Much of the cost of processing card transactions is “firm.” But there are still a few things you could investigate that might lower your costs.
Here is our list to get your savings started:
We explained batch processing in our last blog: Understanding Why Your Money Takes Time To Hit Your Merchant Account + Batch Processing. (“Batch processing” refers to large merchants sending a batch of transactions, it is different to batching out or settling the terminal.)
One thing you may not be aware of. Any transaction that you do not “batch out” within 24 hours of the time the issuer gives you the approval code defaults to a different, much more expensive interchange category. So, pay attention to your timing or ask your ISO to setup Auto Batch and you may save some money!
The more data you collect at the time of purchase, the less risk the banks perceive they are taking on. That means they might give you a better rate.
For instance, when processing the transaction — and this goes for both card-present and card-not-present transactions — are you asking for the CVV/CVC code on the back of the card?
Could you also expand your data collection to include the customer’s address and zip code? Talk with your merchant service provider (ISO) to learn what other data might help you earn a lower rate. The less risk the banks take on, the less they have to charge you to cover their costs.
Just like we suggest with individual consumers, if you sell to businesses, you can collect a different set of data to reduce the banks’ assessment of risk.
For business buyers, find out if you can enter into the transaction the PO number, invoice number, or taxable amount number. All this extra data can help lower risk and quality you for a lower rate.
SIC codes are four-digit numerical codes assigned by the U.S. government to business establishments to identify the primary business of the establishment.
As we discussed in our blog Understanding Credit Card Transactions + Fraud Risk, different industries have different risk assessments, which affects the processing rate you pay. Double-check that your business is classified correctly.
For instance, if your business is teaching yoga and other physical/mental fitness skills, double check with your merchant service provider (ISO) that your classification on your merchant account is “school” and not “gym.” They are differently rated industries.
As we discussed in post 5, When Do You See Your Money?, Square, Stripe and PayPal are aggregators. They charge a flat fee per card transaction and, in turn, you can process your purchase on their merchant account. They “aggregate” the card processing needs of smaller businesses and you pay a premium for this convenience.
When your credit card transaction volume is modest, this approach makes good business sense. But when you reach a certain dollar volume of credit card purchases per month (we recommend $3,000 as this threshold), you should consider getting your own merchant service account. You are now crossing into sales volume that earns you a better rate if you have your own account.
That wraps up our series explaining just about everything a business owner needs to understand about the credit card process and why you pay the rates you do!
A sample of what you'll learn each month: