than doubled in the last ten years. For the first time in history, credit card interchange fees now exceed the amount customers pay in overdraft fees. According to a Market Watch article, credit card interchange fees totaled $33.8 billion in 2016, which is just higher than the $33.3 billion financial institutions collected in overdraft fees that same year.
A credit card interchange fee, also known as a “swipe fee,” is the amount of money a merchant pays their credit card vendors each time a customer uses a credit card to pay for a product or service. These fees are roughly 1% to 4% of each transaction, depending on the agreement between the merchant and the financial institution. Today, the average swipe fee is almost a dollar. What can merchants do about these fees?
In many cases, as a merchant, you are forced to raise your prices to compensate for the money your business loses on each credit card transaction. The consumer ultimately pays the swipe fee, albeit unknowingly. But, if you continue to incrementally raise prices on the goods and services you sell, you run the risk of losing business — especially that of repeat clients who might shop around for a lower price on similar merchandise.
The best thing you, the merchant, can do for your business is to have professional, third-party financial security experts analyze and update your company’s merchant-creditor agreements.
The financial experts at Merchant Broker conduct a detailed investigation of your merchant accounts to reveal hidden fees that could be costing your business thousands of dollars. We’ll show you an in-depth pricing analysis so you can understand exactly where your payments processor may be overcharging you.
Merchant Broker acts as your financial partner, mapping out a strategy, contacting banks and credit institutions on your behalf to negotiate lower fees and uncover hidden revenue opportunities. Ultimately, we want to help you increase your bottom line instead of supporting the banks with high swipe fees. The financial experts at Merchant Broker also provide technical support and chargeback assistance to help fight chargebacks and minimize revenue losses.
We don’t sell payment processing, instead, we negotiate on your behalf to help increase your bottom line. Finally, if our analysis shows that your current security level requires additional protection to keep sensitive credit card data safeguarded, we can help you create a stronger infrastructure for a more comprehensive, PCI compliant system. We’ll alert you of any potential risk areas, and connect you with products and services that provide the level of security you need.
What qualifies Merchant Broker to negotiate merchant fees? More than 10 years ago, we discovered alarming inconsistencies, patterns, and careless practices in the ever-changing payment industry. We put our expertise to work and created a “payment industry powerhouse.” We partner with you, negotiate on your behalf, and educate you regarding the latest credit interchange fees, data best practices, and PCI compliance policies.
For more information about partnering with Merchant Broker, contact us today.