Part of my business, Success Factor Consultants, is offering merchant processing services
(credit/debit card) from a fantastic company called Talus Pay. I added Talus Pay because it's my goal to make small businesses more profitable and competitive in today's marketplace.
You would not believe what I've come across talking to hundreds of business owners every week about their chosen payment processing method.
Now, you might be totally happy with your current method of payment processing, but is that method STILL in the best interest of your business?
As I visit businesses, I hear everything from...
"We've never done a review of our rates", and
"We were really burned by a processing company so even if we are paying high rates, we are happy with the status quo", to
"We only take cash or checks, always have, always will".
I agree that sometimes the benefits of a system or method can out weigh a higher cost but if you haven't taken a hard look at that lately, maybe it's time!
Here are some things I see everyday that might help you re-evaluate your current payment methodology.
1) Many times, businesses starting out will use Square, PayPal, Stripe, ECWID, or some other FLAT-RATE card processing plan.
While those processors have a single rate for all transactions (typically around 3%), there are no other fees. This can be attractive when cash flow is a bit sporadic in the beginning.
However, be aware that because FLAT-RATE companies like Square and PayPal take out their 'cut' at each transaction, you can be quite unaware of how much you are paying in fees every month.
For comparison, in general, if you are handling $1,500 - $2,000 on average each month in card transactions, it is more economical to use a company like Talus Pay.
2) Quite often, I see companies who discount their product if the person pays by cash or check. They are quite pleased that this offer usually has the customer running out the door to get cash and avoid using their card.
But let's think about this. Let's say I'm buying a larger ticket item for $1000. An appliance store owner I talked with said he would discount the item from $50-$100 if they paid in cash. He uses Square so, at 3% the fee for processing would have been $30.00. And if they had consistent business like that through the month, using a company like Talus Pay would have been probably more than 50% less. This manager actually told me they average about 30k in credit card sales per month. That's a lot of MOOLAH paid in fees ($900)!
Now, if I offered you $10 off a $1000 item if you paid cash, how willing would you be to get back in your car, run to the ATM, possibly pay a fee at the ATM, and go back and hand the merchant cash?
The fact is that if you discount enough to make it attractive enough for the customer to jump through those hoops to pay you in cash, then you have really effectively created a processing 'fee' for cash payments that is probably significantly above what the processing charge would have been in the first place.
3) Businesses buying into POS systems without full evaluation. POS or Point of Sale systems can be fairly simple or fairly complex. Some will house inventory, allow you to do business online through a Website (like Shopify), or keep track of inventory or ingredients.
Three questions to ask yourself:
Do you really need it right now? Will a simpler method of accepting card payments suffice for now? An auto repair shop owner told me he bought a whole POS system but never wanted all that complexity for what he does.
Did you research POS systems for your industry or did you research payment processors who have POS systems for your industry?
What is the cost for the equipment/software?
Many processing companies offer POS systems now. If you are bent on a certain POS system just know that you will probably be very limited if you want to find a cheaper processor who can integrate with that particular POS system.
I advise establishing your processor FIRST. Once you like them and know they have your back on lowest fees and best customer service, THEN look at what POS systems they offer or can integrate with.
At Talus Pay, you will never buy or lease any equipment. I hear horror stories of 36 or 48 month equipment leases when they paid $75-$100/mo and STILL had to return the equipment PLUS were paying 40%-60% higher fees than they should have for processing. One new restaurant I visited paid $18,000 for their POS with equipment. OUCH!!
4) Do's and Don'ts...
DO check reviews
DON'T believe everything you read in reviews. BBB has the most balance reviews because when a complaint comes in the customer is required to work with the company toward resolution and that result plays into the BBB rating. Many bloggers who post ratings are affiliates for one or more of the (surprise, surprise) TOP RATED processing companies they reviewed, but I've also even seen review sites that seem more genuine and legit have up to 50% incorrect information. It's hard to know what to believe and who to trust so I recommend starting with and leaning heaviest on the BBB.
DO review your rates at least every 12 months.
DO pay attention to your processing statements so you know what you are paying. Many owners I talk to don't have a clue.
DO track your transaction fees if you are using a FLAT-RATE processor like Square, PayPal, ECWID, Shopify, Stripe, etc. so you know what you are paying monthly in fees.
DO scope out a processor. Get on their Website, call customer service, is the rep fairly local and available?
DON'T let ego, pride, or even ambivalence get in the way of making a change if one is needed!
5) Some states allow you to charge the processing fee BACK to the customer if it's either a surcharge or a convenience fee. As of the writing of this blog, it's still an illegal practice in 10 states but it is allowed in Virginia where I live.
When I see the high fees merchants have been paying, I can understand why a merchant would want to offset that cost. Merchants have told me the consumer should pay the fee if the customer wants the convenience of using their credit/debit card.
But think about this...
Mostly likely, the customer is also carrying a balance and paying fees to carry that balance.
If you negatively impact your customers who are already extended financially, you may just be keeping those customers from making larger or more frequent purchases.
The fee being passed on to the customer is out of the customer's control. The customer has no option to shop around for a better deal on fees.
Likewise, the business owner loses motivation to shop around for competitive fees because the fee is no longer impacting the bottom line.
Because rates vary between card types, I've seen business owners charging as much as an additional 4% to 5% at the register, but when I've reviewed their processing statement, their overall rate is only 2.6%. One business owner actually showed me the 'profit' he was making by adding that fee 'back' to the customer. It's why this should still be an illegal practice or more strictly governed.
And the credit/debit card processors are under less pressure to be competitive with their rates because the merchant no longer is as motivated to challenge the rates.
YES! I am unashamedly biased about representing Talus Pay. Talus offers wholesale pricing and as a standard rate can beat any price out there, they have short term contracts (1, 2, or 3 year), and you will never buy or lease any equipment from us!
Message me to schedule a review of your rates today!