If you’re a business owner that takes credit cards, you know every transaction you process incurs interchange fees. And while many companies believe interchange fees are just part of doing business, you may not understand how those fees are structured, why they increase and how to reduce them.
The reality is you may be paying more than you should for credit card processing.
Payroc is one of the only platforms in the payments industry that allows businesses to choose how much to pass along interchange fees for credit cards, in the form of a surcharge.
Let’s look at how interchange fees work.
Interchange fees make up the majority of your processing cost and are calculated based on a percentage of transaction volume plus a per-transaction fee. These fees vary based on several variables:
Within the interchange process, there are entities who play different roles and can be considered “winners” or “losers” in the payment acceptance process, when it comes to fees.
Interchange fees aren’t static. In fact, they’re adjusted approximately every 90 days, which can result in a sudden spike in a merchant’s monthly fees – which can be yet another reason for merchants to feel like they’re potential losers.
The important word here is “potential.” Merchants can offset and distribute the interchange fees, creating a scenario where every player involved in the transaction is a winner. To take advantage of that scenario, the first thing to do is look at your pricing plan.
How your pricing plan is structured impacts interchange fees and how to offset them. For example, companies with a flat-rate pricing plan aren’t subject to individual card price fluctuations; they pay the same flat rate regardless. But if they're on an interchange plus plan, it’s a different story.
If you are on an interchange plus pricing plan, you could switch over to flat-rate pricing and guarantee the same rate every month, regardless of card price fluctuations. The other choice is to surcharge credit cards, where you pass the interchange fee back to the end consumer.
When merchants use a surcharge program, they can pass a portion or all of the interchange fee on credit cards to the customer. The type of surcharge program determines how much of the fee is passed along and the type of transactions involved. For example, compliant surcharging applies only to credit cards. Even though debit cards are not surcharged, merchants will still see their overall effective rates decrease.
At Payroc, we offer our clients and merchants choices that include surcharging.
Payroc has a suite of options that fall under a program we call Payroc Choice.
So how do merchants know whether they should take advantage of dual pricing, surcharging or cash discounting?
It's generally a good idea to review your processing statements every six months to determine if your costs are in line with your expectations when you signed your provider agreement. If your fees have gone up or if you're paying more than you think you should, it might be time to look at alternative pricing options.
Payroc can help merchants conduct that analysis. Our analysts can review merchant statements and identify:
We can then deliver a side-by-side comparison of several of our options to determine the best pricing plan and how the three fee savings options will impact costs this month, this year and over the next three years. We consistently save merchants hundreds or even thousands of dollars each month.
To find out more about how Payroc can save your company money and pass along interchange fees, reach out to our sales team today.