Zero fees or no-cost credit card processing sounds attractive. And, why won’t it? You have invested so much effort, time, and money into setting up your business that you will gladly go for zero fees credit card processing to avoid extra expenses. But is it really zero cost to you?
Is it possible to have ‘no cost’ or ‘zero charges’ at all? There are so many things to keep in mind before you choose zero fees processing.
In this article, we’ll discuss everything you need to know about this process. So, let’s get started!
Zero Fee Processing
Zero fees processing is a process in which credit card processing fees are passed to the customers. This is called surcharging credit cards. Though a business doesn’t get charged with any processing costs, the customers pay the fees.
No-fee credit card processing is available with several traditional processors; however, companies nowadays are offering ‘free’ or ‘no cost’ processing. In this process, the processor will handle surcharging on your behalf.
Is Free Credit Card Processing Really Possible?
Well, the answer to the question is, ‘yes’. Some merchants offer zero fees processing as a term to cover most of the cost. But, you still incur costs, like compliance fees, monthly fees, etc. Also, surcharges are applied to credit cards only. If a customer chooses to pay with a debit card, there will be costs of processing the transaction. To top it all, there may be equipment charges too.
Let’s have a closer look at Zero fees processing.
To get a clear view of zero fees or no-cost processing, you first need to know what fees merchants pay.
What Is A Merchant and What Fees Does He Pay?
Merchant is a term used by processors to refer to their customers. Merchant service providers provide businesses with tools to accept credit cards, debit cards, or other e-payment forms for transactions.
Generally, a merchant pays for the services a payment processing company offers; this payment is called fees. As already stated, merchants meet setup fees, interchange fees, monthly fees, PCI DSS compliance fees, and more! But where is zero fees? Well, it is all up to the payment processor how much to charge for the setup. Still, you have to pay the interchange fee. But why?
Since you let your customers pay using credit cards, you have to pay some fees to the credit card network, including the interchange fee. This fee is established by MasterCard, VISA, Amex, or any other card brand, which varies based on the industry. Now that you have to pay this fee, zero-fee processing is not possible!
Thus, while the payment processor says you pay zero fees, there are several charges you can expect. You pass the charges to customers or clients; they pay extra for your products and services. Technically, you have zero fees or no cost processing, but you surcharge your clients.
What Is Surcharging? How Is It Different From Zero Payment Processing?
A surcharge is a fee or charges added but not included in the price of goods and services. You can choose to surcharge your customers with any payment processor, who will list it as a separate line item on receipts. The processors also make sure that only credit card transactions are surcharged, that too at appropriate amounts.
As a business owner, you need to inform your intent to surcharge and display clear signage that you surcharge. On the other hand, a zero-fee processor handles everything except displaying the signage. Zero processors also inform the card brands on your behalf.
Does Zero Fees Or Free Credit Card Processing Suit Your Business?
Getting zero fee processing merchant services is something every business owner would find appealing. However, there are some setbacks to zero-fee or surcharge. As your customers cover these costs, you need to ask yourself a few questions, like-
How Will This Influence Your Customers?
First and foremost, you need to consider if free credit card processing will affect your business in the long run. Many customers may not want to pay 2-3% more for the products and services you offer. It may impact customers’ satisfaction, as well as your sales.
Are Your Competitors Surcharging?
If your competitors also surcharge, then you are on the safe side. If they don’t, it will be challenging for you to attract and retain customers. They can find your alternative unless or until you sell something unique.
Are Your Target Customers Against Surcharging?
Many customers avoid using cards if surcharges are applied. They may choose to pay with cash or debit card, which has lower-cost transactions. Or, your customers may simply choose not to buy from you.
What If Zero Fees Processing Doesn’t Fit You?
If zero-fee or no-cost processing fits your business, you are good to go. However, if your target customers pay using debit cards or avoid surcharges, lowering the payment processing is the way to go. For this, you need to look for a reliable and legit payment processor based on your business type and size.
Make sure that credit card payment processing equipment is operational to minimize the risk of any potential frauds. Furthermore, you can think about imposing minimum purchase limits for credit card users rather than passing the fees to them. It will also save you from paying on low-value transactions. With all these steps, you can keep the processing fee low and retain the customers.
Conclusion
Zero fees processing seems like a wonderful solution when you are looking for ways to skip extra spending on your business. But, as you look closer, there is a different story. We advise you to do thorough research about your competitors. If they also use the same option, you can go with it. However, if zero fees or surcharging is something the clients won’t accept, it’s time to look for alternatives.
Hopefully, this article will help you get clear on how the zero-fee processing model works!
About Author
Ashok Sharma working with GETTRX– a premier financial technology platform provider. GETTRX provides businesses high-quality financial solutions including credit card, debit card, online check processing systems, and next-generation payment engines.