How to Accept Credit Cards without Incurring Fees

It’s the peak of home renovation season, and your calendar is packed with back-to-back service appointments. Between the rush from one house to another and preparing invoices after completing each project, there's hardly any time left to consider the rising credit card payment fees associated with these transactions. Although this situation indicates that your business is flourishing, these fees have the potential to accumulate rapidly, ultimately becoming a significant drain on your revenue.

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Enabling your clients to pay with credit cards offers convenience for both parties, but there are several ways to approach handling the associated costs. In this article, we'll guide you through various methods for managing credit card processing fees, including choosing the optimal payment service provider for your business.

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Understanding Credit Card Processing Fees

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Credit card payments have transformed convenience, eliminating the hassle of chasing down checks and allowing payments to be received within 24 hours. This shift has been incredibly impactful for small businesses, where timely payments can spell the difference between red and black ink on your ledger.

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The widespread use of credit cards, coupled with their robust cybersecurity measures, has established them as the preferred mode of payment. According to a survey conducted by Intuit, 83% of small businesses that accept credit cards reported increased sales. However, this advantage is accompanied by processing fees, which typically range from 1.5% to 3.5% of the transaction amount, depending on the type of card.

This processing fee, also referred to as the merchant discount rate (MDR), is divided among companies responsible for maintaining the systems enabling credit card payments. It typically encompasses three types of fees:

1. The interchange fee is directed to the bank issuing the customer’s credit card.
2. The assessment fee is directed to credit card networks like Visa and Mastercard to cover operating expenses.
3. The payment processor fee is directed to the platform or system facilitating the payment, such as a service integrated with your business app or website.

These expenses can significantly impact small businesses' profit margins and require a sustainable approach to manage and mitigate them effectively.

Three Strategies for Offsetting Credit Card Processing Fees

Here are some proven strategies you can implement to help your business tackle the impact of credit card processing fees:

1. Incorporate the fee into the invoice: Similar to how you factor in materials and labor costs in your job pricing, you could include a separate line item for card processing fees on your invoices. This enhances your pricing transparency and ensures customers understand what they're paying for. Transparent pricing can foster customer loyalty, as clients appreciate knowing they won't be surprised by additional charges on their next invoice. Moreover, it helps clients recognize the value of the convenience associated with credit card payments.

2. Offer upfront payment options for the fee: Alternatively, you can provide customers with the choice to cover the expenses themselves. By offering flexibility in payment options, you adopt a customer-centric approach that grants customers greater autonomy. For instance, a client might opt to pay the fees upfront for a specific project if they have the funds available. However, for an upcoming project, they might prefer to include the costs on the invoice to allow for a 30-day grace period for payment.

3. Minimum purchase requirement: Implement a minimum purchase amount for credit card transactions. By setting a threshold, you can encourage customers to combine smaller purchases into larger ones, thus reducing the frequency of credit card transactions and minimizing processing fees per transaction. This approach incentivizes customers to maximize their purchases, making each transaction more cost-effective for your business. Additionally, it helps streamline your payment processing operations and reduces administrative overhead associated with handling numerous small transactions.

Selecting the Ideal Payment Processing Provider

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The payment processing vendor you select for credit card transactions can impact the efficiency of your transaction processing and the integration of their service with your bookkeeping system. Payment service providers can align with your small business's bookkeeping requirements, easing the need to spend extensive time reconciling accounts or manually generating precise invoices.

Here are three examples of payment service providers:

1. Stripe: This platform caters to both online and in-person transactions, offering a highly adaptable payment system that seamlessly integrates with a business's app or website. Fees are typically straightforward, with online transactions incurring a charge of 2.9% plus $0.30 per successful card charge. Stripe also provides solutions for billing and recurring payments.

2. Veem: This tool offers seamless and fast payment transactions, boasting lower transaction fees compared to traditional banks (2.9% for domestic payers). Clients also don’t have to set up an account to make payments. Moreover, Veem integrates with various accounting software, streamlining the reconciliation process, while its robust security measures ensure data protection during transactions.

3. Melio: This service simplifies accounts payable and receivable for small businesses by enabling credit card payments on any invoice, even if the vendor doesn't typically accept credit cards. Melio imposes no subscription fees, and vendors are not required to sign up for the service to receive payments. Additionally, Melio does not charge for ACH transfers and offers a competitive credit card processing fee of 2.9%.

Streamline Your Invoicing and Payment Workflow with Decimal

Empowering clients with the option to cover processing fees relieves your business from bearing these expenses. Decimal's invoicing services offer customizable templates that automatically include processing fees and other tailored options. Additionally, our invoicing support efficiently handles both recurring and one-time payments, ensuring seamless financial management for your business.

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Decimal provides technology consultation services to assess your business requirements, covering areas such as bookkeeping and payment solutions. Our partnerships with meticulously selected technology providers guarantee access to the most suitable payment processing systems with competitive fees, seamlessly integrating them into your current accounting platforms.

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Schedule a consultation with us to get started.

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