Credit card processing fees eat away at profitability and impact cash flow. Ideally, you want to receive the money you’re owed quickly and with less expense. There’s no way to eliminate these fees. It’s a cost of doing business and allowing customers to remit payment based on their preferences. However, there are ways to optimize credit card processing and reduce costs with Merchant Cost Consulting.
What Is Merchant Cost Consulting?
Merchant Cost Consulting describes a service wherein credit card processing consultants work with merchants to:
- Help them lower credit card processing fees
- Audit the current credit card processing fees they are currently paying
- Deliver best practices and recommendations without the hassle of switching processors
The objective of working with consultants is to reduce your fees and improve your cash flow.
How Does Merchant Cost Consulting Work?
The first part of the relationship is the audit. You’ll send them at least six months of statements from your current processor for review and analysis. They will find any hidden fees or high rates. In this process, they are determining your effective rate. The effective rate is a calculation where you divide the total fees paid by the total amount processed and multiply by 100. Many companies don’t know this percentage and perceive they’re paying less than they are to processors.
Here’s an example of the effective rate formula.
Total amount processed: $20,000
Total fees paid: $1,000
Effective rate: 5%
From their assessment, they will determine if there are any areas for savings. You’re working with experts that have specialized knowledge. If they do find these opportunities to save, they can:
- Go back one to three months to initiate refunds for fees and overcharges
- Negotiate to remove junk fees to reduce your effective rate
- Monitor all your future statements to continue to check for fluctuations in fees, rates, and charges
They have an incentive to deliver savings to you because that’s how they get paid. Working with Merchant Cost Consulting can also assist you with getting funds faster.
Getting Funds Faster
Receiving timely payments from credit card processors is critical for your cash flow. Events can occur that make this timeframe longer. It’s another area to discuss with consultants. Some ways to speed up the transfer include:
- Be aware of any processing limits you have. If you can only process a certain amount each week, anything after that can trigger a hold. If this is an issue, advise your processor that you need to increase this.
- Reduce chargebacks. Chargebacks occur when customers dispute transactions with their bank. If you have a high chargeback rate, payment processors are more apt to freeze funds. Consulting companies often have chargeback management solutions to support this.
- Find a payment processor with next-day funding. Not all processors have this option. If your current processor doesn’t allow this, it will impact cash flow.
- Avoid keyed transactions. Swiped and chip reads for credit cards process faster than anything you have to key in manually. The former falls into the category of card present, while the latter is card not present. Keyed transactions also have a higher processing charge, so try to minimize them.
- Enact fraud prevention best practices. Thwarting fraud is critical for many reasons. It’s a primary reason for chargebacks, which affect cash flow. Have plans in place to mitigate this risk.
More Robust Security and Fraud Prevention Are In Motion
Security and fraud concerns will always be a trend in credit card processing. Some new measures are improving the landscape, including:
- Tokenization: It’s a form of security that encrypts credit card information, so terminals receive a random set of numbers, which is the “token” rather than the card numbers.
- Biometric authentication: Card networks and financial institutions want to establish new authentication options to mitigate fraud risk. Biometric methods use fingerprints or facial recognition for authentication.
- Artificial intelligence: The financial industry is making good use of AI to identify and regulate fraud. These systems need less human monitoring and can detect fraud early.
Merchant Consulting Services from Pinpoint Payments
If you want transparency around fees and funding time, Merchant Cost Consulting is a smart business move. We specialize in these services and help navigate businesses through this complicated framework.
Learn more about Merchant Cost Consulting today.