We all know inflation is rising and here are the best payment options to offer today. When inflation starts to rise, people consider how much cash they have to spend right now. They make a point to consider their ability to pay and whether they should pay for a purchase all at once. They make a choice to use cash or credit and, where available, take advantage of paying the retailer or service provider in several payments over a period of time.
Offering a comprehensive suite of payment options including credit, E-check, recurring monthly budget payments – and yes cash – is a best practice. The ability to offer a variety of payment programs to meet each and every one of your customers’ preferences is sometimes the difference between getting a customer or not – or worse – getting them, but then losing them because of the payment options available for them to choose from today.
Use of Consumer Credit Cards is Increasing
Yet, the industry tells us that the use of credit cards is rising as many turn to that option to be able to cover all of their expenses, even if it means carrying a balance on their account for a period of time.
If your business has not yet been set up to accept credit because of the cost of processing, now is a good time to consider the latest technology and programs that are available. It is more affordable than you think, and you may need to do it to retain some of your customers.
Reset Your Retail Prices to Meet Gross Margin Targets
Most retailers, restaurants, and service providers are raising prices in order to combat the increased supply costs. Now would be the ideal time to integrate whatever overhead you need and that includes processing costs if you have not done that in the past. It is common industry practice to evaluate ALL of your expenses and costs of selling a product and include them in the retail price.
For example: If your target Gross Margin is 50%, cost of goods is 45% and you have an average processing rate between 2.75% and 3.25% (depending on the card type a customer uses, and your processing volume) you can easily calculate the amount of mark up to include in your retail pricing.
In this scenario outlined above, a rough doubling would work.
COG $0.45
fee $0.0325
Costs $0.4825
SRP $1.00 = about 50% Gross Margin
Of course, you can round up or down to meet your preferred price strategy ending in .00, .50, .95, or .99 and cover your costs – no matter how they pay, in cash, over time, or via their preferred credit or debit card.
Service Fee Programs vs. Cash Discounts
Another option, though may not be seen as “customer-friendly” to those who are using credit cards more and more as inflation goes up, is to add a service fee.
This adds transparency with customers, showing them that there is a cost to using a credit card and that they are paying the fee related to their purchases.
This is normally something that is recommended for transactions with an average ticket and retail transaction amount between $5 and $15.
For example, a coffee shop or ice cream parlor may use this program. In this scenario, the business owner can integrate credit card payment options while passing through the costs for those who do use credit cards, while, at the same time offering a “discount” to cash payers.
Best Payment Processing Programs
Overall, whatever you choose, make sure that you are taking advantage of the most cost-efficient options available.
Clients always ask us:
- “What should I be offering now?”
- “What is best for my business?”
- “What is the newest POS System that is right for my business?”
At any given time economic conditions and financial changes in the marketplace make it prudent to review and consider all programs that are available for you to offer your customers. New technology, software, and apps allow business owners to implement the best payment processing features to suit all of their customers, while ALSO minimizing the overhead expenses related to operating a business.
Do a full review of the suite of options from digital processing, Text2Pay, credit card processing to budget/recurring payment terms, and electronic check, EFT/ACH, or service fee programs. These are available for use every day and can be offered as needed when you have them set up on your account.
Learn More About TransAct Merchant Services
TransAct clients have the freedom to pick and choose what is right for their business at any given time. The best part is you can also proactively promote what you believe is best for your business and your customers, as concerns of inflation arise.
Be able to meet their preferences and review your needs with us. Schedule a quick 20-min free consultation to learn more today.