Understanding credit card processing fees: Don't let your business get overcharged

Did you know that the average small business in the U.S. pays between 2% to 3.5% in credit card processing fees for each transaction? That might not sound like much, but for a business processing $100,000 in credit card sales annually, it could mean up to $3,500 leaving your pocket. At Peak Advisers, we've helped numerous small businesses cut these costs significantly, sometimes saving thousands of dollars a year. Here's what you need to know to keep more of your hard-earned money.

The Hidden Costs in Credit Card Processing

Many small business owners focus on the advertised transaction rate, overlooking additional fees that can substantially increase overall costs. These can include:

• Monthly statement fees

• PCI compliance fees

• Chargeback fees

• Early termination fees

Understanding these fees is the first step to optimizing your payment processing costs.

The Importance of Integrated Systems

For years, we've emphasized the benefits of using a credit card processing service that integrates with your QuickBooks accounting software. Solutions like QuickBooks Payments offer seamless integration, streamlining your financial processes and reducing manual data entry errors.

Key Takeaways:

1. Rates are negotiable: Don't assume the rates you're quoted are set in stone.

2. Read your statements: Regular review of your merchant statements is crucial.

3. Ask questions: If something doesn't make sense, reach out to experts like us at Peak Advisers.

A Real-World Example

Recently, we helped a client who was unhappy with their credit card processing fees. Upon reviewing their statement, we discovered they were being charged an "instant settlement transaction fee" of 1.75%. This fee was unnecessary for their business model and significantly inflated their overall costs.

What We Did:

• Identified the unnecessary fee

• Reached out to the service provider

• Negotiated removal of the fee

• Secured a more reasonable rate for the client

You can imagine how the end result satisfied our client and made him much happier.

Action Steps for Your Business

1. Review Your Statements: Whether you use Intuit, Stripe, or any other provider, carefully examine your monthly statements.

2. Understand Each Charge: If you see fees you don't understand, investigate them.

3. Compare with Industry Standards: Research average rates for businesses similar to yours.

4. Negotiate: Armed with information, don't hesitate to negotiate better rates.

5. Seek Expert Help: If you're unsure about any aspect of your credit card processing, consult with financial advisors who specialize in this area.

The Bottom Line

Mistakes happen, even with reputable service providers. The only person who can catch these errors is you—or a trusted advisor working on your behalf. By taking the time to review and understand your credit card processing fees, you can potentially save your business significant amounts of money.

Remember, at Peak Advisors, we're always here to help you navigate these financial intricacies. Don't hesitate to reach out if you need assistance in reviewing or optimizing your credit card processing setup.

Michael Wallace is a partner at Peak Advisers, specializing in small business financial optimization. For more information or personalized advice, contact michael@peakadvisers.com.