Accepting credit cards may be a cost of doing business, but there’s no reason to overpay for it. A merchant service provider who understands a small business owner’s requirements can create a customized processing solution to minimize costs and maximize efficiencies. A good processing partner can also help merchants evaluate their current systems and find ways to improve them.
The first step is usually a comprehensive statement analysis to determine what a merchant is paying for processing and network fees, in-store equipment and online and mobile commerce. In the fast-moving payments industry, even cost-effective processing systems may need updates. Retail analysts recommend routine self-assessments to ensure your credit card system is competitively priced, compliant and up-to-date.
Here are five telltale signs you may be paying too much for merchant services:
1. Older, non-compliant POS devices:
Older equipment tends to be more expensive to maintain and repair than new equipment. If the device has been EOL’d (end-of-lifed) by the manufacturer, it can be difficult and costly to find spare parts or paper and ink supplies. Older equipment may have limited memory and processing power, and may not be able to accept all payment types, which can cause you to lose customers.
There is also a greater chance that older equipment no longer meets hardware and software security requirements, which can put a merchant at risk for non-compliance. For example, it is now required for in-store and mobile POS devices to accept chip cards, which are also known as EMV (Europay, Mastercard and Visa) cards. When this law went into effect Oct. 1, 2015, it meant that any merchant with outdated equipment would be held liable for any fraudulent transaction, which could include fines, penalties, chargebacks and court-related costs. Studies have shown that most counterfeit card fraud is perpetrated at small and midsize businesses.
2. Fragmented POS systems:
It’s not uncommon for merchants to add machines as they grow their businesses, which may create a patchwork of devices over time. If you have placed POS terminals in areas where they are rarely used, you may be overpaying for hardware. Consider replacing idle POS devices with portable systems that can be carried to tables and checkout lanes. This will reduce costs and checkout wait times.
It’s also important to be able to view your entire device population in real time, to track transaction flows and identify any connectivity issues. This is especially critical for merchants with large operations or multiple locations. There are plenty of modern, cloud-based platforms that can provide a single access view of an entire enterprise, reducing associated costs of back office accounting and reconciliation.
3. Flat and blended rate structures:
Merchants pay a high price for simplified fee structures, which typically pad the interchange rates charged by Visa, Mastercard, American Express and Discover for every transaction. These multi-tiered interchange tables can be complicated, and merchant statements that honestly and accurately show the price of each transaction may run to many pages, but which would you prefer: a one-page merchant statement that’s easy on the eyes, or a five-page statement that’s easy on the wallet? For most small businesses Betterfunds offers an industry low flat rate of 2.25% and custom rates for those processing over 250k.
4. Your business is in a high-risk category:
When credit card companies see a higher percentage of card-not-present transactions, chargebacks, and fraud in a specific industry, they will designate merchants in that industry as high-risk accounts, and charge higher processing and transaction fees. High-risk merchants may have difficulty finding a processor that is willing to underwrite their business. If your business is one of the many industries that are considered high-risk, it is advisable to work with a processor that specializes in your type of business and high-risk accounts in general. These specialized service providers usually have strong banking relationships and underwriting teams whose connections, experience and expertise can help you establish a merchant account and help you safeguard your business and improve your risk profile.
5. Your current provider is overcharging for ancillary services:
Another common complaint among merchants is miscellaneous, ancillary fees. There are numerous examples of these fees, which in many cases, are nothing more than a money grab by the processor. Annual fees of as much as $100 dollars for processing, PCI compliance and more, have appeared on some merchant statements. Monthly merchant club charges, a form of insurance for merchants who may one day need an overnight replacement of their POS device, or regular shipments of paper supplies, frequently cost merchants more than the value of their goods and services.
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