What Does Credit Card Processing Really Cost?

We like to think that we make it easy for our clients to accept credit cards, but one of the things that I still see in the market place today are credit card transaction limits.

Whether it is a minimum purchase or an inflexibility to split the check at a restaurant – and I see both of these signs all the time in my travels – I am wondering if the owner of the business really knows the answer to the question I am asked every day:

“What does credit card processing really cost?”

We would not recommend that a client set a minimum charge amount, and in many states that is actually illegal, but we understand that the swipe or keyed fee is a base cost that should be considered in your margin calculation. Keep in mind, that “base cost” is really quite insignificant compared to the “opportunity cost” of a dissatisfied customer, a lost sale, or even worse, a lost customer.

For just a few cents, you can run a credit card charge, even under $5 or $10 and serve customers who don’t have cash in their wallet without you losing out in the end.

It is more and more common for people to not have money on hand, whether they don’t like the idea of carrying cash due to safety concerns or it is related to the increased use of direct deposited payroll services. Even with extended-hours banking, it is inconvenient to go to the bank and ATM fees can be exorbitant, making people think twice about withdrawing money just to have cash for small purchases.

As a side note, the other day I found myself without the money to pay for my lunch at a cash-only networking event. Later I found out that I paid $6 in fees to take $20 out of the machine (the ATM fee plus my bank fee!) I was pretty upset and I can assure you that will never happen again! If it wasn’t a networking group luncheon, I’d probably never return to the restaurant again.

At the end of the day, is it worth the cost of losing a customer versus paying an additional, nominal fee to run two or more credit cards for your guests? Would it be better to get the retail value of the coffee and serve the customer, rather than make them pay cash which they might not have…perhaps forcing them to choose another spot to stop every day or every time they visit your town? Or, if you’re lucky, they may just limit what they can buy because they do not have enough cash.

If you’d really like to know the answer to the question of real cost, we can perform a free assessment of your business to help you understand what the real expenses are and how much margin you need to allow for in each transaction. Our promise is that we will be honest with you and tell you what you’re paying so that you can understand the true costs of your transactions.

~ Mary Ann