Simpler Smarter Savings

They say that cash is king. But if you look around most businesses on the high street today it becomes apparent that the king is dead. Seriously, how many customers do you see pay cash these days? Not just in your business, but in any business? In an era where customers have so many convenient ways to pay with just a tap of their credit or debit card (or indeed, their smartphone) it’s easy to see why so many eschew fumbling around with dollars and cents.

In order to remain competitive in an increasingly savage business climate, your business needs to make sure that it offers credit card payment options that are fast, secure and convenient for the customer. And when it comes to credit card payment processing, here are 30 tips that all canny business owners should keep in mind…

1- Unsure which pricing solution to use? Choose Interchange Plus!

It’s the least expensive and most transparent pricing model. While you may experience fluctuations in rates from different card associations, it’s easy to see the processor’s markup and plan your finances accordingly.

2- Avoid tiered pricing like the plague

The trouble with tiered pricing is that some payment processors can be very vague when it comes to what does or doesn’t constitute a “qualified rate”. This can make it very difficult to preempt their markup and plan your cash flow accurately.

3- Never ask a sales rep their rate

But… The rate is what’s important right? Not necessarily. In fact, ask for the rate and their answer could be fatally misleading. It’s much more pertinent to ask about the pricing model that the rate is based on. Otherwise you could fall for attractive rates which are supplemented by hidden costs.

4- Opt for monthly discounts

Some processors take their payments throughout the month. Others do so on a monthly basis. This option is much easier to manage. It’s easier to reconcile, better for cash flow and ultimately cheaper.

5- Never agree to pay a cancellation fee

It’s an unnecessary overhead (and all businesses could do without those). Most processors worth their salt eschew cancellation fees and their very existence indicates that a processor may try to lock you into a long and unfavorable contract.

6- Remember that markups can be negotiated

Don’t waste time obsessing over comparative rates from card associations. Rates may vary by card type but the processor’s fee usually  can be negotiated to offset this fluctuation.

7- Small businesses shouldn’t have to settle for bad rates

Even the smallest businesses can and should get competitive rates. Don’t let any processor tell you otherwise.

8- Quickbooks processing may be popular… But it’s needlessly expensive

Quickbooks may be great for keeping your books, but it only works natively with software company Intuit’s processing services. It may seem convenient to have an all-in-one solution, but that convenience is rarely worth the high rates.

9- Let processors do the legwork

Remember that you’re in a buyer’s market. If the processor you’re approaching can’t give you what you want, it’s really easy to find one that will. Instead of asking what they want to give you, compose a list of what you need and take it to companies.

10- So your homework… But don’t believe everything you read

Just like any consumer, you’ll want to do your homework on the processors you court and find out what other consumers say about them. Just take “reviews” with a huge grain of salt. Many of these are generated by affiliate business with a vested interest.

11- Avoid proprietary card machines

Some card machines will only work with a certain processor, rendering them useless if you choose to switch at a later date. Make sure your processor has a terminal which can also be used with other processors.

12- You can find out interchange rates online

Some businesses opt for flate-rate payments because they’re worried by fluctuations of interchange rates for different cards. However, there’s no mystery behind them. They can be found online.

13- Trying to predict credit card processing expenses will drive you crazy

It’s really hard to know what your processing costs will be on a transaction until it actually happens. While it’s commendable that you want to be prepared, avoid credit card processing calculators. At best they’re a hypothetical ball park figure… But at worst they’re wildly inaccurate.

14-Do you really want to pay for cardholder rewards?

Ever wondered why so many businesses won’t accept Discover or Amex? Because they don’t want to subsidize the card holder’s rewards. The cost of the air miles, cash back or other incentives which encourage customers to use their card come at the expense of businesses who pay higher rates. Therefore, be careful about which cards you do and don’t accept.

15- Be wary of rates that seem too good to be true

They literally always are. They might be “qualified” rates that the processor never allows you to access no matter who the customer is. Or they may be obfuscated by hidden fees.

16- There’s no such thing as a free credit card machine

If a processor offers you a free terminal this might seem like an amazing deal. But that machine isn’t free. You’re paying for it in instalments through your (inevitably) higher rate.

17- Don’t let price be your only deciding factor

You may have an eye on the purse strings but a lower markup could cost you more in the long run. Make sure a cheap processor won’t leave you with inadequate security provision, or other fixed costs.

18- Contract terms don’t necessarily mean consistent rates

Just because a rate is dictated in the contract terms does not mean that that’s your rate for the length of your contract. Unless they explicitly state otherwise, a processor can jack up their rate whenever they like.

19- Be wary of “wholesale rates”

Some processors might advertise “wholesale merchant accounts”. But this is really just marketing speak. There’s no such thing. Just a beneficial sounding name which could tether you to a bad contract.

20- Be wary of anyone telling you that you need more than one account

Some processors will try to tell you that you need separate merchant accounts for present and not-present transactions. This is manifestly untrue. One is all you should ever need for both.

21- Know what to do about chargebacks

Processors will keep a close eye on your chargeback ratio. If it reaches more than 1% of transactions, they may cancel your account. It’s imperative that you have measures in place to prevent chargebacks. The best offense is a string defence.

22- Leverage SecureCode for lower rates

Both Mastercard and Visa have extended verification programs with participating banks to help combat fraud. Businesses that participate in Verified by Visa or MasterCard Secure Code programs can qualify for lower interchange rates. More fraud protection and cheaper rates. Looks suspiciously like a win to us!

23- If you see the words “Non-Qualified Rates” run in the opposite direction

Okay, not literally. But tiered pricing plans tend to have attractive “Qualified rates” and punishing “Non-Qualified Rates”. Guess which ones many small businesses get. Perhaps that’s why businesses who transition from tiered pricing to interchange plus tend to save 20%-40% on fees.

24- Your customers can help share the burden of processing fees

As of January 27, 2013 businesses are allowed to charge their customers a credit card processing fee. However, there are several steps that must be followed for proper surcharging. Ensure that you learn and follow these.

25- Make sure your processor returns fees on refunded items

Returns are an inevitable part of most businesses. However, when you refund your customer, make sure that your processor has also refunded your fees back to you.

26- Beware any processor who tries to charge you for returns

No business should be penalized for issuing returns. However, many processors that use tiered pricing charge a qualified discount rate on return volume. If you occupy a sector that has a naturally high rate of returns e.g. online fashion retail, this can seriously impede your cash flow.

27- Clear your batch every day

Most authorizations need to be settled within 2 days.. Holding them longer may cause them to be charged at a higher rate to interchange standard or EIRF categories. Clearing your batch every day can save you from this unnecessary expense. If possible, set your terminal to auto-batch at the end of every business day.

28- Your processor should never raise their rates without notice or permission

Processors cannot legally change your rates without at least notifying you first. A minority may even request that you sign off on any changes to your rates. Usually, a notice of any rate increases will be posted on the first page of your processing statement.

Be aware, however, that processors can raise costs without raising their rates.

29- It’s great that you’re accepting payments with your phone… But Square isn’t the only solution

There are a plethora of services that can turn virtually any smartphone into a credit card processing machine. However, while Square is by far the highest in profile, it may not be the cheapest or the most beneficial for your business. Take a look around and you’ll find a number of other reliable and affordable options.

30- Seasonal business? Find a processor that offers seasonal shutdown

Fees incurred while you aren’t doing business can be crippling to those whose trade is seasonal. Fortunately, there are processors out there who will offer seasonal shutdown so that if you aren’t bringing in money, you aren’t paying fees!