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Payment Processing Small Business Tips

Tips for Reducing Credit Card Processing Fees

reduce credit card fees

Credit cards are a favorite payment method for many consumers, so to do business with these consumers, merchants need a means of processing credit cards. Credit card processing refers to the many steps that occur behind the scenes that enable a customer’s issuing bank to pay merchants.

Because this process requires a few different parties to do their part, merchants must pay fees that reimburse these parties for their services. No one likes fees eating into their profits, but the good news is that there there are ways you can make them lower.

What Fees Are Associated With Credit Card Processing?

Credit card processing can be a great benefit to your business since it allows customers the convenience of paying with a card. However, processing credit cards comes with some fees that are deducted from the transaction. These fees include:

  • Interchange fees: Issuing banks, which are the banks that issue credit cards to consumers, take an interchange fee. The credit card networks set these fees and typically update them biannually. Interchange fees consist of a flat rate paired with a percentage of the sale and vary according to the type of sale. Certain transactions require higher interchange fees than others.
  • Assessment fees: Card networks, with the exception of American Express, take an assessment fee from merchants when their branded cards are used in transactions. These fees are usually based on a percentage of the total transaction volume for the month. You cannot alter these fees, but they are minor compared to interchange fees, consisting of a fraction of a percent of a sale.
  • Discount rate: Typically, merchants just see one fee for credit card processing, which the credit card processor takes. This fee goes to cover interchange fees and assessment fees, and whatever is left goes to the processor. The amount the processor takes is known as a discount rate, sometimes also called a markup. Different processors charge different fees, and you may be able to negotiate discounts.

In addition to these fees, you can pay additional fees for chargebacks, which occur when a customer disputes a charge from your business. You can typically avoid these fees by being careful to avoid errors and fraud.

How to Reduce Credit Card Processing Fees

credit card transaction fees

Now that you know what credit card transaction fees you’re required to pay, let’s talk about how you can reduce those fees. You can’t avoid credit card transaction fees, but you can find ways to minimize them. We’re especially focusing on interchange fees and discount rates, which can be the fees that end up costing you the most. Let’s look at five ways you can keep fees low so you can maximize your profits from credit card sales:

1. Read Cards Instead of Keying Them In

Some merchants who don’t have a credit card reader but have partnered with a credit card processing company take credit cards as payment by manually keying in the information on the card. This type of transaction is sometimes called a card-not-present transaction. Consumers use this method when they shop online and have to enter their credit card information for the sale to go through.

The issue with manually entering credit cards is that this method incurs higher interchange fees than swiping, inserting or tapping cards does. For example, the interchange rates for Visa and Mastercard are higher when the cards are keyed in rather than swiped. Fees for manually entering cards tend to be higher because this method is generally less secure. Of course, you need a card reader to avoid keying in cards.

2. Get an EMV Card Reader

We just looked at the importance of using a card reader to process credit card transactions, but not all readers are created equal. Older credit card readers weren’t designed to accept EMV chip cards. These new chip cards are far more secure than magnetic stripe cards since they generate a unique code for every transaction. If your card reader isn’t EMV enabled, then you will most likely pay higher interchange fees.

Your credit card processor may call these higher fees EMV non-compliance fees or EMV non-enabled fees. In addition to these higher fees, which you may have to pay whenever you swipe a chip card instead of using an EMV reader, you can pay even more if you process a fraudulent payment. As of October 2015, the liability for this fraud scenario was shifted to merchants who haven’t adopted the more secure EMV process.

3. Settle Transactions Promptly

Merchants send off their transactions in batches, typically at the end of a business day, to be settled. Typically, you can get the best interchange rate by settling charges within 24 hours. Otherwise, you may be subject to an interchange downgrade. The exceptions to the typical one-day rule are travel and entertainment businesses, which typically have eight days.

If you’re a typical retail business, don’t put off your clearing call. If you have the option to set a certain capture delay, opt for either immediate or one day. This way, you can capitalize on the best interchange rates available for transactions from that day.

4. Compare Quotes from Processors

While you can find ways to qualify for lower interchange fees, these fees are still set. In other words, you can’t negotiate for lower fees. However, discount rates from credit card processors are more negotiable. Some credit card processors, including NRS Pay, offer a custom rate. It isn’t all about negotiating with one company, though.

