If your business accepts credit or debit cards, have you looked at your merchant rate and fee structure since the pandemic started and been surprised at how much it’s gone up?
If the answer is “yes,” the good news is you can take steps to contain card acceptance costs and reduce their impact on your profit margins. But first you have to understand what’s going on.
The rise in “card-not-present” transactions
In response to the pandemic and changing customer behaviors, many businesses have pivoted to sales strategies such as curbside delivery, online order-and-pickup and other e-commerce models where purchases are made through card-not-present channels. This represents a shift from traditional point-of-sale transactions where the card and cardholder are present.
Unfortunately, transactions where a buyer provides a card number online or over the phone carry greater fraud risk, and the card brands and many card processors are making businesses that accept cards pay more in fees to offset the added risk.
The industry’s reaction: More fees
For instance, with the rise in card-not-present transactions, Visa® has created separate interchange fee structures for transactions in which the business collects the street number and ZIP code of the customer, and for those where the customer does not use an Address Verification Service (AVS) to do this. Companies that don’t use AVS can expect to pay 30 to 50 basis points more per transaction.
Many merchant providers have also been adding their own risk-based fees. They run all or a portion of sales through a risk engine, which generates a score that determines the additional fee.
What’s more, some merchant providers have started charging processor acquiring fees; some are charging a special fee for merchants that insist on paying their discount monthly rather than daily; and others levy a surcharge on merchants whose devices can’t read EMV chip cards.
Cost containment strategies
Fortunately, the Hancock Whitney Merchant Services team can help identify and apply a number of strategies to reduce card acceptance costs.
For instance, we can make sure you know to ask for – and how to use – an Address Verification Service; help you take advantage of any special rates available to specific industries; and analyze your merchant services statements to identify risk-based and other “junk” fees.
Know the surcharging rules
Some businesses are assessing customer surcharges on card transactions as a way to defray the rising cost of card acceptance. If you go that route, we can help make sure you do it without violating the rules. Generally, you shouldn’t assess surcharges:
- On debit card transactions
- In states where it is prohibited by law
- At a rate higher than 4%
- Unless you first register with the card brand and wait a minimum of 30 days to receive approval
- Without disclosing it to the customer as a separate line item on their receipt
All it would take is for one cardholder to report any of these violations to their bank and your business could be fined up to $10,000 and have its card account terminated.
We’re here to help
Want to learn more? Ask your banker for a no-cost, no-obligation review of your current merchant card processing account statement. Our Hancock Whitney Merchant Services specialists can help create a plan that optimizes cost savings for your unique business situation. We can point out risk-based fees that are driving your card acceptance costs up, suggest ways to optimize your fee structure, and identify rules violations exposing your business to fines or penalties.
We’re ready to help you mitigate some of the pandemic-related costs of providing card acceptance services to your customers.
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