1. Stop trying to figure out your processing statement on your own; instead, learn your 'effective rate'.
You can study the myriad of rates and fees on your statement, and spend hours trying to learn the terminology and suss out the difference between 'commercial level II' and 'CPS-Commerce Preferred Retail'.
Or you can learn to calculate the most important number in a processing account, the one that tells you your real cost for accepting credit cards- the effective rate.
To figure your effective rate, simple divide the amount you paid your processor by the dollar volume that you processed. Be sure you are accounting for all of our costs- if you pay an annual feel or annual PCI fee (you shouldn't be paying either, but that's for later) divide those fees by 12 and add that to your amount paid. If you are leasing or renting your terminal (shouldn't be doing either) or paid a lump sum up front for it (shouldn't do that), include that amount as well.
For example, let's say in December you processed $10,000, and it cost you $380. You lease your terminal for $49 a month, so add that in- $380 + $49 = $429. You then divide total payout, $429, by your amount processed, $10,000 and come up with an effective rate of 4.29. Another way to look at it is for every $100 you ran through your credit card terminal, it cost you $4.29 to do so.
If you are an average small business processing between $5,000 and $25,000 a month with an average ticket between $20 and $100 dollars you should be paying an effective rate of 2.0% to 2.5%. Anything higher than 2.5 means there is probably room for savings.
Let's go back to our example business owner who was paying 4.29% on $10,000 monthly volume. He switches to a processor watching out for the business owner's interests and his new rates and fees equal an effective rate of 2.5. He'll finding he's paying $179 less a month, saving his business $2148 a year.
2. Identify fees that you shouldn't be paying.
Most business owners look at the list of fees on their credit card statement and assume they are just the price of accepting credit cards. Not so.
One of the most insidious fees in the payment industry right now are the ones related to the PCI program. In order to be PCI compliant a business owner is required to complete a self assessment questionnaire. It takes about ten minutes, and can be done for free on the PCI DSS website. Most processors charge an annual PCI fee that ranges from $50 to several hundred dollars. Some charge non-compliance fees of $15 to $50 a month every month a merchant hasn't completed the assessment. The worst charge the annual fee, the non-compliance fee, and automatically enroll you in 'breach protection' coverage that they charge you $15 or more a month for.
If you question your processor about these fees they will tell you they are mandatory and every company charges them. It's not mandatory, and though most processors charge these fees, a few don't. If you can't find one, contact me.
Other fees you shouldn't be paying are set-up and application fees, annual fees, 'preferred customer' or 'customer club' fees (this is where they charge you $8 to $15 a month for terminal paper and advanced reporting. A good representative will supply you with free paper and answer any reporting questions for you), and customer service fees.
I know of a processing company that charges a $195 application fee, a $95 annual fee, $75 annual PCI fee, and $11.95 monthly club fee. Over the life of their mandatory three year contract it drains $1135 out of their customers- all of it unnecessary.
And of course, you should never pay for your terminal. No lump sum up front. No monthly rental. And by all means, no four or five year lease. You should get a free terminal in exchange for letting a company handle your processing. And by free, I mean absolutely free- not free except for a $69 set up fee, or $39 for shipping.
3. Don't get locked into a long term contract
The worst position a business owner can find himself in in terms of his credit card processing is to know he's over-paying a processor and could reduce his costs with a different company, but unable to switch without being hit with a big early termination penalty. Its time contracts for credit card processing went the way of the dodo bird.You should only work with a processor that offers month to month agreements with no early termination fee.
There you have it- three methods any business owner can use to save $1000 off his processing costs. If you have any questions just contact me, and I'll be happy to help.
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