The most important thing is to directly compare quotes from various processors so you can make the best decision for your business. Make sure you understand what’s included in the quote you receive. It should include the interchange and assessment fees along with the processor’s discount rate. Some credit card processors will complicate things to obscure hidden fees and padded pricing, so look for simplistic, transparent pricing models. This way, you won’t be blindsided by exorbitant fees.

5. Get Payment Processing From Your POS Provider

one credit card provider

There are many benefits to having one provider for both your POS system and your payment processing. By partnering with one company, you can enjoy a more integrated, streamlined process. You can also enjoy some possible financial savings. In some cases, you can qualify for lower processing fees. As Fit Small Business notes, working with the same provider for your POS and payment processing can simplify your payments and eliminate fees you may otherwise be expected to pay, such as a fraud prevention fee or an integration fee.

You may also receive free equipment. For example, National Retail Solutions (NRS) provides a free EMV card reader to all merchants who commit to using our credit card processing for three years. This EMV reader can help you process payments more securely and avoid penalties for being non-compliant with EMV technology. Our card reader is also capable of taking Apple and Android payments. While credit cards remain popular, these mobile wallet apps are quickly gaining traction with consumers.

Get Discounts Through NRS Pay

For simplified, fair credit card processing rates your small business can afford, partner with NRS Pay. We offer a transparent fee model and do not pad fees. Instead, we offer two simple pricing models for small business payment processing fees. Our flat rate is $0.10 plus 2.49% of the sale. If your business processes more than $10,000 in credit card transactions monthly, then you can also qualify for a custom rate.

NRS is committed to helping small businesses succeed. We can even help you implement a cash discount program to offset credit card processing fees. Request a free quote today to get started.

Categories
Payment Processing

The Story of Credit Card Processing

the story of credit card processing

The idea of credit has been around for centuries, but not the kind of credit we’re used to today. In the past, credit was only good for people in your community who knew you and trusted you to pay later. They may have kept a running tab that you would pay off periodically. Credit was essentially nothing more than an I-O-U.

Today, credit cards allow people to quickly pay for goods and services all over the globe. You no longer need to have personal credibility with the merchant. You can simply swipe, insert or tap your card and settle up with your issuing bank later. If you enjoy this modern technology, you may be wondering how it all started. Let’s take a look at the origins of credit card processing as well as the future of credit cards.

The Earliest Types of Credit Cards

When were credit cards invented? The answer depends on what exactly you mean by credit card. The idea of a credit card that would allow you to have credit anywhere, as opposed to at a single store, didn’t emerge until the mid-20th century.

The Diner’s Club, Inc. introduced the very first credit card people could use at a variety of establishments in 1950. The founder, Frank McNamara, hoped that, eventually, restaurants throughout New York would accept the card — and they did. Though this card was good at various participating locations, it still wasn’t a universal card. The American Express Company followed with a similar type of card in 1958.

With these early credit cards, the participating merchants would pay a percentage to the credit card company as a service charge. The fee for the Diner’s Club was 7%, which McNamara justified by assuring restaurant owners that cardholders would spend more. The cardholders would pay an annual fee to use the card along with paying off their monthly bill. The system proved to be pretty useful, and it led to an even more useful type of credit card — the bank credit card.

The First Bank Credit Cards

The bank credit card system is what we use today. The first bank-issued card was known as the Charge-It card. It was invented before the Diner’s Club card, but it had minimal impact since it was only good at several establishments near the Brooklyn bank. The bank card system really started to take off in the late ’50s.

first bank card

This system came with some real advantages over the earlier credit card systems. This system did away with annual fees and lowered the service charge for merchants because banks were now able to charge interest on their cardholders’ outstanding balance. Another advantage of this system is that it wasn’t tied to a specific location.

The first bank credit card that people could use almost anywhere, not just at certain establishments, was the BankAmericard, which first came out in California in 1958. In 1966, it started to become valid in other states.

Processing Credit Cards Manually

Today, credit cards work electronically, so you may be wondering how credit cards worked before the internet. Early credit cards were just paper or plastic cards that functioned as a sign or form of ID that the cardholder had credit with a certain organization or bank.

The first credit card processor was a simple, manual machine, called an imprinter. The cashier would fill out a form, place it in the imprinter along with the card and use the mechanism to stamp the information from the card onto the form. Merchants would mail these forms to the issuing banks to receive payment.

