A male business owner wearing a dark apron smiles as he holds an electronic payment machine for a customer credit card.

Role of Transparency in Merchant Processing Services


When it comes to credit card payment processing, retailers should understand the importance of transparency in merchant processing services. Learn more.

Retailers work every day to build customers’ trust – building relationships, providing products that meet their needs, and fulfilling their commitment to service.

But another component of trust is transparency in business practices. If customers start to feel a retailer is hiding information, their trust could be undermined – or even lost altogether.

Because transparency can influence a customer’s buying decisions, brands that do not communicate in a proactive manner may lose customers and significant revenue. According to Sprout Social, 86% of Americans consider transparency one of the most important traits in a business. Even more surprising, 73 percent of consumers consider transparency more important than price, with 40 percent of customers willing to switch from their preferred brand to one that offered more transparency.

Transparency of Credit Card Transaction and Processing Fees

While businesses often focus on building transparency into ethical practices, corporate sustainability and partnerships, many retailers overlook the importance of transparency in merchant processing fees.

Each time a customer uses a credit card to pay for a product or service, the business owner must pay a credit card transaction fee to the bank that issued the card.

Transaction fees include interchange fees, which are paid to the issuing bank, and assessment fees, paid to the payment network, such as Mastercard or Visa. Additionally, the merchant must pay the payment processor for the transaction. Other fees required for processing credit cards include flat fees and incidental fees charged by the merchant service provider. Motley Fool calculated that fees per transaction typically start between 1.15% + $0.05 and 2.50% + $0.10, with the fees significantly higher if the customer uses American Express.

Last year, Fortune reported that Visa, Mastercard and Discover raised their fees to merchants, increasing customer concern about the impact of those fees. Customers know that merchants must pay them, and they are often concerned about how the fees impact the overall price of products and services. Because retailers cannot directly charge customers for using a credit card, businesses typically increase prices overall. All customers, even cash customers, are impacted by increased processing fees.

Minimizing Transaction Fees

The most effective ways to improve transparency and reduce customer concern about fees include proactively managing and lowering fees whenever possible.

Consider the following six ways your business can minimize the impact of transaction fees on your bottom line, and on your customers.

1. Research the best credit card processing company for your business.

If you process more than $20,000 in credit card payments a year, look for a processor that does not charge an IRS filing fee. Some processors now charge an additional fee to companies for which they are required by law to supply a 1099-K.

2. Negotiate fees with your processing company.

Consider the posted processing fees as similar to a sticker price on a car, and negotiate fees when signing the contract. Some processing companies will waive the cancellation fee in the contract at the merchant’s request.

3. Understand and eliminate flat fees when possible.

Two models are typically available for paying processing fees that are outside the fees charged by the issuing bank: interchange plus and flat fees. With the interchange plus model, merchants pay the lowest fees available at the time and the fees vary by month, depending on the transactions. Merchants on a flat-fee plan pay the same amount regardless of purchases, which often totals more than the interchange fees.

4. Set a minimum purchase amount for credit card purchases.

With many customers using credit cards for small purchases, companies with flat fees lose a significant percentage of revenue from these sales. Many merchants require a minimum purchase to pay with a credit card to improve the ratio of sales income to fees.

5. Train employees to swipe instead of manually entering a card number.

Processing companies charge a higher percentage fee when the card is keyed in to the terminal. For example, Square charges 2.6% plus $0.10 for cards that are swiped, tapped or inserted compared with 3.5% plus $0.15 when a number is keyed in. While a seemingly small difference, the percentage adds up quickly over time.

6. Purchase a credit card terminal.

Leasing a terminal typically costs more in monthly payments and fees than the total cost of purchasing the terminal. Many merchants hesitate because of the responsibility of maintaining an owned processor. However, even with these additional costs, purchasing is almost always a better investment.

Communicating Fees and Providing Transparency

After taking measures to reduce fees, the next step in improving transparency is communicating with customers. When customers understand the fees and there are open lines of communication, they are more likely to have trust in the merchant.

  • Post fees in your store. Detail all the fees you pay on transactions and post the information in the store. Consider using official documentation from the processing company to further build trust from your customers.
  • Proactively explain the minimum credit card fee to customers. Merchants often hang a sign on the counter stating the minimum without explanation. Consider adding details explaining that this measure keeps you from increasing prices overall for both cash and credit customers. Hold training sessions with employees to help them effectively answer customer questions and provide an FAQ sheet with additional information to help with follow-up questions.

Credit card fees are a cost of doing business. However, by proactively minimizing the fees, you can increase your overall profit margins and revenue. By communicating with customers and sharing your efforts to keep prices as low as possible, you create transparency that helps you grow your business and build a loyal customer base.

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