In this age and day, a good number of people do not want to carry liquid cash in their pockets, purses, or wallets. As a wise entrepreneur, adding credit cards as an acceptable mode of payment can greatly improve your sales and returns on investment. However, it is important to understand generally how credit cards work before taking the huge step. Since there are different types of credit cards, merchants, and payment processors, the associated fees also vary a lot. In addition to considering the security and convenience of transactions, the rates are an important aspect to look at before introducing credit card payment as an acceptable method in your business. Below are a few things you should know about credit card processing fees, what they constitute and how they work.
Components of Credit Card Processing Fees
The two major components of credit card processing fees include an inquiry fee and a percentage of the total transaction amount. However, there are also other fees associated with credit card processing services depending on the merchant you sign up with. For instance, some payment processing companies charge an initial sign-up fee, monthly account fee, and so on. Some companies also induce an opt-out rate or early terminal fees. Other associated fees may include reporting fees, statement fees, network fees, monthly minimum fees, gateway payment fees and so on, which are together referred to as flat fees. Again, these may vary from provider to the other.
Main Types of Credit Card Transactions
Just like it is with debit cards, there are two major types or categories of credit card transactions. These include the following.
• Swiped Transactions
• Manual Entries
For swiped transactions, the consumer presents his or her credit card when paying for their purchases or service, which is then swiped physically through a POS terminal for the transition to be processed. For manual entry transitions, on the other hand, the details of the card are manually entered or keyed in for processing. These are either internet-based or mobile phone-based transactions.
Choose Your Merchant Company Wisely
The best way to save on credit card processing fees is to choose your merchant or credit card processing provider wisely. It is important to carefully look at the fees and rates a provider will charge you for subscribing to them since these will directly eat up a portion of your profits. When doing this, also consider digital apps and e-wallets as an alternative to credit card processing terminals if and where you can to keep your costs lower. Again, it is important to note that some credit card fees are negotiable. For instance, transitional percentage rates can be negotiated between the business and the provider. However, you stand a better chance of getting a good deal if you’re sure of a higher customer base paying using credit cards. In other words, the higher the amount of credit card transactions, the higher the chances of paying lower credit card fees.
Whichever merchant account provider you choose, be sure to stay on the lookout for hidden charges. Advisably, consider working with a reputed provider that has been in business for a considerable amount of time.