How To Reduce Credit Card Processing Fees
Want to reduce processing fees on your credit cards but don’t know how? Here is a handy guide to help you out.
Even the best credit card in India will have processing fees. And with increasing credit card usage amongst customers in a digital age, this has become a major point of concern by all means. The processing fee on a credit card is a tiny percentage of the original transaction value. It is charged by the bank to the merchant. The amount may otherwise seem negligible, although it may pile up if you have multiple business transactions.
Things that impact processing fees on credit cards
- The type of business plays a vital role in influencing the processing fees on credit cards. There are varying processing fee slabs for various kinds of business, on the basis of the merchant codes (retail, fuel, etc.).
- The type of transaction also determines the processing fees charged for credit cards. Processing fees could be lower for POS transactions which are contactless and even for swipe cards.
- If your business entity falls in the high-risk category, then processing fees could be higher for credit card transactions even if you choose the best credit card in the industry.
Lowering credit card processing fees – Vital Tips
Here are some useful tips on lowering processing fees on credit cards that you can consider:
- Choose the right model for pricing – Whenever you talk about pricing models with processors of payments, ensure that you get the right one for your business. In usual cases, pricing models/plans for businesses are based on the type of business, transaction volumes, growth of the business, and the type of business risk. Choose carefully and do not feel shy to negotiate the plan for pricing with your processor of payments.
- Keep negotiating the markup charges – While assessment and interchange charges are usually non-negotiable, you can always embark on a negotiation of the markup charges. This is influenced by the provider of the merchant account. Higher transaction volumes come with lower charges and vice versa. If you are a business with higher daily transactions and value, then you can negotiate a better deal on markup charges. You can demonstrate your higher sales graph and forecasted sales, along with annual business turnover and growth plans. You can get discounts with higher volumes.
- Showcase your commitment towards credit card security – A little chunk of your processing charges will be allotted for the payment processor. This will also go to the banks issuing the credit cards for ensuring security against risks involved in transactions via credit cards. If you are a high-risk entity, you are likely to pay a higher processing fee for the credit card. However, if you can showcase your commitment towards security and the fact that your business has the lowest possible risks and zero fraudulent transactions, then you may get a lower processing charge. Your proposal for negotiations should have a policy stating a clear-cut return and refund mechanism for customers, standard PCI adherence, entry of security data for validating payments, signatures for transactions, full billing addresses, saved transaction history and receipts, and secure POS terminals for enhanced security.
- Mechanism for address verification – Address verification services are robust mechanisms which lower probabilities of risks and frauds related to credit cards. This ensures the validation of the billing address of the cardholder with the one in the records of the bank, making sure that the transaction on the credit card is carried out by an authorized holder or relative. This mechanism integrates another layer of safety for the entire payment processing system, while lowering identity theft or fraud-related risks. This also ensures that payment processors and banks can build trust in a business, while ensuring lower fees for payment processing as well.
These are some useful tips that can help you reduce processing fees on credit cards. You should keep tracking payment-based analytics regularly, including processing fee payment patterns. This will help you examine the current scenario, and work out strategies for reducing your processing charges. Businesses need to deal with the issue, since they have higher volumes of credit card transactions on a daily basis. A little patience and information-backed negotiations will help you immensely in this regard.