4 Strategies to Minimize Merchant Account Fees in Your Business
Particularly when running on limited margins, merchant account fees can be one of the main irritations for company owners. The cost of processing payments may rapidly mount up regardless of your size—a small firm just starting or an established player with heavy transaction volume. Fortunately, there are strategies to maximize your payment system, reduce these costs, and retain more of your hard-earned money in your company. Understanding merchant accounts and applying appropriate techniques can help you to manage your payment processing expenses.
Understand the Fee Structure
Merchant accounts might include a range of merchant account fees that are not necessarily clear-cut at first look. While some providers may charge depending on a tie-red scheme, others charge a fixed price for every transaction. Setup costs, monthly fees, transaction fees, and even extra charges for chargebacks or overseas payments can all be included in these prices. Deep knowledge of these fees is essential in order to reduce unneeded expenses.
Selection of a merchant account provider with open pricing comes first. Many times, companies ignore the specifics in their contracts, which results in unstated expenses. Surprising expenses may be avoided by closely examining the charge schedule and making sure it fits your company model. If your company handles largely low-ticket products, for instance, you might want to choose a supplier with reduced transaction costs; if you do significant transactions, a flat-rate provider may be more cost-effective.
Optimize Your Payment Methods
The way you handle payments determines a lot of the expenses you will incur. The costs are cheaper, the less complicated and more safe your payment method is. For instance, compared to card-not-present (CNP) transactions, including internet payments and in-person purchases utilizing EMV (Europay, MasterCard, and Visa), chip cards usually pay less costs. Because of their heightened possibility for fraud, CNP transactions—which are thought to be riskier—attract more costs.
Focusing on fewer card-not-present transactions is one of the best strategies to cut expenses. Implementing cutting-edge security techniques like tokenization or 3D Secure can help online companies not only guard against fraud but also let you negotiate reduced prices for CNP payments. Should your company have a brick-and-mortar presence, urge consumers to pay via contactless devices like Apple Pay or chip cards, which often have cheaper processing fees.
Leverage Volume Discounts
The rates merchant account companies give depend much on your transaction volume. Your leverage negotiating fees increase as you handle more transactions. If your company deals with a lot of transactions, you should approach your provider and talk about possible reductions.
Most companies use tie-based pricing; in this case your transaction volume rises will lower the rates. Negotiating for higher pricing is worthwhile even if you are not at the top level. Ask for a charge cut depending on your increasing company size or long-term commitment without fearing consequences. Sometimes, merchant account providers are ready to provide better conditions to draw in more business from bigger clients or to keep a devoted customer.
Minimize Chargebacks and Fraud-Related Fees
When a consumer objects to a transaction, chargebacks—whereby a transaction is reversed—can be a major cause of extra expenses; not only do you lose the transaction income when a chargeback strikes, but your merchant account provider also charges you. Particularly if your company suffers a lot of chargebacks, these expenses can soon mount up.
Strong systems that guarantee legal transactions and help to prevent fraud will help to lower chargeback costs. Offering accurate, clear product descriptions and establishing reasonable expectations for your consumers will help you avoid chargebacks, among other things. Confusing or deceptive descriptions are a typical cause for chargebacks; hence, make sure your billing descriptions are clearly identifiable and match the transaction data on consumer credit card bills.
Conclusion
Though they seem inevitable, merchant account costs may be greatly lowered with a planned strategy. Powerful strategies to save money are knowing the cost structure, choosing your payment method, using volume discounts, and reducing chargebacks. You make sure your company isn’t spending more than it should by choosing your payment processor deliberately and being active in tracking and negotiating your charges.
