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WAYS TO DECREASE YOUR
PAYMENT PROCESSING FEES
At first sight the fees
for payment processing will seem to be
reasonable. However, several small to
medium sized and start up merchants were
overwhelmed by the amount of fees they
were charged when they received their
monthly statement. A sale which was
initially profitable becomes much less
profitable after paying all the fees
that were applicable for credit card
processing. The several types of fees
that are applicable are statement fees,
batch fees, authorization fees and
discount rates, among others. These can
add up to become a substantial amount at
the end of every month, eating in to the
profits of your business.
Although, these small
business owners don’t have many options
and the leverage to negotiate a lower
fee with the merchant account provider,
they should understand how and why they
are getting charged with all those
fees’. This will at least help them to
reduce the fees if not eliminate it.
This article will explain about various
fees’ that are applicable to a merchant
account and how you can reduce it.
Clarification
Each transaction with the
credit card attracts many fees. The most
important ones can be put under two
groups: Merchant Service Provider fees
and Interchange fees. The “Interchange
fee” has to be paid to the credit card
company. It is calculated as a
percentage of each transaction amount
together with a small fixed fee. The
“Merchant Service Provider fee” goes to
the company providing the merchant
account and is calculated in the same
way.
Most owners of small
businesses sign a contract for the
merchant account which has a good
“Discount rate”. The rate includes the
merchant service provider fees and the
interchange fees. The problem is: the
merchant would not have seen through the
fine print thoroughly and therefore will
not be aware of what he is being charged
for. With out having the correct
information it is not possible to get
the right account.
Knowing the reason for
variation in fees
Another reason which
increases the confusion is “variable
fees”. The fees are directly dependent
on the category of your transaction.
There are over a hundred different
categories. This will result in
different fees from different merchants
for the same item. This confusion makes
it more difficult to find a better deal.
Is a re-negotiation
possible?
The volume of your
transactions will determine the degree
of leverage you have to re-negotiate a
better fee with your service provider.
You will have a high degree of leverage
to negotiate it your business is
processing more than $20,000 every month
for some time. If not, you cannot do
much. But the “merchant service provider
fee” can be reduced by choosing the
right provider.
The main problem is that:
merchants don’t know how much they are
paying for the different fees. They
don’t try to find out. Therefore, they
end up paying higher fees. You can lower
your fees by finding out how much of the
discount rate is going to your service
provider and re-negotiate this component
for a lower one.
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