Credit Card Fees: How They Affect Businesses and Their Customers

Credit Card FeesMost people don’t really care how credit card fees affect the businesses they shop at as long as the fees are not passed back to the customers. Well, customers may be in for an eye opener. Merchants who accept credit cards have to pay fees to credit card companies just to have the ability to electronically verify and collect the money for each sale. Credit card swipe fees are usually as little as 2 to 4% of any given purchase. However, that can sting a small business that already has a tight profit margin … or even worse, a terrible economy. Even on a good day when the business actually gets a customer willing to pay the regular sticker price, the merchant will only receive 96% of that price if the customer whips out a credit card (or bank card and uses it as credit). Many small businesses have started charging very nominal fees to customers who use plastic to offset some of the credit card fees. Other companies offer discounts to customers who use the good old greenback instead of plastic. Then we have those companies that don’t charge an extra fee to credit card customers, but have increased prices across the board recently … even in this bad economy. Humm.

Don’t Raise Prices to Cover Credit Card Fees

Adding an extra fee is just bad news no matter how you slice it. However, raising prices can be acceptable in some situations. What many small business owners fail to realize is that raising their prices just to cover card fees will have 2 very bad consequences.

  • Push customers away
  • Increase the actual credit card fees they are trying to offset

The fees are set by percentages regardless of the amount of the sale. So raising the price of a widget from $27 up to $28.30 will not really save the merchant anything. The credit card fees for the $27 widget were $1.08 (4%), and the fees for the $28.30 widget will be $1.13 (still 4%). All the merchant did was make his customers notice an unnecessary price hike.

Credit Card Fees are Tax Deductible

Merchants, don’t forget. Credit card fees are a business expense that can be written off at the end of the year. So do it! Claim that expense at the end of the year, and leave your prices alone. You will end up retaining customers while not taking as big a hit on the fees as you expected to. If you can’t sustain your business on 96% of a sale now, that isn’t the customers’ fault. Don’t make them choose to buy elsewhere because you can’t wait and claim the other 4% at the end of the year.

Credit cards and bank cards make life extremely easy for merchants and their customers. Merchants shouldn’t be afraid of the nominal credit card fees that come along with them. Q Web Designs accepts all major credit cards (including American Express), and we have never passed our credit card fees on to our customers.

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Visit Wikipedia to learn more about merchant accounts and credit card fees.

 

qwebdesigns posted at 2012-7-15 Category: Web Site Design