How To Avoid Payment Gateway Charges: Best Practices by ERA
Generally, businesses accept credit and debit card payments through a payment gateway hosted by a third party. A payment gateway connects two points in the payment process. Paying through a payment gateway is convenient when a direct connection to the credit card processor becomes impossible.
While payment gateways prove beneficial and have many advantages, they still cost your business money. Start My Consulting‘s expense reduction analysts can help your business thrive. Let’s explore how to avoid payment gateway charges.
Tip #1: Choose the Right Pricing Plan
With tiered pricing plans, many users find it hard to figure out what they are paying for. Ask your processor to switch you to an interchange or flat-rate plan. Both plans will show you the cost for each transaction.
Tip #2: Keep Flexible Contracts
Stay flexible so you can easily negotiate with your payment processor or switch to a more viable one. Monthly contracts can help you avoid long-term costs and high cancellation fees. Short-term contracts motivate your processor to keep your business and improve service.
Tip #3: Add Surcharge Fees
As a business owner, you must follow certain regulations. Businesses cannot surcharge prepaid or debit cards. However, you can easily avoid paying gateway charges by adding the payment processor fees to other forms of payment.
Be aware that not all states permit surcharging, so do your homework, implement specialized software, or any other means necessary to comply. With businesses attempting to reduce costs and more states relaxing their surcharge laws, you can start adding surcharge fees.
Tip #4: Set a Minimum Amount
Credit card processing fees involve a fixed percentage from each sale. The average business that sells low-cost items makes a small profit after each sale. Even a small decline in profits can result in a loss.
If your business relies heavily on selling small items, consider not accepting credit card payments for any transaction less than a certain amount. Encourage people to pay in cash since you know how to avoid payment gateway charges.
Tip #5: Increase Swipe Transactions
A face-to-face transaction has lower interchange costs, as it is less risky for businesses and banks. Paying in person and physically swiping will help you save on fees. Businesses also have more protection against chargebacks with swiped sales.
Tip #6: Evaluate and Optimize Transactions
The cost of each transaction varies. For example, debit card transaction fees are usually lower than credit cards. If your business uses physical hardware to accept payments, ensure it can process new payment methods.
Accepting payment with an EMV chip is extremely cost-effective, but you must have the proper hardware to take advantage of it. By making an effort to understand your customer base, you can determine the source of the highest processing fees. Once you have this information, you can use it to create a strategy to reduce costs.
Tip #7: Show Credibility
Every business needs to take certain precautions to prevent fraud. To minimize risk, ensure your business has the latest software and technology. A part of your processing fee covers insurance, where the processor and issuing banks take risks.
Start by performing safety measures such as asking for CVV card codes for online transactions, verifying identities, and storing purchase history. If you can show that your business is less prone to fraud, processors will lower your rates.
Tip #8: Use an Address Verification Service
An Address Verification System (AVS) enables card issuers to verify a customer’s billing address. The AVS system makes a valuable tool for preventing credit card fraud and lowering processing fees. Many credit card processors will reward you for using AVS.
For example, Visa has a lower interchange rate when you do an AVS check on your transaction. Contact your processor to see how you can integrate AVS into your payment gateway.
Tip #9: Provide Accurate Transaction Data
Businesses need to provide identifying information for every card-not-present transaction. Cardholders will see this information on their statements, which helps them identify how much they paid and to whom. Missing data from the sale may result in an interchange downgrade.
Tip #10: Start Accepting Electronic Payments
Start offering ACH payments or electronic transfers, as they are convenient, fast, and reliable. ACH reduces payment errors and minimizes the risk of failed credit card transactions. Additionally, bank transfers do not impose interchange fees, making them considerably less expensive.
Tip #11: Use the Same Provider
Having one provider handle your Point Of Sale (POS) system and payment processing has many benefits. If you partner with one company, you can enjoy a seamless and integrated process. Most importantly, you can save money by qualifying for lower processing fees.
Other benefits include simplifying the payment process and removing fraud prevention and integration fees. The provider may also offer free equipment and other incentives. Keep reading to learn how to avoid payment gateway charges.
Tip #12: Negotiate Online Payment Fees
Transactions that do not need a physical card are riskier and more expensive to process. Businesses that conduct most of their sales in person end up ignoring this type of processing. If you provide online sales, negotiate directly with your processor to lower e-commerce fees.
Tip #13: Get PCI Compliance
The Payment Card Industry (PCI) provides a set of rules to protect credit card information. Processors give new businesses between 60 and 90 days to become PCI compliant. After that period, processors charge businesses a non-compliance fee.
Complying with PCI prevents extra fees and reduces the risk of cyberattacks. PCI offers breach protection that serves as an insurance policy if your customer’s credit card information gets stolen.
Tip #14: Settle Transactions Quickly
Typically, businesses submit their transaction batches at the end of the day. Settling charges within 24 hours will give you the best interchange rate. Otherwise, you may have to pay higher interchange rates.
If you can set the capture delay date, choose either immediate or one day. Then, you can take advantage of the low interchange rates for transactions that day.
Tip #15: Review Statements
Regularly reviewing your statements can help reduce the monthly fees you pay. Business owners often overlook price changes that appear on their statements. Many payment processors gradually raise their fees over time, particularly at the end of the year.
If you catch these changes early, you have the chance to negotiate terms with your current processor or find an alternative payment solution that matches your needs.
Tip #16: Just Ask
Ask the processor to lower the fees. The payment processor has all the details of your fee schedule. Start by having a conversation with your processor if you want a way to reduce costs.
As a business owner, it is important to work with the right people to offer you the best advice for your particular business needs and the industry’s current state. The quickest way to lower your processing fees is to prove that you are valuable. When you sell more, you process more transactions, adding more value to the processor.
Discover How To Become a Business Owner
Expense Reduction Analysts (ERA) own and operate Start My Consulting, a business consulting firm with over 25 years of experience. We lead an initiative that encourages people to become franchise owners and start their businesses under the ERA umbrella. Visit us online to learn more about our merchant processing audit services.
Now that you know how to avoid payment gateway charges. Contact Start My Consulting today to get more information on how we can help your business grow. Call us at (469) 626-6936.