This imprinting method didn’t include any real-time authorization from banks, which led to some problems, including fraud and overcharging. Cashiers used phone authorization as a solution in some situations, especially for large transactions. The cashier would call a number listed on the credit card to see whether the cardholder was authorized to charge a certain amount.

Electronic Credit Card Processing

These early processing methods were far from ideal. Thankfully, it wouldn’t be long before electronic processing came onto the scene. In the early ’60s, an engineer named Forrest Parry came up with the magnetic stripe that is now a fixture of credit cards. An important event in the history of credit card processing occurred in 1969, when these magnetic stripes became the standard means for credit cards to store the cardholder’s account information. This technology, along with electronic payment terminals, enabled electronic credit card processing.

Credit card processing technology has come a long way in the past five decades. Modern POS systems with electronic credit card processors can process credit cards more efficiently and more securely than ever before. Today, a cardholder can swipe, dip or tap their card to initiate a speedy process of authorization and authentication. If a transaction is approved, the customer goes on their way, and the payment information goes to the POS to be sent out for clearing and settlement.

EMV Credit Cards

One of the most recent developments in the timeline of credit cards is EMV chip technology. EMV stands for the three parties who collaborated to make this new technology the standard for credit cards — Europay, MasterCard and Visa. EMV chip cards were developed to make credit card payments more secure.

Rather than a magnetic stripe that stores static information about the cardholder and their account, which can be duplicated or stolen, EMV cards contain a computer chip that generates a new code for every transaction. To read this code, merchants need an EMV card reader.

If they don’t have one of these modern card readers, they could be held liable for credit card fraud that occurs at their stores. EMV chip transactions are slightly slower than transactions with older cards, but it still only takes about 15 seconds, and the cardholder doesn’t have to worry about their information being stolen.

Emerging Payment Methods

Today, the average American has three credit cards, which they can use to pay anywhere credit cards are accepted. That includes online stores, retail shops, restaurants, gas stations and more. Merchants who don’t currently have credit card processing capabilities are very likely to lose business since some people don’t even carry cash anymore. In addition to credit card processing, merchants should also be aware of other emerging payment technologies.

pay with smartphone

In particular, the new payment method that’s rapidly gaining traction is mobile wallet pay. Mobile wallet apps are linked to a person’s bank account, just like a card is, so they can use their phone to pay. This new payment method is becoming increasingly common, which means merchants need to adopt credit card readers that are also capable of taking mobile payments to please these customers. A whopping 29% of consumers already say they would prefer to pay with their smartphone all the time.

Accept New Payment Methods for Your Small Business With NRS Pay

The future of payment processing is likely to include both credit cards and mobile payments, so your business needs to be prepared to accept all of these payment types. You can accept credit cards, including EMV chip cards, along with Apple Pay and Android Pay when you partner with NRS Pay for payment processing. We make it easy and affordable for your small business to embrace these payment technologies so you can meet your customers’ needs and grow your business.

Categories
POS System

Why a Tablet is Better Used as a Toy than as a POS

tablet pos toy

You may have a touch-screen tablet at home you can use to read ebooks, check your email, play games and listen to music. Tablets have become popular devices since Apple released the original iPad in 2010. Today, around half of Americans own a tablet. You may have also seen some merchants using tablets as their POS system. While a tablet is a fun toy and a great piece of technology for personal use, when it comes to POS systems, it falls short.

You’re far better off using a traditional POS system that includes a dedicated POS terminal. Note that these systems are only “traditional” in comparison to tablet options. Modern terminal POS systems use cutting-edge technology that far surpasses traditional cash registers, and they often have a sleek appearance similar to a tablet. We’re going to look at the pros and cons of each option so you can make an informed decision for your business.

Tablet vs Traditional POS Systems

Let’s start by explaining the basic differences between a traditional POS system and a tablet used as a POS system. A traditional terminal POS system includes the hardware and software needed to facilitate the point of sale. At the very least, this will include a POS terminal, but all-in-one systems can include everything from a barcode scanner to a credit card reader, receipt printer and more.

There are two main types of terminal POS systems — on-site and cloud-based. Both kinds include terminals on-site, but the difference lies in how you access the software. On-site systems have the POS software installed on the local server, whereas cloud-based systems use the internet to access POS software stored remotely on the cloud. A cloud-based system has some significant advantages over an on-site terminal system.

