Friday, April 10, 2015

Combat High Credit Card Fees

Recently I discussed how bad debt is a massive cash drain and why you should avoid granting credit whenever possible.  And I shared a way to do this while upholding the professionalism of your business.  Today I'd like to explore another expensive cost and a way to use it to your advantage.

Does your business accept credit cards?   Increasingly, consumers are paying with debit cards.  Do you accept these?  Between monthly fees and per item clearing charges merchant credit card fees eat up a significant chunk of your profit.  Do you find yourself grumbling when a customer hands you a card to pay for a $2 item? 

How Do You Combat this Charge?

Many companies set a minimum amount or charge customers a fee to accept a credit card.  Does your business do this or do you eat the cost and silently fume?  The first two options piss off the customer and the last one pisses you off.  So what do you do?

Did you know that your merchant card agreement prohibits assessing a surcharge?  You'll find it in your terms of service.  You risk being canceled and/or fined if they prove that you charge a higher price for customary goods and services.  Obviously they see a surcharge as devaluing their method of payment.  They don't often exercise this remedy.  But you can get around the restriction by using the following method.

Post a notice at the cash register and on your eCommerce page: "All charges include an automatic 3% discount for cash.  Other forms of payment will be charged accordingly." 

Instead of charging a premium for accepting a card, announce that your prices include an automatic cash discount.  This way you aren't technically charging more for accepting a card; you're eliminating an existing discount.  Consumers are much more receptive to losing a discount than being charged a premium.  A premium feels punitive.

This type of reframing is a strategy my consulting firm specializes in.  I write about a technique we called the Grandfather Discount on how to raise prices in a previous post that became an extremely popular post.

Turn an Expense into a Profit Center

Increase your discount to 5% for a charge that costs you 3% to turn this expense into a profit center.

Try it and comment to let me know how it works for you.  I appreciate the feedback.  Also, do you have a thorny problem?  I love helping.  Give me a crack at it.  I'll post it and credit you for the idea.

Next time I'll discuss why it's so important for companies to focus on cutting costs.  Increasing revenue is great but cutting costs do much, much more for you.  Until then,

profitable business All!

3 comments:

  1. Good day! This is my first visit to your blog!
    We are a group of volunteers and starting a new project in a
    community in the same niche. Your blog provided us valuable information to work on. You have done a
    wonderful job!

    Here is my page quest bars

    ReplyDelete
  2. This blog was... how do I say it? Relevant!! Finally I have found something which helped
    me. Thanks a lot!

    Here is my webpage: quest bars

    ReplyDelete
  3. Thank you for sharing your info. I really appreciate your efforts and I will be waiting for your next post thank you once again.

    Also visit my homepage: quest bars

    ReplyDelete

Google-Translate-Chinese (Simplified) Google-Translate-English to French Google-Translate-English to German Google-Translate-English to Italian Google-Translate-English to Japanese Google-Translate-English to Korean Google-Translate-English to Russian Google-Translate-English to Spanish

Ratings and Recommendations by outbrain

You might also like:

Related Posts with Thumbnails

-----------------------------------------------------

Search This Blog