Ideal Cost Reacts: Part 4 – Business 2 Community’s “25 Mistakes Businesses Make When Starting to Accept Credit Cards”
We chose to review this comprehensive article because it lays out what merchants should realize when dealing with credit card processors as well as what action steps they might individually take to optimize the payments process. The author relies on many third-party sources for its claims. Since the piece is quite comprehensive, we’re going to break it down in a 5-part series with a final verdict at the end. Let’s see if this guide helps small businesses make better decisions.
16. Believing you’re not at risk.
Just because you’ve played by the rules and have avoided chargebacks doesn’t mean you’re in the clear. When you accept credit card payments there’s always a potential risk lurking around the corner.
For example, if you process a payment for $2,000, which isn’t the norm, your risk profile goes up. Additionally, your risk profile could change if you work with a questionable affiliate or in a high-risk industry.
When filling out a merchant application, typically, merchants are asked to estimate their average sale as well as their “high ticket.” Many merchants accidentally lowball their high ticket. We always advise our clients to estimate their once-in-a-blue-moon sale and add another 20%, just as a buffer. As long as the processor is aware ahead of time, the risk profile drops considerably. If a merchant becomes aware in advance that they are about to process a large order, they can also call their processor ahead of time to advise them of the pending large transaction.
Working with a high-risk industry will cause the account to be flagged, but more than likely, the account will be declined in the first place. Most processors won’t research affiliates before approval, even though they’ll ask for some common marketing methods.
17. Not weighing the pros and cons of minimum payments.
I’m sure you’ve walked into a store only to see a sign that says, “$10 Minimum on Credit Card Purchases.” Even though you just wanted a cup of coffee, you either can leave or end-up spending more money than you thought.
Business owners do have the right to set a purchase minimum of up to $10 thanks to the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Business owners can also add surcharges – unless you reside in Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
And, let’s not forget that you’re also charged a fee — usually two percent — whenever you process a credit card.
With all that in mind, if you’re a small business selling primarily less expensive items, like a coffee shop, a minimum requirement for credit card purchases may not be beneficial. However, most customers don’t have a problem spending at $10 at your business. Let’s not forget, most people prefer using plastic. So, it’s not a bad idea to require a minimum payment.
Merchants have been posting signs for many years requiring minimum purchase amounts. It is true that it wasn’t a standard approved practice until after the Dodd-Frank Act, and specifically, the Durbin Amendment passed in 2010. The concept of adding surcharges is a grey area, but it is not completely clear that it is banned in all of the listed states.
The fee for a $10 purchase isn’t always 2%. Ironically, the Durbin Amendment was conceived to help reduce credit card processing fees, but for many purchases under $10, the fees went up dramatically.
18. Never reviewing your monthly statements.
I get it. It eats-up a lot of time to thoroughly go over your monthly statements. But, it’s actually time well spent.
If you just chuck your statements into a drawer, or never login and view your statements online, how else are you going to understand your cash flow, rate charges, or uncover hidden costs?
If you’re confused about an item or term on your statement, don’t hesitate to call your processor for an explanation.
This is absolutely imperative. Merchants should always read their monthly merchant statements and question anything that doesn’t look right. Unfortunately, they are nearly impossible to read, so for peace of mind, they can always visit IdealCost.com for a free review.
19. Not promoting that you accept credit cards.
Most of your customers may assume you do accept credit cards. But, it wouldn’t hurt to remind them. And, if you recently started accepting credit cards, then you need to definitely let your customers know.
Simply place signs that not only declare that hat you accept credit cards, but also feature the logos of the cards you do accept. I would place signs at both the front of your store and at the checkout counter.
If you’re an online business, place logos of the cards you accept throughout your site. You could even write some blog posts that explain the various payment methods you accept. I would even compose some posts that walk your audience through the payment process.
This is a simple way to increase impulse buys.
This may have been true ten years ago, but virtually every business states their methods of payment acceptance these days. It is so unusual for a business not to accept credit cards that customers naturally assume their cards are accepted everywhere.
Don’t Take On The Credit Card Processors By Yourself
Since 2009, IdealCost.com has helped hundreds of companies nationwide reduce their merchant account fees through identifying and fixing hidden profit, overcharges, fake fees, and billing errors. Clients have saved $300-$20,000 per month on their credit card processing fees without going through the hassle of changing their processing vendor, bank, or equipment. Switching credit card processors should be a last resort, only reserved for funding delays, poor customer service, or technical difficulties. Before you consider switching credit card processors, see if you qualify for IdealCost.com’s monthly savings program. Upload your most recent merchant statement for a free analysis. You’ll receive an estimate within 24 business hours.
If you are opening a new credit card processing account or switching credit card processors, feel free to contact us for a free consultation. IdealCost.com can help secure the best terms and fees based on your specific needs.