You can’t be in retailing today without taking credit cards, even if you’re selling Renaissance clothing and accessories.  The percentage of our store’s sales paid for in plastic has risen dramatically since the start of our business. — and so have the charges we pay to have these credit card sales processed.

Many of us were in the habit of automatically using the same bank that holds our deposit accounts, and often our business loans, to process our credit card transactions. This can lead to a reduction of the service charges on your banking, but it is worthwhile to periodically review whether this is really saving you money if the processing fees are high.  Your bank is probably outsourcing the work to an electronic payment service provider anyway.

Comparing the fees of different credit card processors has to be one of the most confusing tasks we face as small business owners. Credit card processing is filled with varying transaction charges and service charges, and differences based on what brand of card is used, whether the card is credit or debit, and whether you have a terminal that will accept PIN numbers.

I wish that I could give you a simple way of looking a these important charges, but there is no clear formula.  You would do best to ask for bids from several different vendors.  Start by calculating the Net Effective Rate of the fees on your last few months statements, and ask competing companies to show you how they would lower it. The NER is reached by dividing all fees charged into your net credit card dollar volume (sales). 

One caveat: you should also find out from your fellow business owners what a company’s reputation is for service.  Are they available to help if the system goes down?  How quickly will the money be transferred into your bank account?  And lastly, has the company raised its rates after it has gotten an account?

We can all help each other by sharing our positive and negative experiences with credit card processors so that the smallest share possible goes to Master Card and Lady Visa — and the greatest share goes to the Retailers of the Realm.

Happy Retailing,

Carol “Orange” Schroeder

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