Small business merchant services

Small business cost savings: 4 tips to get more value from merchant services contracts


Between competitors, regulations and taxes, small business owners face enough hurdles. Getting more value from your merchant services (also known as point of sale or POS services) isn’t often talked about, but there’s a way to save money on the services that allow your business to accept credit or debit card transactions. Here are 4 tips to get more from your merchant services contracts:

Ask for monthly reconciliation for fees instead of ‘per transaction’

This is also known as batch closing or batch processing. Asking for monthly reconciliation will lower the number of transactions that go through your bank account, potentially reducing monthly banking fees! It also makes your statements more streamlined (re: shorter).

Don’t pay for a PCI-DSS?

A payment card industry data security standard (PCI-DSS) is industry lingo for the technology that merchant services providers are obligated to maintain to satisfy the security standards of credit card companies. Which is good news for us consumers. But if this fee is on your statement it is unfairly being passed onto you as it is the credit card company’s cost of doing business, not yours.  Generally, this is just a fee grab.

Pay attention to the effective rate of your contract, not the base rate

Base rate is usually a marketing term that merchant services providers use to state what Visa and MasterCard charges would be, at a minimum for those card types. But it’s the effective rate of the contract that will give you a better understanding of the true cost as related to your gross transaction volume. I’ve seen clients over-charged anywhere between 25% and 150% for their base rate, which can equal thousands of dollars in additional fees per year. If you are wondering how to calculate your effective rate and determine if you are overpaying check this helpful article with calculation instructions.

Rent, don’t lease payment terminals

Many payment companies will tell you it’s more cost effective to lease a payment terminal, with you assuming ownership after 3-5 years. However, there are potential issues to be mindful of:

  • Technology and security standards are ever changing, so by the time the terminal is paid off the equipment could be obsolete or require substantial upgrades (charged at an additional cost or through a new lease).
  • Wear and tear means terminals need to be replaced and a broken terminal does not end a lease.
  • Payment providers like to lock a merchant into using their services, even with discounted rates, due to lease obligations.
  • Terminal leases are usually non-cancellable and personally guaranteed, meaning it is very difficult for business owners to get rid of leased payment terminals.

Renting a terminal provides you with the most flexibility and up-to-date equipment, without committing you to ongoing costs. And if you want to negotiate, some providers will be willing to because they may be overcharging substantially in other fee categories. Others will not. It’s important for you as a merchant to show that you have done your research .

For advice on how to make the most out of your business banking needs, read my first post.

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