How Small Family-Run Businesses Can Save Money on Payment Processing -

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Tired of bleeding cash every time a customer makes a payment?

Payment processing fees are slowly killing small family owned businesses. Every swipe, tap, and online transaction cuts into already thin profit margins. When you’re running a family business every penny matters…

And that’s a problem.

The problem is most family-owned businesses don’t pay attention to what they’re being charged for payment processing. They get setup with a system and just accept the fees that are handed to them. Over time, that can amount to losing thousands of dollars each year that could be returned to the business.

Luckily…

There are ways to save on electronic payment processing that actually work. The first step is understanding how different payment types stack up against one another. A comprehensive eCheck vs ACH vs Credit Cards Comparison dives deep into the various fees charged by payment processors for each payment method and highlights which payment method works best depending on your business model.

But there’s more you can do to lower costs. Let’s take a look!

What you’ll learn

Why Payment Processing Fees Take A Larger Chunk Out Of Family Businesses
Credit Card Processing Fees Are More Expensive Than You Think
Ways to Accept Payments That Won’t Break the Bank
How to start saving on processing fees today

Why Payment Processing Fees Take A Larger Chunk Out Of Family Businesses

By nature, family businesses aren’t set up like corporations with huge margins. Most family-owned businesses operate on tight budgets with little to no finance department crunching the numbers in the background.

The issue is…

Payment processing fees are normally percentage based. That means your business is going to be charged a fee for every transaction no matter how small you are. Large scale businesses making millions in sales can negotiate with payment processors for lower rates. The local family bakery or hardware store? Not so much.

In fact, NBC News reported that U.S merchants paid $172 billion dollars in processing fees in 2023. Small businesses end up shouldering the largest portion of those fees because they lack purchasing power to negotiate lower rates with payment processors.

And if that wasn’t bad enough…

Small businesses that process less than $1 million in sales each year are typically hit with higher effective rates too. We’re talking between 2.5% to 3.5% per transaction. Let’s say you run a corner store and make $100 in credit card sales. 2.5-3.5% would equal $2.50 to $3.50 before your business even sees that money.

Here’s another example

Say your family business processes $15,000 worth of credit card sales each month. At an average rate of 3%, you’re looking at paying $450 each month or $5,400 a year.

Just in fees.

Credit Card Processing Fees Are More Expensive Than You Think

Accepting credit card payments is the most expensive method of receiving payments.

A lot of business owners aren’t aware of how costly credit card processing really is. That’s because all the fees associated with credit cards are hidden under confusing bank statements and pricing models. When you break down the average credit card transaction you’ll notice that there are three fees that take a cut from the merchant (your business).

Take a look:

Interchange fees paid to the card issuer bank. This is the largest fee of the three and cannot be negotiated.
Assessment fees paid to the card brand/company (Visa, Mastercard).
Processor markup. This is the fee your payment processor charges you.

When you add all of these fees up you’ll end up paying anywhere between 1.5% to 3.5% out of every transaction. Did you know that premium credit cards charge even higher fees? The fees your customers benefit from through rewards end up being funded by your business.

There are also hidden fees to consider…

You also have to pay for PCI compliance, chargebacks, monthly statement fees and sometimes even equipment rentals. That’s an additional $500 to $2,000 each year.

Ways To Accept Payments That Won’t Break The Bank

So what can family businesses do to combat high payment processing fees?

Consider other payment types. Credit cards aren’t the only way to accept payments. In fact, there are payment methods that cost your business a fraction of the price. The two biggest alternatives to credit cards are ACH payments and eChecks.

Accept ACH Payments

Businesses can accept ACH payments which are bank to bank transfers that don’t utilize card networks like Visa or Mastercard. That means you avoid pesky interchange fees.

On average, businesses that accept ACH payments experience 40% lower transaction fees when compared to credit card transactions. ACH fees are normally between .20 and $1.50 per transaction. When compared to the traditional percentage model credit cards use you’re bound to save a lot of money by utilizing ACH payments.

You should look into ACH payments if:

You have recurring billing or subscriptions
B2B invoicing
Any large transactions where a percentage would eat away at profits

Accept eChecks

eChecks are almost identical to ACH payments. eChecks are digital versions of paper checks that get processed through the ACH network. Fees are similar to ACH payments and provide the same cost savings when compared to credit cards.

If your family business has repeat customers that you invoice regularly or collect payments from you should strongly consider eChecks. They’re an easy payment method to implement and your customers will love how affordable they are.

Accept Debit Cards

Debit cards are another alternative your business should consider. Regulations keep debit interchange fees at around $0.21 plus 0.05% per transaction. That’s significantly cheaper than accepting credit cards. One of the easiest ways to lower your fees is to encourage customers to pay with debit over credit.

How To Lower Your Processing Fees Starting Today

Nobody is saying you have to completely revamp how your family business accepts payments. Even the smallest changes can add up and help you save money.

Audit your current processing statement. Go through your current statement with a fine tooth comb. Look for any hidden fees, extra charges, or markups that seem too high.

Negotiate with your current payment processor. The processor’s markup is negotiable. If your business has been with them for a long time and has no history of fraud you may be able to negotiate a lower rate.

Offer alternative payment methods. Don’t make your customers pay how you want. Allow them to pay however they want! Give your customers the option to pay via ACH, eCheck or debit card. A lot of consumers are more than happy to use these payment methods when given the choice because it’s cheaper for them as well.

Implement dual pricing. Some businesses offer their customers a small discount for non-card payments. This can drastically reduce the amount you pay on processing fees.

Switch to interchange plus pricing. If your business is on a flat rate or tiered pricing model you’re most likely paying too much. Switching to interchange plus will always save you money. Interchange plus pricing separates the actual interchange fee from your payment processor’s markup. Meaning you’ll be able to see exactly what your business is paying.

Wrapping Things Up

Payment processing fees are a huge killer for small family owned businesses. They make it difficult for your business to grow and most family owners don’t realize how much they’re actually losing.

However…

If you educate yourself on how payment processing works, provide your business with cheaper alternatives to credit cards, and take steps to reduce costs where you can…

You can prevent your hard earned money from going down the drain.

Let’s review once again:

Audit your current processing statement
Negotiate with your current processor
Offer alternative payment types
Implement dual pricing
Switch to interchange plus pricing

The family businesses that take their payment processing seriously are the ones that prosper. Don’t let those processing fees take what’s yours!