Often, I sit with merchants who are fixed on the best card processing rate that they pay, this has become the benchmark for what merchants think will give them the better deal. But in reality what they are paying goes beyond these rates.
My thoughts time and time gain revert to the reps that have visited before and said “I’ll beat the card processing rate you’re currently paying” but neglected to show the merchant the real cost of card processing fees. I’m sure I hear my own eyes roll when this happens and spend the next few minutes explaining that it’s not just about the rate you’re paying, it’s the additional processing fees and how they impact your charges and monthly bill.
Many merchants don’t bother to download their statements, they simply accept the fees they pay. Viewing a statement I can see what your paying and identify the hidden charges, this doesn’t necessarily mean it’s all bad but if you have got a good deal don’t you want to know? Better still if those costs can be reduced further, a free review is perfect.
I liken the cost of customer payments to buying a bed, you simply wouldn’t buy a cheap bed frame and get it home to find there are no slats, nuts and bolts. Card processing fees are the same, the rate you pay is the bed frame but then you need to purchase the slats which we could liken to authorisation fees and then the nuts and bolts the PCI compliance fee. You need all of these elements to process your customers payments
Authorisation fees are an expense to a business for each time it processes an electronic payment for a customer transaction. Per-transaction fees vary across service providers and typically 0.03p to 0.05p.
Authorisation fees and the impact on a convenience store owner, pub or fish and chip shop is significantly different to a car sales showroom due to the quantity of transactions being processed.
Last week I visited a local convenience store in Wolverhampton, not a big store but one that appeared to be the tardis of all things needed, you know the ones.. they literally manage to sell everything need! Popular in the local community this store owner processed 3,724 card payments in the previous month.
He was being charged 0.3% on debit cards and 0.7% on credit cards (Consumer) and processed £48,000 in card payments in that same month and paid £162.00 in authorisation fees, in addition to the card rate.
The store owner thought he was on the best rate available and that he was paying the lowest fees available, he also believed that in some cases he was on a better rate than other business owners he knew. However, this merchant didn’t get the right deal for his business and with the other additional costs for PCI, dashboards he’s never accessed it transpired he was paying £121 per month too much.
The conclusion is that the above merchant was paying over the odds 0.75% of his revenue for card processing fees, totalling £361 that month. Working with an independent advisor like myself would have saved him £121 in that same month and card processing fees across the board costing 0.50%.
The upshot being, the rate you pay for debit and credit cards is not the defining factor when looking for the better deal, all charges need to be included and you need to be matched with an acquirer that has the right offering for your type of business, it really isn’t a one size fits all. You should be aiming to pay 0.50% – 0.55% on total fees, dependent on your annual turnover of course.
Check to see if you’re paying too much for your card processing email@example.com or give me a call for a chat 01952 915059
Tracy Hazlewood offers FREE consultancy and payments support that is informative and inclusive for the Shropshire SME. Her expert knowledge and resources allow her to give the local business owner an understanding of the customer payments eco system, and includes a proactive and responsive approach.
Her approach has a demonstrable impact on outcomes for Shropshire retailers, hospitality, service merchants and businesses in need of support during and after the current COVID-19 crisis.