A tablet POS system is somewhat similar to a cloud-based terminal system since it also accesses POS software through an internet connection. The main difference comes in with the POS hardware. Whereas a traditional POS system, whether cloud-based or not, includes a dedicated POS terminal and accompanying hardware, a tablet POS system combines a general-purpose touch-screen tablet with software that allows it to function as a POS.

tablet vs traditional pos system

This puts tablet POS systems in the category of online POS systems, meaning you need to find your own hardware, whether that’s a tablet, laptop or mobile device.

Pros and Cons of a Tablet POS System

Now that we’ve covered the basic differences between terminal POS systems and tablet systems, let’s talk about the pros and cons of each option, starting with tablets.

Why do some merchants choose to use tablets as part of an online POS system? Tablets do hold some appeal as an option for facilitating sales. Let’s take a look at the pros of using a tablet as your POS:

  • Sleek appearance: One reason some merchants are attracted to tablet POS systems is that they have a sleek look that suggests to customers that their business is up on the latest technology. This may be especially important if you want to appeal to younger consumers. Tablets do have a modern appearance, but so do many modern terminal POS systems.
  • User-friendliness: Another possible advantage of using a tablet as your POS is that many people are already familiar with the basic functions of some of the most popular tablets on the market. It’s helpful when your employees already know how to use the tablet, but they will still have to learn how to operate the app you use for facilitating sales.

pros and cons of tablet pos

  • Mobility: One of the biggest possible advantages of a tablet POS system is that it is easy to move. That won’t matter much to brick-and-mortar establishments, but if you take your business on the go (I.e. Farmer’s Markets), then having a mobile POS is an important advantage. Keep in mind, however, that you may have other pieces of hardware you also need to carry around, such as a card reader.
  • Low cost: Another reason some small business owners may be attracted to the tablet option is that it can be more affordable. If you already have a tablet, then you only need to pay for access to the POS software and any other elements you need, such as a card reader. If you don’t already have a tablet, keep in mind that tablets can be quite expensive, so this isn’t always the most affordable option.

Now, let’s talk about the cons of using a tablet as your POS:

  • Fragility: One problem with tablets is that they’re not made to last. For one, tablet screens shatter easily if they’re dropped. You can purchase protective cases to help prevent this, but these cases tend to take away from the lightweight, sleek feel of the tablet. Even if you don’t break your tablet, its usable lifespan is typically only three or four years at best.
  • Prone to theft: Another issue with tablets is that, because a tablet is a multi-purpose device, it’s far more tempting for thieves. Consider the difference in a POS tablet that is a permanent fixture on your checkout counter and a tablet sitting on your counter. It can be all too easy for a criminal to swipe the tablet when employees aren’t looking.
  • Lack of customer support: When you purchase a software application to facilitate the point of sale, then you may have some customer support for the software itself. However, this support will not extend to your tablet device. So, if you have issues with the tablet itself, you’ll need to seek tech support elsewhere.
  • Clumsy use: Another issue with using a tablet at your sales counter is that, since it’s a handheld device and not a freestanding terminal, it requires employees and customers to pass the tablet back and forth. The employee will need to input necessary sales information and then pass the tablet to the customer so they can swipe their card or sign. This makes for a clumsy sales interaction.
  • Complicated integration: Perhaps one of the biggest disadvantages to using a tablet as your POS is that it won’t come with any of the other hardware you need to smoothly facilitate the sales process, such as a barcode scanner, scale, card reader or receipt printer. Not only do tablets require you to find these components elsewhere — you may have trouble finding hardware that is compatible with your tablet.

 

Pros and Cons of a Traditional POS System

Now let’s talk about the pros and cons of opting for a traditional, terminal POS system. These pros and cons depend in part on which type of POS system you choose. We’re going to use the National Retail Solutions POS+ as our model and talk about pros and cons of a cloud-based all-in-one system as compared to a tablet system.

Let’s start with the benefits you can enjoy with a traditional POS:

