Imagine this: At the end of the month. You’re buried in invoices, and then there it is — the big one, a bill for credit card processing fees. Ouch! It felt like money going out the window.”
Credit card processing fees are a huge burden on the restaurant business. They nibble away at your profits. This article explains those fees for you. We’ll also consider how to reduce them, legally. Let’s get started!
A Guide to Restaurant Credit Card Processing Fees
Credit card processing can be daunting, but knowing the fundamentals is a good start. When a person pays with a card, money embarks on a journey. Numerous players are engaged to finalize the transaction. Let’s break it down.
The Entities Involved: Issuing Banks, Acquiring Banks & Payment Processors
Think of it as a team effort. First, the issuing bank. This is also the bank who issued the customer a credit card. Next, we have the acquiring bank. Your restaurant uses it to collect payments. Finally, the payment processor facilitates the communication between the banks. Each has a role to play. All are paid for their respective roles.
It’s the Interchange and the Processor Markups, You Pinhead!
Fees are like a layered cake. The interchange fee is the base layer. Banks take these as a per transaction fee. These are fees from card networks like Visa or Mastercard called assessments. The top layer is the markup from the payment processor. This is their commission for executing the transaction.
Let’s do some math. Say you have a $100 bill. That interchange fee could be 1.5% ($1.50). For example, assessments can be 0.15% ($0.15). The markup on the processor might be 0.25% ($0.25). Your total fee is $1.90. And though that might not sound a lot – it all adds up real quick!
Why Restaurant Credit Card Fees Are Usually Higher
Credit card processing costs are higher for restaurants commonly. There are several key reasons for this. Such factors include the risk of fraud or how customers pay. Let’s explore why.
Soft Skills Needed to Improve Risk Factors: Chargebacks and Fraud in the Restaurant Industry
There is a perception that restaurants are a riskier business. Chargebacks are a big reason. A chargeback occurs when a customer challenges a charge. It’s like a rebate the bank wants returned. Risk also increases with fraudulent transactions. This could be when a person uses a stolen card. More risk equals higher fees.
Card-Present vs. Card-Not-Present (Online Orders): Transaction Types
[✓] The method a customer uses to pay affects the fee. Things like swiping a card in person is “card-present.” Online ordering is “card-not-present.” There are fees that are higher for online orders. Instead, there’s a greater risk of fraud. You cannot examine the card in person.
Ticket Size and Transaction Volume
Not just how much people spend, but how often. Higher costs may also come from small average tickets with many transactions. Each transaction has fees. When you have lots of customers, even small fees accumulate.
Tips to Reduce Credit Card Processing Fees
Want to save money? You sure can! Some strategies for reducing your restaurant’s credit card fees. Follow these tips to keep more of your hard-earned money.
Tips for Negotiating with Your Payment Processors
Don’t be afraid to haggle! Check with your payment processor. Ask for a lower rate. Ask about any hidden fees. Ask if your current lender will match a competitor’s offer. Feel free to negotiate and don’t settle for the first offer.
Best Practices for Card Acceptance Transaction Processing Optimization
Little things can make a huge difference. If your credit cards do not swipe, swipe it correctly. Train employees to recognize fake cards. Implement an address verification system. It can also help to avoid chargebacks. You can reduce your risk, and fees, by doing these things.
Why You Should Have Cash Discount Programs: Encouraging Customers to Pay Cash
Urge people to use cash. Provide a small discount on cash payments. Post any clear signs up to date. That way customers are aware of the discount. Cash payments mean less credit card fees.
How to Traverse Surcharging and Credit Card Fee Legislation
If I want to charge a fee for credit card payments, can I just tack that on? Sometimes, but it’s tricky. Laws about surcharging vary. You need to know the rules.
Federal and State Surcharging Laws Explained
Some states ban surcharging. Some permit it, but with strings attached. You need to properly disclose the surcharge to customers. Violators can be fined for failing to comply. Better to know the laws where you do business.
Surcharge Program Implementation: One Sure Way to Regulate Disclosures
If surcharging is legal, do it correctly. Inform customers before they place an order. Post signs in the menu and at the register. Don’t spring them a fee at the end. Transparency plays quite an important role.
Beyond Surcharging: Innovative Approaches to Pricing
Don’t want to surcharge? No problem. Try a broad price hike of a couple percentage points. This avoids having to charge credit card users directly. Another idea is to create package deals. Get creative.
Selecting a Payment Processor for Your Restaurant
It is crucial to choose the correct payment processor. They are not all alike. Compare fees, features, and service. A decent processor can also potentially save you cash (and a few headaches).
Understanding Pricing Models: Interchange Plus, Tiered, and Flat Rate
A different price, depending on the processors. “Interchange plus” is often the cheapest. You pay the sum of the interchange fee and a small markup. So-called “tiered” pricing organizes transactions into buckets. This can be less transparent. “Flat rate” is simple. You pay one fee for every transaction. Understand the advantages and disadvantages of each.
Evaluating Features and Integrations: POS Solutions and Online Ordering
Does this processor communicate with your other systems? Can it integrate with your POS system? What about online ordering? The depth of integration is what makes life easier. It can also reduce errors.
Processor: What to Look For in a Processor Customer Support and Reliability
What if something goes wrong? You desire good customer support with a processor. Look for 24/7 service. Check reviews by other restaurant owners about their reliability. Good support is worth paying a tiny bit extra for.
Conclusion
Did you know that credit card fees take a bite out of restaurant profits? The first step is to understand them. Negotiate rates, incentivize cash payments and select the appropriate processor. Take control of these costs! Get advice when you need it. Smartly managing your fees is one way to help your restaurant survive.
