How much are you paying customers to shop with you?

There isn't a week that goes by that a new credit card offer doesn't show up in the mailbox. Credit card issuers are constantly trying to lure new customers to transfer balances or, at the very least, apply for a new and improved credit card. New and improved in that every time you use it, you will earn some form of "reward". Sounds good to the consumer who uses plastic anyway so why not get paid something back for doing so.

But, here's the issue. These newer breed cards are great for the consumer but not so great for you, the merchant. Every time you accept one of these cards for payment, you are paying an increased discount rate over what you would pay for a plain old "generic" credit card.

Today, I met with a merchant (hair salon) that is currently on a Four Tier pricing model. Thirty two percent of her volume is in Tier Three which is clearly rewards type cards. She is paying over 3.08% + $.03 for each of these sales. Also in this category would be card not present type transactions which she says, they do maybe ten of those a year. In taking a look back during the same time period last year, her Tier Three volume was a much smaller percentage of the total. So, it's obvious that more of their customers are receiving, and using, these cards for the perks they receive.

So, obviously, we'll be moving her over to a Cost Plus Pricing model so that at least, since she's already receiving these cards, she'll be able to pay less for them. It's a tough game out there these days people, just trying to stay profitable. You need to look at any way you can to reduce your cost of doing business.

Let me encourage you...take a detailed look at your monthly credit card processing statement...EVERY MONTH. Compare to the previous month and even, take the time to compare to the same time period a year ago. Look for any noticeable changes. Also, make sure that you totally understand all the fees that you are being charged. Ask your rep, if you can even find them, to explain in detail what everything is. If they don't know, themselves, which isn't too uncommon, find someone that can enlighten you. My contact info is also available here if you so desire.

The bottom line here, and in all my posts is to GET EDUCATED. Accepting credit cards for payment in your business is a necessary evil. You must, therefore, do all that you can to ensure that you are paying fair and accurately for the "privilege" of this service. Thanks for reading!