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Every restaurant owner knows that those little fees add up quickly
<p>Every restaurant owner knows that those little fees add up quickly.</p>

Are you paying too much for credit card processing?

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A business’s success oftentimes depends on thriving revenue and cash flow, making cutting monthly administrative fees and saving money of utmost importance. One example of a monthly fee that consistently eats into revenue is a monthly credit card processing fee. Many business owners receive this bill, pay it and never think twice about it because they believe it can’t be lowered. The truth is, however, there are merchant processing companies that can lower your cost up to 40 percent by offering transparent monthly fees and no contract, significantly reducing the bill each month.

Below are three key elements to understanding your monthly payment processing statement, and some red flags to look for that indicate you should switch processors:

1. Interchange. This is the direct cost of credit card transactions, so every time you process a card there are always rates associated with it. These rates are set by the credit card companies themselves and are the same across the board for every provider. Interchange rates are based off of numerous factors including business size, industry, customer card type and how the transaction is being processed. Exact rates are available online if you’re interested, but averages for swipe transactions are as follows: debit around 0.05 percent; Visa and Mastercard around 1.5 to 1.65 percent.

2. Markup. It may be basis points, or a discount rate, but whatever they call it, there is a percentage placed on top of all transactions so traditional providers make a variable profit from your volume. This means that when your business is doing well, you have to pay more money to your traditional merchant services provider.

3. Ancillary fees. All those line item fees and hidden charges, like batch fees, statement fees, PCI compliance fees, monthly minimums, IRS fees and customer service fees fall under this category. Ancillary fees are often thinly veiled excuses for a provider to make a larger profit off of you and your business and rarely are necessary to cover any cost.

Breaking down the above, interchange rates are often negotiable, but will often be raised without warning and must be specified in a contract. If interchange rates are not negotiable, find a different provider. It’s important to keep in mind that there are now providers who charge 0 percent markups on top of interchange.

What types of cards you accept is also a key aspect for saving money. As mentioned, the average PIN debit transaction is 0.05 percent compared to a 1.5 percent credit card transaction. Limiting your transactions to just credit cards can automatically rack up expenses and harm your company in the long run.

Many business owners would be surprised to hear that they can even save money with American Express if they’re with the right provider. American Express’s traditional rate of 3.5 percent sounds daunting, but the company has introduced a new program called OptBlue that has revolutionized the pricing model. OptBlue is designed specifically for small businesses and deconstructs rates based on industry type and ticket size. Rates are as low as 1.6 percent and average around 2.4 percent. Further, stats show that AmEx card holders spend an average of 70 percent more per ticket at small businesses. Opt Blue is a game-changer. Ask your provider about details on the program, see if you’re eligible and enroll if you are. If your provider doesn’t offer OptBlue, you might want to find one that will allow you tap into this resource.

Another money-saving factor is choosing a company that provides multipurpose hardware; the less hardware you have to purchase, the more money in your pocket. Or even better, find a provider that will provide you with free equipment while you process with them.

Once they understand these components, business owners can easily see where they can cut costs and make smarter decisions about how they process payments. Extra fees, markups and hidden charges are things everyone should keep an eye out for and everyone can avoid. Making sure your provider is transparent with all these factors, and also doesn’t require a contract, plays a vital role in saving money every month. Fees can add up quickly so checking your monthly statement and making sure you understand exactly what you are paying for and why can help save your business a substantial amount of money.

Suneera Madhani is the c.e.o. and founder of Fattmerchant, a subscription-based merchant processing company based in Orlando.

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