Accepting credit cards ensures that your customers never have to carry cash and you don’t have to worry about storing large sums of money on the premises. Still, credit card processing fees can add up quickly, accounting for a decent-sized percentage of your revenue. The National Retail Federation estimates that swipe fees (or credit card interchange fees) cost merchants and their customers nearly $50 billion a year.
Here’s a look at alternatives that may help you reduce your credit card fees without requiring your customers to pay in cash:
Set a minimum order value. Many small businesses post signs requiring customers to spend a minimum of $5 or $10 in order to pay with credit cards. Setting a minimum order value helps merchants avoid lots of little transactions that are eaten up by swipe fees. However, it’s important to familiarize yourself with your state’s credit card laws and your merchant agreements to make sure that minimum order values are allowed. According to Consumerist, Visa and MasterCard forbid merchants from requiring a minimum purchase. American Express does not forbid this practice but it requires that merchants treat Amex card-holders the same way they would Visa or MasterCard holders assuming they accept the other cards.
Accept Bitcoin. Bitcoin is a digital currency that some users are buying as an investment vehicle or looking to spend. The transaction fees for processing Bitcoin can be lower than credit card processing and you can usually process Bitcoin transactions within 24 hours (compared to 48 hours or more for credit cards). Traditional point-of-sale systems can’t process Bitcoin, but a mobile point of sale platform, such as an iPad- or smartphone-based app, can offer you greater flexibility in adding new types of currency.
Take Dwolla. Smartphone-toting customers may already have the Dwolla app downloaded to their phone. The non-contract credit-card alternative processes payment for free if the transaction is under $10, or for 25 cents if the transaction is $10 or more. Dwolla also integrates into your mobile point of sale solution so your cashiers can send payment requests and watch transactions in real time.
Use PayPal. Across the United States, 1.9 million physical stores and other sellers accept PayPal, eBay’s payment services platform. PayPal recently introduced a “Payment Code” feature that lets shoppers pay for purchases using their smartphones by entering a four-digit code or scanning a QR code.
Sell Gift Cards. While some gift card programs charge swipe or use fees, some newer programs, like the one offered by Instore, do not. With a gift card sale, not only do you get to spread potential credit card fees across a larger transaction price, but the ensuing transactions on the card do not carry fees.
As consumers become more accustomed to paying with cash alternatives like Bitcoin, Dwolla, PayPal, or gift cards, companies that embrace these options will be well-positioned to win their business.