Supply chain uncertainty. Consumer sentiment. Rising costs of goods and services. These three big things create economic uncertainty and make it difficult for merchants to navigate a profitable path forward. Each of these factors can impact costs, squeeze cash flow, and hurt the bottom line.
According to The Nilson Report, total U.S. merchant processing fees reached $172 billion in 2023, a 48% increase from 2019. Most businesses recognize that they are paying more but lack the expertise to identify unfair practices or calculate their effective rate. Additionally, merchants view switching as risky and challenging, fearing they will be locked into expensive, long-term contracts and poor service.
Business owners everywhere are seeking solutions to ease rising costs and financial pressures. Let’s explore the levers a merchant can pull to lower the cost of payment acceptance at a time when external forces are beyond their control.
Understanding Credit Card Rates and Fees
Credit card processing fees typically consist of a percentage of the purchase price plus a fixed charge. The card brand, the card issuer, and the processor share the money collected.
What is Interchange?
Card brands set interchange rates and fees, which represent the baseline cost for processing credit and debit card transactions. The cardholder’s issuing bank receives the money from interchange fees, and every business that accepts cards incurs them. Hundreds of rates exist, varying based on factors such as the type of card used, where the purchase takes place (in-person, online, or by phone), and the business’s industry.
Interchange fees make up the bulk of transaction costs and play a crucial role in funding valuable features, such as fraud protection and rewards programs. Typically, the card brands raise interchange rates twice a year, in April and October. While the fees are non-negotiable, they can be offset.
➜ Controlling interchange is your best opportunity to lower credit card acceptance costs.
Beyond Interchange: Processors’ Add-on Fees
Payment providers mark up interchange rates to maintain their technology platforms and operate their centers. Some providers use the card brands’ semiannual interchange rate hikes to increase transaction fees or add hidden or fabricated charges. They employ deceptive tactics to inflate rates and fees, relying on complex and unclear statement descriptions to enrich themselves.
➜ Uncovering padded interchange and hidden fees is an effective way to calculate potential savings.
Often, merchants who use the payment provider linked to their core business software feel trapped in a processing relationship, resulting in higher costs and inadequate customer support. Additionally, features like surcharging, which can help offset processing costs, may be unavailable. Worse, businesses may unknowingly run a non-compliant surcharge or cash discount program, putting them at risk of substantial fines from the card brands for violating card brand rules.
➜ Finding an alternative integrated payments provider frees merchants to maximize savings and boost productivity.
A Better Way: PayJunction’s Cost-saving Solutions
PayJunction brings a fresh partnership approach to every relationship, helping businesses combat rising costs with a mix of solutions and services that provide significant savings, backed by award-winning support. Businesses that switched to PayJunction have saved up to 75% on processing costs!
Offset Interchange Costs with SmartSurcharge
An effective way to reduce the impact of credit card fees is through surcharging. Surcharging allows merchants to add a small fee, capped at 3%, to a customer's total when they opt to pay with a credit card. This fee allows businesses to not have to raise prices across the board and helps offset processing costs. Surcharging applies only to credit card transactions, not to debit cards, cash, checks, or ACH bank payments.
The cost savings from surcharging are significant, especially for businesses with high-ticket goods and services, such as automotive dealerships.
While surcharging is legal in most states, businesses must adhere to legal regulations for the states where they are located and sell and the card brand rules governing credit card surcharges. Failure to comply can lead to penalties, legal actions, damage to a business's reputation, and, in extreme cases, termination of a merchant agreement with the card brands.
PayJunction’s SmartSurcharge solution boosts profits, minimizes customer friction, and helps comply with card brand rules and state laws.
- Debit card detection: Our systems automatically identify debit cards and disqualify them from surcharges to maintain compliance with card brand rules.
- Customer-friendly: Our terminals, invoices, and receipts display surcharge amounts. Customers can easily avoid the fee by paying with a debit card, cash, ACH, or a check.
- Compliance guidance: Our onboarding teams help merchants follow state and card brand rules when enrolling them in SmartSurcharge. We provide helpful support resources, including recommended signage, disclosure language, compliance guides, and best practices.
- Flexible: SmartSurcharge allows merchants to choose the amount to pass to the cardholder. The surcharge could cover the total cost of processing (capped at 3%) or a lesser amount, such as 1.5% or 2%, which minimizes the impact on customers. Businesses can implement the optimal strategy based on savings goals, the competitive environment, and customer feedback.
Integrate Payments + SmartSurcharge, Your Way
Merchants that accept payments in their core business software are often stuck with an overpriced provider, inadequate features, and poor support. Additionally, surcharging may be unavailable or limited to specific payment channels, such as online or in-person only, which prevents businesses from maximizing savings.
Our No-code Payments IntegrationⓇ integrates payments into any cloud-based software quickly and securely, using a free browser extension. It takes mere minutes to define transaction fields and map workflows. Businesses can accept payments and apply a surcharge to in-person purchases, phone payments, email and text invoice requests, recurring payments, and more. Payment information seamlessly flows between the POS, DMS, PMS, or accounting software.
Start with a Smart Statement Audit
It’s challenging for businesses to determine the actual cost of payment acceptance, but PayJunction gives merchants the power to protect their bottom line in a time when external financial pressures are beyond their control. Our Trusted Partner Pledge includes:
- Free statement analysis: We identify downgrades and misleading billing habits to reveal exactly where you’re overpaying, and we recommend solutions to optimize processing costs. You may learn that you can uncover enough savings to lower, or even eliminate, the surcharge percent, potentially giving you a competitive edge.
- Transparent pricing: Our service is built on valuing long-term relationships over short-term profits. We offer a choice of pricing programs, no hidden fees, no PCI fees, month-to-month contracts, and no cancellation fees.
- Award-winning service: U.S.-based support reps answer phone calls within 60 seconds. Team members take personal ownership, following through on every issue until it is resolved and confirming that each customer is satisfied.
Sometimes it takes an expert’s eye to see beyond a processor’s stated rates and calculate the total cost of acceptance. Any fee other than card brand interchange and assessments can be adjusted, negotiated, or eliminated. Interested in a statement audit? Our PayJunction experts will comb through your current statements for free upon request.
