You know you have to spend money to make money and nowhere does that seem truer than when it comes to the cost of processing credit card payments. You’ve done your research and found the right processing company for your business needs, but it’s still hard to swallow the percentages of each sale that you’re basically paying to get paid.
Trimming the Budget
If you find yourself looking for ways to trim your operating budget, reducing your fees seems like an easy way to do that. After paying the transaction fee and percentage of the total sale, you realize that the smaller the sale total, the more the cost of processing the payment eats directly into your profit margin. Many small businesses try to reduce this loss by placing Minimum Purchase limit signs on their counters.
Review Your Contract
Seems straight forward enough – if a sale under $5.00 doesn’t allow you to make a profit, simply do not process sales for that amount or less. Aside from aggravating your customers, the vast majority of contacts with credit card companies state that you are not allowed to place minimum restrictions on purchases you process through their system. That’s right – the majority of storeowners who have this rule in place are actually breeching their contract and are liable for immediate termination of the contract if a customer were to call and complain.
Most consumers are unaware that credit card processing companies themselves generally do not support the purchase minimum limitations, so most storeowners are safe from being reported. But, regardless of it being against contract or not, consumers are frustrated with purchase minimums. They understand that you have to pay to process their credit card, but they see it as the cost of doing business. Losing a $5.00 sale to a disgruntled customer may not seem like a big loss, but even one a day adds up quickly.
How many cash customers your business sees everyday? Not many? Most customers paying with their credit/debit card do not have any cash on their person at all. If they are unaware of your limit until they’re ready to pay, chances are they are not going to go find an ATM to withdrawal cash (which may result in additional ATM fees for them). The other alternative is to purchase additional items to raise their total, which they do not appreciate having to do.
Offsetting the Cost of Processing
One way to offset the fees of processing credit card payments is to offer a discount to cash customers. 10% off for any customer who pays with check or cash. Also consider building the cost of your payment fees into the price of your products or services. Your customers would appreciate a slightly higher price to begin with as opposed to a surprise, “We can’t process your credit card payment” as they’re ready to check out.
The best practice is to follow all the rules, regulations, and guidelines set forth in the contract you make with your credit card processing company. This includes not placing minimum purchase amounts on credit card transactions.