A credit card processing rate hike is the last thing small and medium-sized businesses need right now. But that’s exactly what they were going to get just as the economy began to open again. Thankfully, Visa decided to delay their increases, but not forever. At a time when businesses are struggling to keep afloat, they need to find ways to reduce overhead. Now is a great time to review your credit card processing statements for ways to lower credit card processing rates in preparation for the interchange rate increase that is inevitable.
Will the “delayed” Interchange update be a final blow to small and medium businesses?
All of the major card brands planned an interchange update that included adjustments to the interchange rates for accepting credit cards. This will be one of the largest adjustments to interchange rates in a decade. These adjustments would mean rate hikes for many of the country’s small businesses, including the hard-hit restaurant sector.
This will undoubtedly affect smaller businesses more than the larger big-box stores. This is because while small businesses must follow the rate schedule, larger national chains can negotiate rates.
The card brand network’s interchange overhaul was originally to take place in April 2020. But, due to the Covid-19 pandemic, card brands first announced they would delay the adjustments until July 2020. Now, considering the state of the economy, Visa announced, they will postpone the planned interchange adjustments until April 2021. At least most of them. They have decided to go ahead with the interchange rate reduction that was planned for the supermarket sector.
In addition, They recognize there has been a significant increase in disputes for services undelivered due to the pandemic. Because of this, they are waiving fees related to processing chargebacks and disputes to further support merchants.
Visa announced, they will postpone the planned interchange adjustments until April 2021.
When these rate increases go into effect next year, they will affect every merchant. Some more than others, but still, everyone. Changes to interchange are universal and apply to all merchants that take payments using cards under the card brands. These fees are set by the card brands and are not fees your processor or broker are in control of. However, many WILL take advantage of the update. We call this marking the markups up.
Now is the perfect time to review your credit card processing rates and take steps to reign in costs where you can. That way, when the updates go into effect next year, it won’t be such a blow to your bottom line.
How to lower your credit card processing rates and insulate yourself from rate increases.
One of the first things you should do is review your processing statements. This will help you understand what you are being charged, what type of pricing model you are on, and whether or not there are any extra fees that can be negotiated. It will also tell you whether your processor is invested in your success or their own.
Many times, merchants sign up for a merchant account under a great “introductory rate”. But, over the years that rate keeps going up. You could be paying much higher rates than you need to.
Vet your processor
Vet your processor to make sure you are with a trustworthy advisor. Call your processor or merchant account provider and ask them to go over your statement with you and explain each of your fees. If they are not willing to do this, or they can’t explain certain costs, that is a red flag. Your merchant account provider should be a trusted advisor and business partner. After all, you are trusting your livelihood to them.
Insist on Interchange Plus pricing.
Interchange rates are public knowledge and posted on the card brands’ websites. But, even so, it is easy for salesmen to pad the pricing without merchants knowing. How often do merchants have time to research the correct pricing for hundreds of different card types?
It is our opinion that the only transparent pricing model is Interchange Plus pricing. With this pricing, the interchange rates (set by the card brands) are passed through to the merchant and serve as the base of their processing fees. Then, a flat rate is added by the merchant account provider. This rate is the same for every card that is processed.
This way it is much easier to see what the card brands are charging, and what your merchant account provider is charging. Interchange Plus pricing also usually gets you a much lower effective rate than if you were processing under a “Tiered” pricing structure.
Negotiate or remove excess fees.
Merchants often don’t realize that almost all the fees, with the exception of interchange, are negotiable. Keep in mind- if you’re being given a ridiculously low rate, it might be made up for somewhere else. Monthly minimums, cancellation, and start-up fees are all negotiable, and many times unnecessary. Make sure your per-transaction fee is comparable. And never lease terminals.
Accept alternate forms of payments.
Here, we’ve been talking mostly about the cost of accepting credit cards. But, you can keep your overall costs down by accepting any alternate forms of payment that fit your business model. For instance, debit card fees are regulated by the Federal Government and therefore are much cheaper to process. In addition, accepting ACH is a significantly cheaper payment form because it does not go over the interchange network. Any portion of your sales that opt for payment methods other than credit card is going to help reduce overall processing costs.
Consider a Compliant Surcharge Program.
Compliant surcharging programs are one way to insulate yourself from rate increases. This is because surcharge programs allow you to effectively pass on a portion of your costs to your customers. But they must be done properly. Each surcharge program must be set up to comply with Visa’s, and all the card brands, guideline. When done right, you won’t become a target for the card brands or risk getting your merchant account shut down.
Upgrade to EMV compliant terminals.
The upfront costs will be worth it in the long run. Having EMV compliant terminals not only reduces your risk of fraud but also your liability in fraud cases. EMV Specifications and technology increase the security of payment data, thereby reducing the incidence of certain credit card fraud types.
In addition, without EMV compliance, the liability for fraudulent charges fall on the merchant. In the past, liability fell on the banks and card issuers when fraudulent transactions occurred. Since the EMV liability shift went into effect October 2015, liability now falls on the merchant if they’re not compliant. What does this mean? If a transaction is processed with an EMV chip-enabled card, on a terminal that is not EMV enabled, the merchant is held liable for any fraud.
Ready to take a proactive role in your credit card processing?
The impending update and increases to interchange are inevitable. But that doesn’t mean you must resign yourself to paying a high price for your credit card processing.
At Bankcard Brokers, our goal is to bring affordable merchant service solutions to our clients. We are confident we can lower your credit card processing rates to a level you can live with for life, and be the last merchant service provider you will ever need.
Our ETA-Certified Payment Professionals are committed to continually educating themselves on the most current solutions available in the industry. We work with you to develop the solutions and rates that are the best fit for your business model. We believe that by becoming your trusted resource for dependable and transparent service, we will earn a customer for life.
Give us a call to go over your rates, and “Experience The Bankcard Brokers Difference!”.