4 steps to help you keep credit card processing fees low

4 steps to help you keep credit card processing fees low

Many business owners understand the importance of initially selecting the right merchant. What many entrepreneurs forget about is monitoring their chosen merchant account to ensure that the fees they are charged are not too high. Monitoring a merchant account and the fees charged for transactions paid with credit cards is crucial to the continued success of any business.

1. Watch your statements.
Every month someone within the organization should read the merchant account statements sent by the company handling credit card transactions. The monthly merchant account statement will outline, in detail, any fees associated with transactions entered into using credit cards.

A merchant account provider can't make changes to a business' merchant account without giving the business a 30-day notice. Such notices are typically given in an "Important Reminders" section of the monthly statement. Review all changes to your merchant account and consider the effect the changes will have on the fees you are charged for credit card transactions.

2. Avoid chargebacks.
Chargebacks from transactions that took place using credit cards can increase the fees charged on a merchant account. A chargeback takes place when an unsatisfied customer takes steps to get a refund through his or her credit card company.

A business will receive a notice from its merchant account provider when a customer chargeback is instigated. The business has a short period of time to send in documentation to refute the chargeback. If the business has valid documentation to support their claim that the chargeback is invalid, the business does not have to refund the customer's money. If the customer prevails, the merchant account provider will take the money from the business to refund to the customer.

Chargebacks are costly. A company with a high percentage of chargebacks can lose its merchant account. Following ethical business practices, having good customer support and a well-documented return policy and keeping adequate records are steps that can be taken to make sure that a merchant account is not subject to a high percentage of chargeback transactions. Lowering chargebacks will lower fees charged on merchant accounts, which will in turn make taking payments from credit cards less expensive.

3. Make sure your merchant provider's fees aren't too high.
A business should be concerned with the discount fees, transaction fees, statement fees and monthly minimum fees. Each time credit cards are used for a payment, the merchant account provider will charge the business a discount fee plus a transaction fee. The average discount fee is 1.75-2.35 percent of the transaction total. The average transaction fee is between 20 and 50 cents per transaction. A monthly statement fee of $10 is usually charged on top of these other charges. A monthly minimum fee is charged only when other fees don't add up to a specified amount, usually $30.

4. Don't be afraid to move on.
Most merchant account providers charge around the same percentage fee for credit card transactions. A provider that quotes a percent fee much lower than other providers should be approached with caution. This provider will have to make up the reduced fees somewhere. This type of provider could have several fees hidden in the "fine print" of the account agreement. A business that thinks this description fits its merchant account provider should start shopping around for a new provider immediately.

If a merchant account provider is up front with all the fees charged and is an established business with a good reputation, it is a worthy provider for a business. Sketchy providers that aren't up front with fees and seem to have popped up out of nowhere should be approached with caution.

Published: September 3,2023