In a largely electronic world, most transactions are now paid for with plastic–either a debit or credit card. Fundera reported some interesting statistics about credit card payments as of 2021:
- 80% of consumers prefer using cards to make payments versus paying with cash.
- 38% of consumers said they prefer credit cards because they don’t like the inconvenience of carrying cash.
- 76% of consumers have at least one credit card, and the average credit card user has four.
Accepting payments with debit and credit cards is a must for most businesses, including those in the towing industry. While they are preferred by customers and make receiving payments more manageable for you, they also come with their share of fees. One question many small businesses struggle with is understanding the impact of credit card fees on profitability and how to reduce this expense.
What are credit card processing fees?
Credit card processing or merchant fees are costs a business pays whenever a customer pays for a transaction using a debit or credit card. There are three different parties involved in the process:
- The card issuer. This is the bank that provides the card, such as Citibank or Chase.
- The credit card network. These networks like VISA and Mastercard partner with financial institutions to help facilitate the transfer of funds.
- Payment processor. This is the company the business works with to process all the payments its clients make. An example might be Square.
Most of your fees will go to your payment processor, but the card issuer and the network impact your costs.
What are common credit card processing fees?
There are several different credit card processing fees involved in electronic transactions. The two most common are interchange fees and processing fees.
- Interchange fees. Interchange fees are based on the type of credit card (the network) your customer is using. These are fees or rates assessed by the network on every credit or debit card transaction. The merchant is responsible for paying the fee plus an additional surcharge given to the payment processor. For example, an interchange fee may be assessed as 1.5% plus $0.10, with .2% going to the processor. The only way to control these costs is to limit the network of cards you will accept (for example, by accepting only VISA or Mastercard.)
- Processing fees. These fees are based on the transactions you submit through your payment processor. You have more control over these fees since you determine who will process your transactions. For example, if you use Square to take payments, you will pay a fee to Square for using their processing system.
How can you reduce the impact of credit card fees on profitability?
Fortunately, there are several ways to lessen the impact of credit card fees. Here are five ideas our team compiled for you:
- Apply a surcharge to card payments. While this is an easy way to pass on the fees you pay to your consumers, it may not be appealing to them and could lead to negative reviews. Also, it’s important to note that surcharges are not always legal, depending on the type of card and where your business is located.
- Encourage in-person payments. You’ll get your payments faster by using on-the-spot card readers and accepting payments in person. Card issuers and processors usually charge lower rates because there is less exposure to fraud.
- Offer to take ACH payments. In contrast to card transactions, these electronic transfers go directly from one bank to another on the automated clearing house network. By avoiding interchange fees, these transactions are less costly for businesses.
- Become PCI compliant. There is a significant movement for businesses to become PCI compliant to secure their customer’s confidential information better. Card processors may charge additional fees if you’re not compliant, and you could receive a cash bonus or free data breach protection for becoming compliant.
- Negotiate lower processing fees. The amount charged by card processors is negotiable, but they often don’t tell you that. Shop around and ask for the best rates. These companies are hungry for your business and may give you a discount if you ask for it.
At Collins, we are partners in your success.
At Collins, have a long tradition of working closely with our clients in the towing industry to help their businesses be more successful. Throughout our history, we’ve relied on stories and feedback from our clients to improve our products to make their work as easy and safe as possible. We’re proud of the quality of our products, and we hope you are, too.
If you haven’t checked out our Hi-Speed DollyⓇ and Carrier Dolly systems, you’re missing out on one of the best investments you can make in your towing business. Equipping your trucks with our Hi-Speed DollyⓇ and Carrier Dolly systems will make you an employer of choice in your community.
Collins Manufacturing has been the industry leader in towing equipment for 45 years. Our Hi-Speed DollyⓇ and Carrier Dolly systems make towing vehicles from even the most challenging situations safe and simple for your crew. Our safety ratchet system prevents injuries to employees from slipping grips and prevents the vehicle from dropping. When your workplace and employees’ safety matters, choose Collins. Contact us today to learn how you can implement Collins towing equipment in your company.