How to Cut Credit-Card Fees
The cost of accepting credit cards is a sore point for merchants. As Washington mulls regulation, here’s some advice on negotiating lower rates now
When shoppers swipe their credit cards at Dollhouse Bettie, a vintage-lingerie purveyor on San Francisco’s Haight Street, it used to cost the store 2.3% to 4.2% of every sale, depending on the type of card. Now the retailer pays 1.7% to 3.8%. Co-owner Michelle Athanasiades says the lower rates, along with a bunch of other fees she got her processer to drop, will save her business $4,000 this year.
Business owners have long grumbled about the cost of taking credit cards, and for the first time, Congress is considering regulating how the fees are set. But small shops like Dollhouse Bettie, which has annual revenue of over $350,000, can reduce how much they pay to accept credit cards, to a point, with some effort.
Merchants paid $62.7 billion in “swipe fees” in 2008, according to David Robertson, publisher of payment-industry Web newsletter The Nilson Report. That includes fees to card processers, networks like Visa (V) and MasterCard (MA), and the interchange fees set by the networks but paid to the banks that issue
Card processers outline these charges in baffling documents that many small-business owners don’t take the time to crack. They may also levy an assortment of other fees. Companies that train a sharp eye on these costs and negotiate with their processer will find savings. “There is a lot of competition in the business, and competition offers the opportunity for merchants to really shop around and see what is the best deal or the best service they can get,” says Jamie Savant, a partner at the Strawhecker Group, a payments-industry consultant. While only a handful of true processors actually route payments, they’re served by thousands of merchant-level reps that compete for the retail accounts. (These reps must register with banks.) Savant says merchants should get detailed price quotes in writing from three different providers about 45 days before opening a new store or renewing an existing contract.
source: businessweek
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