  • Sleek appearance: We mentioned that a tablet POS has a stylish, modern appearance, but so do many modern POS systems. If you’re after that sleek, glossy screen and touch-screen functionality, you don’t have to go with a tablet to get it. Terminal POS systems can deliver that same modern look.
  • User-friendliness: Another pro that some terminal POS systems share with tablets is that they can be very user-friendly. The software on the POS+ reflects the simplistic design you get with a tablet, complete with an easy-to-navigate menu screen of icons. Even employees who have never used a tablet or smartphone can quickly learn how to use a POS.
  • Integrated hardware: Now let’s talk about some important advantages that traditional POS systems have that tablets lack altogether, like integrated hardware. All-in-one POS systems, in particular, streamline the process of setting up your sales counter and facilitating sales since all the hardware is made to communicate and work together seamlessly.
  • Customer support: Another advantage you get when your POS company supplies you with your POS hardware and software is that you can depend on their company to offer support when you need it no matter what the issue is. If your company offers quality customer service, then you can count on their team to fix the problem so you can avoid downtime.
  • Enhanced security: We mentioned how a tablet is prone to damage and theft. Both of these issues make tablets relatively insecure. POS terminals, on the other hand, are very secure. Terminals are less prone to theft, and employees must log in to use them. Customers have a screen facing them that displays information about their purchase, but they aren’t allowed any access to your touch-screen terminal.

enhanced security

While the pros far outweigh the cons for traditional POS systems compared to tablets, there are a couple of potential disadvantages to consider:

  • Upfront cost: As we mentioned earlier, if you already have a tablet, then running point of sale software on your tablet can be a low-cost option for you. However, the additional hardware you need to facilitate sales can add up and end up costing you just as much as a terminal POS system would. And if you need to buy a tablet in addition to all of the other hardware components, then your upfront cost could be even higher than if you were to purchase in an All-in-one POS Terminal.
  • Lack of mobility: If your business attends street fairs, trade shows or other events where you need to facilitate sales in a temporary location, then you may need a mobile option. POS terminals are not made to be mobile. However, cloud-based systems allow you to access your software and data from any device. The ‘My NRS Store” mobile app for example allows you to monitor your store from anywhere. You could also use the app to scan new products into your system.

Why It’s Better to Use a Traditional POS System

Considering the pros and cons of each type of system, it’s clear that a traditional POS system is the better choice for most retail store owners. A terminal POS system offers some of the same advantages as tablets plus several advantages of their own. They can also help you avoid some of the pitfalls of using a tablet.

One of the most important distinctions between a tablet and a traditional POS system is in the way they integrate with other hardware. A tablet may seem like a great option for integrating modern technology without having to purchase a dedicated POS system. However, once you start setting up your sales counter, you’ll realize that you’re missing some important components. How will you scan in items? How will you accept credit card payments? How will you print receipts?

The hardware needed for these other functions may need to come from other vendors. Then, you’ll have to figure out how to integrate these components with your tablet. In some cases, you won’t be able to integrate them at all. You may end up spending more money than you had planned to purchase all these components, and you’ll have an inefficient checkout process that doesn’t deliver the modern convenience you were looking for.

Tablets are certainly neat tech toys, and they can be useful for a lot of things. As with many multi-purpose devices, though, they fit into the “jack of all trades, master of none” category. In other words, a tablet may be able to do a lot of things, but if you plan to use it to facilitate sales, it can not measure up to devices that are designed specifically for that purpose.

Everything about a traditional POS system, especially an all-in-one system, is intended to make your sales process as smooth and efficient as possible and to help you manage your business effectively. The same cannot be said for a tablet since it’s made to run a variety of applications rather than just POS software. When you’re serious about sales, a modern terminal POS system is the superior choice.

Features and Benefits of POS+ from NRS

If you want your employees to be able to play their favorite games or check social media while at work, then a tablet is a great choice. If you want a device that is designed specifically for sales, then you need a traditional POS system. It’s as simple as that. Choosing a POS system can be an involved process, so we offer resources on our blog to help you find the perfect option for you.

At National Retail Solutions (NRS), we’re confident that the best choice you can make for your business is to invest in the NRS POS+, a cloud-based, all-in-one POS system that integrates all the hardware and software you need to manage your sales and check out customers. Far from a toy, this piece of cutting-edge technology can revolutionize the way you do business. NRS knows what small businesses need in a POS, and POS+ offers all of these features and benefits. Here are just a few of the benefits you can enjoy with POS+:

  • Integrated hardware, including the touch-screen terminal, cash drawer, barcode scanner, receipt printer and customer-facing screen
  • Automatic software updates
  • Ongoing customer support
  • Low monthly cost
  • Remote access with a mobile app
  • Sales analytics reports
  • Inventory tracking
  • Automated customer rewards program

nrs pos system

These are just some of the benefits you can cash in on when you use POS+ as your POS system. Keep your tablet for watching videos or playing games and get POS+ for facilitating sales like a pro. To get started, get a free quote from NRS.