Processed too high and so much revenue wasted. You have all of these fees that you just don’t understand. You’re not alone.
Nowdays, it is a must for almost every restaurant to accept credit cards. The vast majority of customers simply no longer have cash on them. But those processing fees? They can eat into your profits very much. Restaurant credit card processing fees made easy We’ll break them down. You’re taught to save money.
Breaking Down the Costs: The Components of Credit Card Processing Fees
So, what really happens behind the scenes whenever a customer swipes a credit card at your location? There are key players. They each get a cut. Understanding the money flow is very important.
Interchange Fees
These are charges imposed by the bank that issues the card. That means Visa, Mastercard, Discover and American Express. They set these rates. This can vary depending on what kind of card you used. Rewards cards tend to also come with higher interchange fees. The costs can also vary based on how the card is processed. Online orders tend to be higher than those made with swiped cards. You also pay what your business type is.
Assessment Fees
(These are also sometimes known as network fees.) It’s not just Visa, Mastercard, Discover and American Express. They are not interchange fees, but they do contribute to the overall cost. You can think of them as a small tax on every transaction. They also assist the card networks in functioning.
Processor Markup
This is what your payment processor does for profit. Their revenue comes by way of a markup over the interchange and assessment fees. They may also assess monthly fees, statement fees and other charges. So it’s best to shop around. Look for a processor that has reasonable rates.
Understanding the Different Structures of Credit Card Processing Fees
Different pricing models are used by different payment processors. Some are simpler than others. Choosing the best one for your restaurant can help you save some coins. So, here are a few options to consider.
Interchange Plus Pricing
This is considered the most transparent pricing model out there. The processor will charge interchange and assessment fees, which it passes through directly to you. They then add a fixed markup on top of that. Your bill, for example, could feature something like this: Interchange Fee (1.5% + $0.10) + Assessment Fee (0.13%) + Processor Markup (0.2% + $0.05). The total cost is very clear.
Tiered Pricing (Bundled Price)
With tiered pricing, the processor sorts transactions into “qualified,” “mid-qualified” and ”non-qualified” tiers. Each tier has varying levels. The problem? It can be tricky to know what transactions belong in what tier. A downgrading could happen, and sneak fees may enter. For example, Qualified (1.7% + $0.10), Mid-Qualified (2.5% + $0.15), Non-Qualified (3.5% + $0.25).
Flat-Rate Pricing
Flat-rate pricing is simple. You only charge a fixed rate and a fixed fee per transaction, no matter what type of card is being used. An example: Square is a flat-rate processor. It could be 2.6% + $0.10 per transaction. Great for small businesses with low volume. Larger restaurants may pay higher.
What Affects Restaurant Credit Card Processing Fees
There are many factors that influence your credit card processing fees. This is not a single simple number. KnowingThe Factors HelpsYou Save
Card Type
Interchange fees are higher on premium cards, such as rewards cards and business cards. Transnational cards are also generally more expensive. See If These Cards Do More The card issuers just charge more to offset those perks.”
Transaction Type
Card-present transactions (swiped, inserted or tapped) typically incur lower fees. Fees are higher for card-not-present transactions (online or phone orders). Why? Because they are more risky. Online transactions are more prone to fraud.
Business Type & Risk
Restaurants are sometimes considered as higher-risk industry. And this is because chargebacks happen a lot more here. If they didn’t like their meal, some customers may dispute a charge. This potential risk can translate to higher fees for merchant processing.
Keep on inquiring about decreasing credit card processing fees
You really don’t have to tolerate high credit card processing fees. You can not pay full price to get your costs down. Here are some ideas.
What Is Your Current Statement Actually Telling You?
Step 1: Get Familiar with Your Current Statement Search for all the various fees you are being assessed. Look for mistakes or things that you think are too high. Understanding what you’re paying is critical to negotiating.
The Importance of Shopping Around and Getting Quotes
Get quotes from different payment processors. Do not just eyeball the headline rate. Compare the pricing models. See what all the fees are. Be sure that you’re comparing apples to apples.”
Working with Your Current Processor
After you have quotes from other processors, call your current processor. Let them know you are considering a switch. Rephrase: If they can match or beat the other offers You may be shocked at how eager they are to negotiate.
Conclusion: Avoiding Common Pitfalls and Hidden Fees
Some processors attempt to sneak through additional fees. Be on the lookout for these common traps. AHEAD Being aware can prevent a headache in the future.
PCI Compliance Fees
PCI compliance involves adhering to security guidelines that safeguard cardholder information. There is a charge from processors for this. Be clear about what you’re getting for the charge. You can even do PCI compliance on your own.
Early Termination Fees
Some processors hand you long-term contracts with early termination fees. Make sure you read the fine print before signing anything. And if you decide to cancel early, those fees can be pretty steep.
Monthly Minimums and Other Fees That Don’t Make the Cut
Be aware of monthly minimums, statement fees and other hidden charges you may have to pay. These can add up fast. Request that the processor explain all fees before you sign up.
Trends to Keep an Eye on as We Look to the Future of Restaurant Payments
The payment landscape is constantly evolving. Every day, new technologies are being released. Here’s a quick glimpse of some things to watch.
Contactless Payments (NFC)
How to contactless payments work, such as when you tap your card or phone? They are speedier and easier. Their fees may also be a little lower than traditional swiped cards.
Mobile Payments (e.g., Apple Pay, Google Pay)
There are other options, as well, including mobile wallets such as Apple Pay and Google Pay. They are straightforward and safe to use. Other processors may charge lower rates on mobile payments.
EMV Chip Cards
It is more secure than the old legacy technology – magnetic stripe cards. They help prevent fraud. That helps reduce chargebacks for the restaurants.
Conclusion
A Guide to Restaurant Credit Card Processing Fees for Business Owners Know the fees. Pick the right processor. Negotiate rates. Avoid hidden charges.
Spend some time reviewing your existing processing statements. Look for ways to save money. I learned that a small effort can increase your earnings.
