Is your business short on cash? Are you constantly stretching out the time between invoice payments? Wouldn’t it be great if you could find a magic source of additional revenue without investing more time and energy into your business? For many business owners, CFOs, and even managers, thoughts like this are constantly swirling around in their heads, especially now when costs are high for everything. However, there is one area that many businesses overlook for cost savings — credit card fees.
Credit card processing fees are a necessary evil in the digital payment age. Customers and even fellow businesses expect to be able to make payments via credit card. However, each credit card payment a business accepts is subject to a processing fee. Depending on the type of business, that fee can be between 1.5% and 3.5% of the transaction total, according to NerdWallet. Over time, that percentage off of each payment your business accepts can eat a hole in your profit margin.
So, what are credit card processing fees? They are fees charged by credit card companies like Visa and Mastercard to complete card transactions. There are three main types of fees the major credit card companies charge on each transaction:
- Interchange fees: These are typically the largest fees, and they go to the issuing bank to process the charge with the credit card.
- Assessment fees: These fees go to the credit card companies themselves. They cover their operating and network costs.
- Payment processor fees: These fees go to the processor or the tool your business uses for processing credit card payments. It covers the cost of accepting credit cards in your business.
As you can see, each portion of your merchant processing fee goes towards a different player in the credit card world. For years, the amount merchants have been charged for credit processing has been a significant burden, especially for small businesses. Recently, a landmark settlement was passed between Visa and Mastercard to lower these fees. The $30 billion deal lowers fees by four basis points for the next three years and seven basis points for the next five years.
Despite this victory, many payment processing experts say it’s a short-term business win. Credit card payments are a necessary business expense, eating away a significant portion of a business’s revenue. This small concession may not change the long-term trajectory of credit card processing costs for businesses. The National Federation of Independent Businesses (NFIB) stated: “[while the settlement] will provide a limited amount of short-term relief to small businesses, it does not solve long-term anti-competitive rate-setting practices that are the root of the problem.”
As an independent treasury strategist, I see daily how credit card fees affect businesses. It’s not an issue that can be ignored. To save money on these fees, you need a payment processing strategy to protect your business. That’s where my team and I can help. We’re experts in payment processing and know all the ins and outs of credit card processing fees. With our help, we can develop a strategy for your business to lower your credit card costs and save your business money!
