Does your business accept card payments? If so, are you paying more than you should for payment processing?
Here are 13 nifty tips to reduce your card processing fees.
1. Ensure you are PCI compliant
Payment processors naturally want you to treat cardholder’s data securely. If you’re not doing that, you might get a brief grace period to get things set up better, but then they’ll start charging you monthly fees for the extra risk your business represents. Become PCI compliant to avoid that extra cost.
2. Negotiate your setup fee
When you’re first talking with a payment processor, they may ask for a setup fee. There are cases where a setup fee can be reasonable, but in many cases card processors will be willing to lower or waive this fee to get you signed up. Definitely something to ask for!
3. Use 3-D Secure
If your business takes payments online, the card processing fees that you’re paying will almost be affected by whether you’re using technology known as 3-D Secure. This is the box that pops up after you’ve entered your card details that asks you for a password to confirm that you are the cardholder. (Visa call their implementation Verified by Visa and MasterCard call theirs MasterCard SecureCode.)
Due to the lower risk of fraud, the card networks charge less for processing payments that have been verified using 3-D secure. Visa, for example, currently charge processing companies 1.30% for unsecured e-commerce payments but only 0.87% for payments secured using Verified by Visa.
4. Get your own merchant account
You may have started your e-commerce business using an all-in-one payment processor such as PayPal. That makes sense to get started, but tends to mean you pay over the odds by the time your card processing volumes get larger. If that sounds like you, look at getting your own merchant account. You’ll typically pay a minimum £20 per month fee to have the account but your card processing fees will almost certainly be lower.
5. Ask your payment processor for a fee review
When did you start trading? If you’ve built up a couple of years of trading history and have had the same payment processor since the start, chances are that they may be able to offer you better rates now. Speak to your account manager to see what they can do for you.
6. Get quotes from other providers
You should always know what the going rate is for card processing at your scale. To find out, get some quotes from other providers to compare to what you’re currently paying. You can find a list of merchant account providers here.
7. Encourage customers to use debit cards rather than credit cards
It tends to be cheaper to take card payments using debit cards rather than credit cards. If your customer has one of each, opt for the debit card if you can to reduce your card processing costs.
8. Reduce fraud with AVS
If some of the payments coming through your website are fraudulent, you could start racking up some large chargeback fees. To reduce these fees, make sure you’re using the Address Verification System (AVS).
With AVS, you require customers to enter a billing address. When their payment is attempted, the payment network checks whether the address they’ve entered matches the address they have on file with their card issuer. If the addresses don’t match, the payment can be rejected. As a fraudster trying to use the card may not know the cardholder’s billing address, this can help reduce fraudulent payments and hence chargebacks.
9. Screen for fraudulent payments
If you’re suffering with lots of fraudulent payments and chargebacks, you’ll want to look at the more comprehensive fraud screening systems offered by some payment processors. These typically allow payments to be scored according to certain rules and then accepted, rejected, or queued for a manual review.
Again, fraud screening can help reduce fraudulent payments and so reduce the number of chargebacks you receive.
10. Offer contactless for small payments
Contactless payments have become hugely popular in the UK now. According to the UK Cards Association, 58 million contactless cards had been issued by December 2014.
For merchants, contactless payments are great for two reasons: they’re quicker so you can serve more customers in less time and they can be slightly cheaper to process. Visa, for example, charges processors 0.65% for contactless payments up to £15 versus 0.77% for chip and PIN payments.
If you’re thinking of replacing an old credit card terminal that doesn’t have contactless support, this is an extra reason to do it now.
11. Encourage customers to use contactless
Following on from the first point, some of your customers no doubt have contactless-capable cards and aren’t yet using them. Why not suggest they start paying that way? They’ll be faster to serve and you’ll save a little money along the way.
12. Review your statement and see where you could be saving
If you’ve been processing card payments for a while, get a detailed breakdown of your charges from your processor. Take a look through and ask them to explain anything you don’t understand. It’s always good to know what you’re paying for different types of payments and you may find simple ways to tweak your business to reduce the card processing fees you’re incurring.
13. If you have a low volume, avoid contracts with monthly minimums
If your business is just getting started and you’re not sure whether it’ll ever really take off, it can be good to keep things simple and avoid signing up for long contracts. Instead, find a credit card processor that doesn’t charge a monthly minimum fee. If you’ve got an online business, Stripe can be a good place to look.
We’ve looked at 13 different ways to save money on your credit card processing. Please share this article if you’ve found it useful.
What have I missed? And what other ways have you found to save money on payment processing?
Do share your thoughts in the comments below.