There is nothing more dangerous than the death of cash. Changing over to a "cashless" society harms many business owners that don't even realize it. This has been in motion for a generation and benefits banks much more than it does main street businesses.
Around the time the internet began, banks and processors started lobbying for and pushing this cashless society. It began as subtle things like optional email statements. Then, as time progressed, they charged a fee if you wanted your statement by mail. Being good people, many of us thought this was a great thing, saving trees and all. However, the banks were thinking about something entirely different. They knew that if you physically open your mail, you are much more likely to read that monthly merchant account statement and see how much you paid in fees. It is also true on mortgages and auto loans.
The hidden truth is that accepting credit cards cost businesses a fortune. It's not like it costs $0.05 per transaction to accept a credit card. On average, a business pays four percent (4%) of revenue to the card issuer and processors. This fee did not exist prior to these credit card companies. Now it is a standard operating procedure.
Why is this so important? What do you care about three or four percent? Let's do the math. If your business does $100,000.00 a year in sales, that is at least $3000.00-$4000.00 a year. Stretch that out over a generation. That is as much as $120,000.00.
What if a company does $1,000,000.00 a year in sales, or $10,000,000.00?. The costs and drain on merchants are enormous. Over the years, people became programmed to accept this as a normal fee to be in business. It is the farthest from the truth, and I will explain why.
When you pay your mortgage, does the bank accept your credit card for payment? The answer is no. They require a debit from your bank account, or you can send them a check or money order (which is the same thing). When you pay your car note, is it any different? The banks refuse to lose that percentage. They are playing the game correctly, and you are not.
If you are a business owner or manager, you always want to find ways to pay less and earn more. Before you look anywhere else, I want you to look at the most accessible place to squeeze, which is how much you pay for processing. Allowing the banks and processors to take 4% or higher of your bottom line is ridiculous.
Start by shopping around. If you are under contract, shop anyway. I own a processing company, and I can tell you, we will re-write an agreement if we are afraid we will lose you. Shop around a lot and get the best pricing you can find. You should be able to get your rate down at least 1/2 point.
Look at your statements. You may have a great rate of 2.3% but still be paying 4. How is this possible? Look at the small fees on your monthly statements. Look at the final amount you paid versus the gross revenue for the month. Do the math, and you will get your actual percentage. That is what you must monitor every month and fight against it. In business, every penny counts, especially in the long term. Do not be afraid to threaten to leave a processor if you want a lower rate. They can threaten you with the cancellation fee as well. You are looking to play hard-ball negotiations to get them to lower the cost. I can tell you they can and will if you play strong enough with them.
Also, take a look at the modern-day cash; bitcoin. Bitcoin and the ALT (alternatives) coins are slowly becoming mainstream. They are the hedge against this move to remove cash. They cost much less and act just like cash. Some exchanges will instantly trade out your bitcoin sales for dollars, making this a viable, cheaper alternative. You may also find that bitcoin may work with your current payment systems.
Also, look into electronic debits, referred to as ACH or eCheck. You may be thinking, why would you want to accept that old form of payment? New secure bank login technology now allows instant verification of the account and funds and faster processing times on debits and credits. You can now process a debit in seconds, and the consumer doesn't need to know their bank account details. The consumer only needs to know how to log into their bank account on their device. As an example, with the technology we created, you can get your deposit the same day. No holds, no reserves, and it costs much less than a credit card. We are also working on a debit guarantee system that will eliminate the risk of chargeback, which is another cost of accepting cards.
Please don't settle for taking the easy route and losing money to the card issuers, processors, and middlemen. Study up on the free advice I gave you above. You will find that you can save money, which is always a worthwhile endeavor.
Thanks for reading. If you like this or any other articles, please make sure and share them on social media. Also, check out my favorite company at Green.Money.
-Lonnie Passoff
Founder and President
Green Payment Processing
About the Author:
Lonnie Passoff started the first-ever internet-only eCheck processing firm in 2008. It has grown to be the largest eCheck processor on the planet. A veteran of the United States Army, he has become a multi-millionaire through honest, smart business practices. He frequently speaks at business conventions and is a paid advisor to multiple corporations. He also holds a seat on the board of a Real Estate Investment Trust and a non-profit Clean Ocean Initiative in the Caribbean.