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February 13, 2024

Payment Processing: 3 Things To Know

Payment processing is a must-have for businesses today, but it's not always as simple as swiping a card. Hidden fees, confusing pricing models, and keeping up with the latest tech can be overwhelming. But don't worry! We're here to break it down for you. In this discussion, we'll cover the basics of payment processing in a clear and concise way, so you can understand the fees, choose the right pricing strategy, and embrace the latest technology with confidence. Get ready to unlock the full potential of card payments and watch your business thrive!

Payment Processing

1. How to Lower Your Transaction Fees

What are Transaction Fees in Payment Processing?

Transaction fees are made up of two separate fees. The processing fee contains the markup from the payment processor for handling the transaction or batch. The most popular payment processors are PayPal and Stripe - both of which charge a flat rate transaction fee that consists of their mark up plus the interchange fee.

Each time that a customer pays with their debit or credit card, the card network (Visa, Mastercard, American Express, or Discover) and issuing bank both get a small percentage of the transaction cost. This percentage is called an interchange fee. It's typically covers the banks' operation costs and risk of fraud. Interchange rates are non-negotiable and vary depending on several factors, like:

  • Card type: Debit cards typically have lower interchange rates than credit cards.
  • Industry: Industries are assigned a Merchant Category Code (MCC). Certain industries face higher rates.
  • Processing volume: High-volume businesses often qualify for negotiated rates.
  • Type of Transaction: In-person transactions that are tapped or swiped have a lower rate than online or manually keyed-in transactions because of the reduced risk of fraud.

How to Reduce Your Processing Fee Costs

There are several models of processing fees. Payment processors like PayPal, Stripe and Squarespace will charge a flat rate transaction fee, typically 2.99% + $0.30 per transaction, which covers the average cost of interchange rates and includes their processing markup. Interchange fees are non-negotiable and are universal across all industries all over the globe. Interchange fees are determined by the card issuers such as Visa, Mastercard and American Express.

While completely eliminating transaction fees might be a dream, several strategies can significantly reduce their impact:

  • Negotiate: Partner with a payment processor who can take a look at your merchant statement to find the best processing rates based on your transaction type, volume and industry. Leverage data to build a strong case for negotiation.
  • Optimize Transaction Types: Encourage debit card usage, which carries lower interchange rates than credit cards. 
  • Embrace Efficiency: Streamline your checkout process to minimize processing errors and chargebacks, which attract higher fees.
  • Consider Alternative Processing Models: Explore different pricing models such as reverse cash discounting.

2. Dual Pricing for Payment Processing

Cash discounting offers a unique strategy for businesses to reduce processing costs almost entirely while simultaneously incentivizing customers with lower prices.

How Dual Pricing Works

  • Implement dual pricing: Offer a lower price for cash payments compared to credit/debit transactions.
  • Processing fees associated with cards are shifted to customers who choose that method, saving your business money.
  • Customers benefit from the discount, fostering loyalty and boosting their satisfaction.

Other Benefits of Cash Discounting

  • Streamline operations: More cash transactions mean less hassle with card processing.
  • Improve cash flow: Faster access to cash through increased cash sales.
  • Enhance customer engagement: Integrate with loyalty programs for added value.

Transparency Matters

Hidden fees and convoluted pricing models are unpleasant surprises that can drain your wallet. How do you know what you're paying? Opt for payment processors who offer transparent pricing, breaking down all fees clearly so you know exactly what you're paying for. This allows you to compare options and identify potential cost savings.

3. Recurring Billing & Virtual Terminal

For subscription-based businesses, smooth and reliable payment processing is crucial. Enter recurring billing, a powerful tool that automates regular payments from your customers, streamlining your operations and boosting revenue predictability.

Benefits of Recurring Billing:

  • Effortless Payment Collection: Say goodbye to chasing individual payments. Set up billing cycles and let the system automatically collect payments on due dates, reducing manual work and ensuring timely cash flow.
  • Enhanced Customer Experience: Offer flexible payment options, allowing customers to choose their preferred frequency and payment method. This convenience promotes customer satisfaction and reduces churn.
  • Boosted Revenue Predictability: Gain clear insights into upcoming revenue based on subscription plans, enabling better financial planning and informed business decisions.

Virtual Terminal: Remote Payment Processing

Managing monthly payments doesn't require physical card swipes. Our virtual terminal empowers you to process payments remotely, anytime, anywhere.

  • Accept All Major Cards: Accept payments from customers using debit and credit directly through your computer or mobile device.
  • Real-Time Processing: Enjoy immediate transaction confirmations and instant access to funds, ensuring smooth cash flow management.
  • Enhanced Security: Benefit from robust security measures that protect sensitive cardholder data, maintaining peace of mind and compliance.

By combining the automation of recurring billing with the flexibility of a virtual terminal, you create a winning payment processing solution. Automate regular payments, accept one-off monthly transactions, and enjoy the convenience of remote processing—all in one comprehensive system.

Find Your New Payment Processing Solution

At Real Nice Websites, we can help you navigate the world of transaction fees, choose the right solutions for your business, and ultimately contribute to your financial success.

Remember, knowledge is power! Simplifying interchange rates, exploring flexible pricing models, and embracing innovative solutions, you can navigate the payment landscape with confidence and minimize the impact of transaction fees on your bottom line.

Get in touch and let's work together to make your online payments smooth, secure, and cost-effective.

 

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Anthony DeVola
MArketing Strategist
Anthony DeVola is the lead website developer, marketing strategist and owner of Real Nice Websites LLC. Helping businesses maximize their marketing efforts by optimizing their entire internet presence from the ground up.

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