Why Are You Paying Too Much For Credit Card Processing?

When was the last time you looked at your credit card processing statement? Did it make sense? Did the numbers seem right? Would you know if they were off?

While credit card processing is a necessary cost of doing business, that doesn’t mean you should just pay any amount for it. Many business owners unknowingly and unnecessarily pay too much for credit card processing.

So, how do you put a stop to it? The answers to these commonly asked questions might hold the key.

First, how much is too much?

There’s no one-size-fits-all answer to this question. But, there are some common processor red flags that might tip you off:

• You can’t easily see what your actual costs are. The fees are hidden like a numbers version of “Where’s Waldo”, making it impossible to understand what’s happening from month to month.
  
  
• Your fees regularly increase. Even when your sales numbers remain the same or fairly close from month to month, the fees go up without explanation.
  
  
• You can’t find anyone at your processing company that can explain your rates. 
  
  
• Your average ticket size, or total amount processed, has changed and you haven’t had your rates re-evaluated.

How is my rate determined, anyway?

If you’ve poked around your credit card statements, you may have heard terms like “interchange” or “interchange plus”.

At the highest level, interchange is the fee that’s charged by the cardholder's issuing bank for the transaction. It can vary between issuing banks, card types, etc. Then, your processor typically adds some other things on to that, because they don’t keep the interchange fee. So, some pricing models are interchange plus a certain percentage of the transaction, or an amount per transaction. Or, maybe both.

Some processors will also offer a flat rate that takes interchange into account on the backend, but isn’t directly visible to you. And then there’s probably a heap of other fees thrown in there. Some, like PCI compliance fees, are valid. Some aren’t.

In addition to interchange rates and fees, your processing rate is impacted by a few different factors:

• Average ticket size
  
  
• Total sales volume
  
  
• Risk assumed based on the type of business/transaction types.

Why can’t I choose my own credit card processor?

Many pharmacies are locked into credit card processing by their point-of-sale provider. They have no flexibility to choose a different company, even though they likely have reps calling regularly offering better rates or service. Why? The simple answer to this is that while credit card processing is a cost center to you, it's a profit center for the processor and those involved along the way. There’s nothing necessarily wrong with this; it’s the way the industry works. Except when you’re being overcharged and underserved, and there’s no room for negotiation.

The other consideration is that pharmacy credit card processing is a very particular niche. There are certain pharmacy-specific aspects that many processing reps simply won't understand. The savings you may find in the short run won't outweigh the headache of using their solution in the long run. Make sure the processor you're working with is familiar with the business of pharmacy, and check with your other technology vendors for compatibility prior to signing any agreements. 

So, how do I fix it?

The best solution is to align with partners that can help you reduce credit card processing fees, either through their own solutions, or by offering you flexibility. Or both! If you're looking for an alternative... RMS might be able to help!