If there is one thing that people have learned from the year 2020 is that the life of people is very uncertain. The Covid-19 pandemic had a drastic impact on the global economy. It has significant implications on businesses and consumer behavior. It forced many businesses to cut down their costs quickly to offset the lost revenues while also making substantial investments to comply with the pandemic’s local laws and therefore it leads credit card processing fees .
So with the start of the year 2021, it was an excellent time for the businesses to find out various long-term solutions to lower the cost of their business. So reducing the retail credit card processing fees is a great thing to start with without dropping down the customer experience.
Credit card processing fee refers to the cost that the payment service providers charge the store owners to process the payments from their customers. The prices may include:
The retail credit card processing fees depend upon the following factors, as mentioned by Magestore.
The payment processor charges different credit card processing fees for different types of business. It is mainly based upon the registered Merchant Category Code (MCC) such as retail, fuel, travel, or a supermarket.
B2B businesses generally include large-scale businesses, or government suppliers charged either level 2 or 3 processing for lower credit card processing rates. But such discounts are usually not applicable to traditional e-commerce businesses or physical terminals.
Suppose the payment processors classify your business into a high-risk category of business, which can be due to the type or the nature of products or services. In that case, you need to open a dedicated account for the high-risk sellers. It would lead to an increase in credit card processing fees.
Cards present transactions often come with lower processing fees than that card-not-present transaction of online and telephone orders. The higher the risk, the higher would be the processing fees.
Following are the seven different tips or best practices suggested by Forbes for reduction of the credit card processing fees of a business:
The most straightforward way for the business to avoid paying credit card processed fees is to pass them on to the customer. There are various rules regarding the surcharge that the merchants must follow. So compliance is the key to it. For example, a merchant cannot surcharge a debit or a credit card. It means the consumers have the option to avoid paying any surcharge if they wish to.
As all the states of India don’t allow surcharging, due diligence either through research or by something else is essential for helping you comply with it.
On e-commerce and phone-based transactions, you can capture the credit card holder’s complete billing address to avoid the expensive interchange cost that comprises a large part of the processing fees of the business.
Interchange fees are the non-negotiable fees paid to the banks that had issued the credit card for processing the debit or credit cards of your customers.
Face-to-face transactions are generally less risky for the merchants and the banks who had issued the card, so they have lower interchange costs. So by encouraging your customers to pay there in person by physically swiping or by dipping their card online or over the phone can be a great thing to cut down on the processing costs.
The swiped sales by using EMV (Chips) are very hard to have any dispute later. It allows the merchant more protection against the chargebacks.
All the merchants should try to offer ACH payments and also electronic bank-to-bank transfers. It is because they have outstanding reliability and are faster than physical checks. Also, they do not have any interchange fees such as credit cards or debit cards, making it comparatively cheaper for businesses to accept.
The payment card industry (PCI) data security standard is a set of rules meant to help protect credit card data. Processors often provide the merchants a certain period to become PCI compliant. The period may be between 60 to 90 days. If the standards are not being met within the given period, the processors start charging their merchants a fee for non-compliance every month.
Ensuring that your business is PCI compliant provides that you avoid paying any extra charges, which ultimately lowers your fees for credit cards.