Small businesses are the ones that are feeling the greatest pinch when it comes to our ever-increasing habit of choosing plastic over paper when it comes time to pay for our purchases. Not only are businesses getting chewed up by costly interchange fees, many are also feeling quite confused by the many different rate categories. Believe it or not, MasterCard has about 170 different categories and Visa has a little less than 100.
Since the card companies charge different rates for different cards, the companies that process these fees simply charge a fee that is high enough to cover any card that is used. So, by the time all is said and done, these processors may be charging more than 3% to small business owners. This is because the credit card companies charge anywhere from 1.77% to 1.80% and then the processors often add on about another 1.5%.
When it comes to Discover Card or American Express, the process isn’t quite so difficult. This is because these companies deal directly with the merchant rather than use processors to process the fees. At the same time, the American Express card have higher fees than the majority of MasterCards and Visas because they have such strong rewards programs. Discover also has perks, but still manages to have lower interchange fees than most MasterCard and Visa credit cards.
Business owners looking for tips on how to save money can do so by shopping around and doing some research before signing a contract with a processor. Working with the right processor can literally save thousands of dollars per year for some companies.
If you are a business owner interested in accepting credit cards, you can do a quick Internet search to find a number of companies willing to do business with you. You might also want to check into the possibility of working with your local bank. Even certain discount warehouses such as Costco and Sam’s Club offer contracts for card processing. You may even want to check with your trade associations or with the chamber of commerce in your area to find out about other available options.
Before signing a contract, make sure you can get out of it whenever you find it necessary. Also, get clear on the fees. You will likely have to pay a monthly fee in addition to the percentage fees you will have to pay. You also need to check into other possible fees, such as being charged extra fees for processing a large amount of small transactions, and make sure they will not have too bad of a negative impact on your overall profits.
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At FeeFighters.com, we strongly support the reform of interchange fees. Here are some ways for retailers to save on processing costs.
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Robert Downey
Interchange fees are one component of the Merchant Discount Rate (MDR) established by acquirers, which is paid by merchants to acquirers in consideration.
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Robert Downey