How to Lower Credit Card Processing Costs and Get Improved Conditions, Part 2: Attitude

This manual is“Part 2” in a four-part series about the best way best to reduce your credit and debit card costs and gain more favorable terms and conditions. “Part 1: The Basics” we published last month.

Note that this series is unique to ecommerce merchants. It may be used as a general guide by bodily businesses, however there is information critical to those companies that is not covered in this set.

Focus on Obtaining’Correct’ Rates

Before beginning any discussions with your current provider or seeking a new provider, you need to have the perfect mindset. Most merchants request a rate review. That’s the wrong attitude. The best attitude is to require the perfect pricing plan, prices, fees, and provisions, all which I will address next month.

Most merchants I function choose to renegotiate with their current supplier versus trying to find a new one. Many do this because of time constraints or the perceived hassle in changing providers. Some merchants opt to renegotiate since they are terrified of changing providers.

Whether you are renegotiating with your current supplier or looking for a new one, you need to have the mindset that there are hundreds of providers who want your business — and you’ll find. You need to demonstrate that (a) you know the card processing company, (b) you know that you are not currently priced correctly, and (c) you deserve more positive terms.

Do not Fret about Providers

To help you establish the perfect attitude, analyze the stock prices of three publicly traded merchant account providers: Tsys (TSS), Heartland Payment Systems (HPS), and EBAY, owner of PayPal, (EBAY). Note that in this current market, all of them are close or at all time highs. If your organization has been publicly owned, would your stock price be at or near an all-time big? Providers make money by charging rates and fees. The more they charge the more they produce. Apparently investors appreciate the profits these companies are making. I have nothing against these three companies; I am certain that they need to do what’s best for their shareholders. And there are likely private providers doing much better then these companies.

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My point is merely to help you get your mindset before negotiating. Don’t feel sorry for any company in the card processing industry. Don’t ask to renegotiate, but instead require.

The next thing you need to realize is that nobody provider delivers the perfect solution for many merchants. Just because you have got a partner working with a provider because of his business does not mean it’s the ideal provider for yours. By means of example, I recently helped an ecommerce merchant significantly lower his processing costs. In cases such as this, it was best to change suppliers because the one he was using concentrated mostly on higher risk merchants. Providers that target higher risk merchants generally demand higher margins because of the danger they incur. My client was not higher risk and has been served by a supplier tailored to his company requirements.

Be Wary of Endorsements

Be cautious with any establishment, business, merchant, or person that endorses a specific provider. Again, no 1 supplier is the perfect alternative for all merchants. In this marketplace, if something or person is endorsing a provider, it is likely being paid behind the scenes for that approval.

Lastly, understand that the credit card processing industry is changing. Have the attitude and understanding that the supplier you’re using today may not be your very best provider two years from now. Also, the industry continues to consolidate. So the supplier you use today may not be your supplier later on. For these and other reasons, do not just focus on cost but also fully understand the terms and conditions.

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  1. Attitude is critical when negotiating costs and provisions.
  2. don’t ask. Instead, require the ideal prices, fees, and provisions.
  3. No 1 supplier delivers the perfect solution for every merchant.
  4. Be wary of endorsements.
  5. Know the business is changing, which may influence your future choice of providers.

In “Part 3: Preparation,” another installment, I will address how to prepare to negotiate with your current and prospective providers.

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