Small business owners are often faced with a plethora of challenges, one of which is the high fees associated with credit card processing. These fees can eat into their profits, leaving them frustrated and struggling to maintain their business. In this article, we will discuss the causes of high fees, the impact they have on small business owners, and what can be done to mitigate this issue.
Understanding Credit Card Processing Fees
Credit card processing fees are charges that are imposed by credit card companies, banks, and payment processors on transactions made using credit cards. These fees are calculated as a percentage of the transaction value and can range anywhere from 1-4%. While the fees themselves may seem small, they can quickly add up, especially for businesses that process a large volume of transactions.
Causes of High Fees
There are several factors that contribute to high credit card processing fees, including:
- Interchange fees: These are fees that are imposed by banks, and they are used to cover the cost of fraud prevention and other bank expenses.
- Assessment fees: These are fees that are imposed by credit card companies, such as Visa and Mastercard, on every transaction. They are designed to cover the costs of maintaining the credit card network and ensuring the security of transactions.
- Processor fees: These are fees that are imposed by payment processors, and they are used to cover the cost of processing transactions and maintaining their payment gateway.
The Impact of High Fees on Small Business Owners
High credit card processing fees can have a significant impact on small business owners, especially those who are already struggling to make ends meet. These fees can eat into their profits, reducing the amount of money they have available to invest in their business. In some cases, they may even cause small businesses to fail, as they are unable to keep up with the costs of processing credit card transactions.
Additionally, high fees can make it difficult for small businesses to offer competitive prices, as they must factor in the cost of processing transactions when setting their prices. This can lead to a decline in sales and a loss of market share, making it even more difficult for small businesses to survive.
Mitigating the Impact of High Fees
While there is no easy solution to high credit card processing fees, there are steps that small business owners can take to mitigate their impact. These include:
- Negotiating lower fees with their payment processor: Small business owners can negotiate lower fees with their payment processor by demonstrating the volume of transactions they process and the importance of credit card transactions to their business.
- Accepting alternative forms of payment: By accepting alternative forms of payment, such as cash, checks, and digital wallets, small business owners can reduce the number of transactions that are subject to high fees.
- Choosing a payment processor that offers dual pricing or a surcharge option: There are payment processors like CardChamp that specialize in assisting businesses of all sizes in passing the fee onto the consumer instead of paying 1% to 4% of every transaction out of their profitability to the credit card companies, the banks and processors.
But it's important if you're going to implement a program like this, to do it in a way that is compliant and transparent and ultimately successful for your business as well as for your customer.
Working with a credit card processing company, like CardChamp that specializes in dual pricing and surcharging can go a long way to ensuring your success.
High fees associated with credit card processing can be a major pain point for small business owners. However, by understanding the causes of high fees, the impact they have, and taking steps to mitigate their impact, small business owners can reduce the costs of processing transactions and maintain their profits. By staying informed and taking a proactive approach to managing their payment processing fees, small business owners can ensure the success and longevity of their business.