When owning a small business, maintaining a close watch on your bottom line while cutting costs wherever possible is crucial to your success. One expense that gets overlooked by business owners is credit card processing. Often, business owners will sign up with the first payment processing company they find and continue to use their services. What these owners do not realize is that they could save money by taking their business elsewhere. Follow these four tips to find out how to save money for your business every year:
1. Use the Competition to Your Advantage
If you already have a payment processor, don’t assume that the rates and fees you pay now are set in stone. The same goes for a business owner preparing to sign up for services for the same time.
You need to first understand how much you could be paying with another company first, which means getting quotes from other companies based on your typical transactions. The best way to do this is to show a few other payment processing companies your most recent statement and asking them what they would charge for the same thing.
2. Avoid Long Contracts with Hidden Fees
Companies within the credit card processing industry lock you into a long contract and with a cancellation fee that may cost your business around $1,000. These long-term contracts are nothing more than a way for the company to overcharge you, provide poor service, and penalize you for wanting to go elsewhere.
The average contract length in the United States for payment processing is 3 to 5 years. The solution to this problem is finding a credit card processing company that offers month-to-month contracts with no early termination fees. While this is not the norm, the truly best processing companies will offer this, while providing unbeatable rates.
3. Understand Interchange Fees
If you don’t know how interchange fees work, you could be in a position to be taken advantage of. These fees are charged and determined by credit card companies, and are split between credit card networks and the banks that issue credit cards. Interchange Unfortunately, most small business owners don’t know the true interchange rate their transactions qualify for as their payment processing company gives them just one discount rate. This rate includes the true interchange rate and a per-transaction fee, although as a business owner you do not know how much of what you pay goes toward the Interchange rate and how much your merchant account provider is actually making from you.
4. Buy your Payment Processing Equipment
Are you currently leasing your credit card terminal? Did you know most terminals cost around $200 to $300, while a monthly lease fee can be up to $45? Terminals are not nearly as expensive as most business owners believe although the cost of that lease can add up quickly. In an extreme example, a business owner paid over $2,100 over his lease period for a basic terminal that retails for only $90. To top it off, he didn’t even own the equipment when the lease ran out! When you own your terminal, you also have the freedom to change to another payment processing company without switching out your equipment.