It’s no secret that it costs a great deal of money for the ability to offer credit card processing for small business.
As a part of every payment your business processes, a percentage of that sale goes to the card processing company and the issuing bank.
For decades business owners have paid a hefty sum to accept payment by credit card, and many have decided to forego card payments altogether.
The number one reason that small businesses do not take credit cards are high processing fees. Businesses are always trying to reduce overhead. With reduced overhead they are able to offer low cost goods or services to their customers.
Rather than raising prices, business decide to cut out expenses. They deem these expenses unnecessary to increase customer loyalty. When a business owner adds credit networks they may incur separate fees.
Did you know that fees can be different for Visa, MC, American Express and Discover? Fees are often added for setting up the merchant account. Many times fees are also added on each individual sale.
Is this smart for a small business? If we compare customers who use credit cards and those who don’t, we come up with a compelling answer.
Dunn and Bradstreet did a study using a simple comparison. They compared businesses that accepted credit cards and those that were cash only. The results that they found were surprising.
They found on average, customers will spend 12-18% more when credit card payment is an option. They also discovered that the average transaction at McDonalds increased from $4.50 to $7.00. The ability to pay with a credit card increased the average total by 25% or more.
Another focus area was the vending machine market. Even with vending machines, the average transaction size doubled when allowed to pay with credit cards.
Many business owners worry about the risk of theft due to credit card acceptance. Credit card fraud is not only a concern for customers but business owners as well.
It is possible for a hacker to hack into a small businesses credit card processing system. Thieves can gain access to sensitive customer data without proper security measures. Potential vulnerable data can include the following.
While unlikely, there is a possibility that hackers can breach small businesses merchant accounts. Skilled hackers try to steal sensitive business data and resell it for a profit.
Hackers can potentially cost both the merchant and the customer a good amount of money. Fighting hackers can take quite a bit of time and energy working to recoup lost funds.
Large corporations aren’t even immune to this issue. In 2013, a hacker installed malware on the payment system at Target. Over 40 million credit card numbers were stolen.
The potential hassle from such problems can lead small businesses to forgo credit cards altogether.
Every processing company is different in the way they handle the major card companies.
Your processor may have separate accounts with the various card networks. Visa, MasterCard, Discover and American Express may all have their own administration fees. These fees are usually monthly and annually and can add up over time.
Some may also need extra paperwork, fraud control measures and extra fee payments. Many small businesses hate this hassle. To avoid this, they decide to only accept certain types of cards.
On the credit card playground, usually the last one picked is American Express. AMEX hasn’t always had the best history with business owners. For many years, American Express charged a higher percentage compared to other card companies.
Today, that has come back into balance. If you decide to use the American Express network, AMEX merchant services with OPT Blue is a great way to go. With this new program from American Express, they’ve leveled the playing field with all other card companies.
While extra time and money to maintain separate accounts is a nuisance, it’s not all. Many small businesses owners have to do specialized training for their employees.
Point of Sale systems today are amazing and also complicated to operate. Some are integrated with cash drawers, others it’s completely separate.
This all leads to extra time that a small business doesn’t have to invest. If you’re working with a system that isn’t integrated, there are many options available. We recommend upgrading your system to save both time and money.
Did you know that many of the newer point of sale systems offer inventory management and marketing tools? We even have a point of sale system that you can get for free that includes these benefits.
If you’re working with an un-integrated system, it’s time to show that old register the door. With the options that are on the market today, you business can save time and money by taking advantage of a free system upgrade.
A Chargeback is when a customer disputes a credit card transaction. When a customer uses a credit card, they have up to 6 months to dispute the transaction.
When a chargeback occurs, the business owner must respond in a short time-period. Prompt response is necessary to win the dispute.
Credit card Receipts should always be kept for at least a year and ID’s should always be checked at point of sale. The various card brands watch charge-backs very closely.
The chargeback rate for any business should never go above one percent. If the rate goes to high, the business runs the risk of not being able to accept credit cards.
Many credit card companies charge fees for chargebacks as well. These fees could be anywhere from $15 to $40 per instance.
We believe that this one advantage far out weighs any disadvantage.
Dunn & Bradstreet found that on average,
Every business owner wants to be smart about their expenses and their business structure. When it comes down to it, 12-18% is quite often the difference between a successful business and one that just gets by.
Let’s get really honest for a second here.
You’re probably thinking,
“I know I need to accept credit cards, but how do I know I’m working with a company I can trust?
How can I get the best of both worlds? Can I get free credit card processing for small business?
It’s Not Only Possible, It’s Available Now!
Here at Shift Processing, we offer a Point of Sale device that allows the merchant to make the decision. If a customer decides to pay with a credit card, they are charged a service fee for the transaction.
The payment device automatically adds a 4% service fee on to each transaction. If the customer wants to use a credit card, they pay the service fee.
Let’s take a look at a couple of examples.
Our first retailer has a medium sized average ticket. A local liquor store processes $100,000 dollars in credit cards each month.
They have an average ticket size of $27.00 and pay just over $3,000 a month in credit card processing fees.
With Shift’s new program, the terminal will add 4% to the $27.00 total. The terminal discloses this to the customer at time of purchase.
The customer now pays $1.08 extra for a new total of 28.08.
The $27.00 goes straight to the business owner.
The $1.08 goes directly to the credit card processing company.
In this case the $1.08 takes care of all merchant fees.
Instead of receiving a monthly bill for $3,000 to cover merchant fees, the liquor store experiences free credit card processing.
With the Shift program, this merchant saved $36,000 in yearly fees.
As you can see with the above example, your small business can accept credit cards. Now it’s up to the customer to make the payment decision.
The Shift system allows your small business to save thousands of dollars in fees every month.
This example is for a local convenience store. This local small business processes $10,000 in credit cards per month.
The average ticket cost for this business is $6.00 per transaction. The low average ticket of $6.00 virtually negates the importance of processing percentage. In a case where the average ticket is this low, the per item charge is much more relevant.
The monthly average cost for this business to accept credit cards is around $600. This is almost six percent of their entire monthly sales.
With the Shift system, 4% is added to each individual transaction at the point of sale. The customer now pays $6.24 instead of $6.00 for their purchase.
The business owner now receives all $6.00. The $.24 goes directly to the processor to cover all processing fees. Instead of receiving a $600 bill at the end of the month, the local convenience store experiences free credit card processing. Another $7,200 in yearly fees saved and another happy business owner.
Our third example is a local jewelry store. For this example, we will assume the average ticket is around $2,000. The merchant processes $50,000 each month and pays over $1,500 in fees.
With the implementation of the new Shift solution, the fee story dramatically changes. When a customer comes and makes a purchase for $2,000, a 4% service fee is now added to the total.
The customer pays the $80 service fee on the transaction for a total of $2,080. The merchant receives the $2,000 for the sale. The processing company receives the $80 service fee.
The bill at the end of the month for the Jewelry store is zero. This small change results in $16,000 a year back in the owner’s pocket.
With the Shift solution, here is a list of fees that you will never pay:
You will never receive a rate increase. With the Shift solution, rates now don’t apply to your business processing. You never have to take a phone call of someone asking you about your credit card processing for small businesses again.
Make the switch today and save hundreds and even thousands of dollars. Let your customer decide which payment method they prefer and save money at the same time.