There’s an old saying which applies to businesses of all sizes: a penny saved is a penny earned. This will certainly be true of you. As a business owner you’ll be intensely aware of every cost associated with your business, so when it comes to payment processing you want to understand what fees you’ll be paying and whether you can avoid them.
The first thing to do is to understand the nature of payment processing fees. These can be categorized in two ways. The first can be listed as wholesale fees. This is the basic cost of the transaction and is normally pretty set in stone. For example, a provider might take 2% of any transaction. There is normally very little wriggle room here and not much point shopping around.
The second is known as mark-up; this represents how much profit a provider is taking from your business. This can come in a variety of forms:
Transaction fees: As well as a percentage charge from your transaction there may be an additional amount. For example, they may quote at 2% + 10; the ‘+10’ figure is a flat fee which is charged on top. All this is profit for your provider and you may get a better deal by looking elsewhere.
Terminal fees: These are often charged to businesses which have a physical location from where they process payments (such as a store). You may have the option of leasing your terminal or buying it outright. Although the latter option represents a higher initial payment, the avoidance of rental fees means it’ll be worth it in the long run.
Payment gateway: These are similar to terminal fees, but work for online businesses.
PCI fees: These are paid to the payment card industry and relate to either compliance or non-compliance with the regulations. There’s little you can do about non-compliance rules. If you’ve been charged these then by definition you are already not in compliance with the regulations. Some providers will add compliance fees which you pay for making sure you stay within the guidelines, although the level of service they actually provide is questionable.
Annual fees: These can be a subscription covering an access to your provider’s annual services. Not all providers include this fee.
Statement fees: These are supposedly for regular admin such as printing and sending statements. You can save money by having all payments processed electronically. This is a good area for erroneous mark-ups as many companies charge excessive fees for admin in the hope you won’t be checking.
Early Termination Fees: These come into force if you end your contract early. You can obviously avoid this by planning ahead more effectively.
Minimum payment levels: Some providers may include a minimum payment level. Any provider who does not exceed this threshold can find themselves being charged an excessive fee.
The sheer number of these fees can be a complicating factor. What’s more they are not always easily visible or explainable on your bills. Indeed, it is often in the interests of the provider to be as opaque as possible as it helps them add a little extra onto their bills. Before you sign up with any provider, it’s a good idea to check you understand their entire payment and billing structures.