When Are Credit Card Processing Fees Harmless?

Some merchants are reluctant to accept credit cards because of the processing fees involved. However, most business owners are likely to find that letting customers pay by credit card has so many advantages that these fees can often be considered harmless and beneficial for business overall.

As you’ll see below, there are several circumstances when it is likely that accepting credit cards – and the processing fees that go with them – can work in your favor.

When Fees Increase Sales & Revenue

Credit cards are the preferred payment method among consumers. And even though accepting them incurs a fee, it does open your business up to a much wider customer audience, thus boosting a company’s profits potential overall, but there are specific ways that credit cards can improve turnover.

For example, they can encourage impulse buys. Most U.S. consumers state that they buy on impulse, especially in brick and mortar (B&M) stores, according to research by CreditCards.com, and new technology is also spurring on impulse purchases.

According to a recent Rackspace survey, 17 percent of those interviewed said they spend more when using mobile devices, such as smartphones and tablets when they shop online, simply for their each of use.

And numerous studies indicate that credit cards make shoppers spend more as well, which can help offset the cost of the processing fees. On average, it’s thought that credit card users spend up to 18 percent more, and the same is likely to be true for mobile payment users as their popularity grows.

When Trading Online

Ecommerce is on the rise in the UK and throughout the rest of the world; strong growth is almost certain in the future as consumers turn their backs on the traditional B&M stores in return for the added convenience that online shopping can deliver.

If you’re trading online, you’ll want to cater for the widest number of shoppers possible, and that means taking a variety of payments, including credit cards. In this case, it is likely to be worthwhile accepting processing fees as simply the cost of doing business, and when the pros and cons are weighed up, it’s probably going to be more beneficial to take credit cards, rather than depending on PayPal, which can limit your buyers.

However, before you choose to sign up with a payments processor, get some firm figures on how much your fees will cost you on a monthly basis and work out your profit margins once these have been subtracted.

When Conducting Competitive Analysis, Acquiring Cost Competitive Rates

Retail is a hugely competitive industry and if your competitors are accepting credit cards, it makes sense for you to take them as well, or consumers who prefer to pay by card are likely to shop with a rival.

In addition, the payment processing industry has a lot of competition, and they’ll all be keen for your business; this can make it easier for you to get a better deal.

If you’re a smaller business, look for a company that caters for the needs of small business payment processing and look for a processor that offers competitive rates to minimize the fees you’ll pay.

When Fees Improve Customer Satisfaction

Processing fees do take away some of your profits, however, this can be balanced out by the ease of service you can provide your customers. In the “How to Drive Customer Satisfaction” article published by MIT Sloan Management Review, the authors noted that transactions have to be made easy, and one of the ways of doing this is accepting credit cards.

Accepting credit card also benefits consumers by:

• Letting them pay quickly and easily.
• And offering them extra choices to pay.

These advantages all improve the service you can give to your customer and the greater the customer satisfaction, the more likely they are to come back again, leading to greater customer retention.

Customer retention is crucial to any business. In an Yotpo article, figures show that 14.77 percent of shoppers are returning shoppers, and they make up 33.3 percent of dollars spent; so, returning customers are more crucial than you might think to the success of your retail business.

When Fees Provide Added Security, Consumer Confidence

Accepting credit cards can also make customer feel more confident about purchasing, especially online; many consumers feel safer using a credit card as opposed to giving out their bank account details.

In addition, by accepting more credit card payments, you’ll have less cash in the till at a B&M store, and a secure way of collecting payments if you have an ecommerce business. Credit cards also give consumers an added layer of protection when they make a purchase, which makes them feel more comfortable paying that way.

When Fees Produce a Better Overall Customer Experience

Whether you’re selling online or from a B&M store, the customer experience has never been more important, and as McKinsey & Company explains, that means putting your customers’ demands first and making them the core part of your business strategy. Part of this means offering consumers’ security and easy ways to pay, which a credit card payment provides them with.

And for the purpose of offering consumers an improved experience and what it can do for your company’s reputation, it is worthwhile accepting the inconvenience of a processing fee.

Conclusion

Merchants can sometimes feel like they are facing a tough choice: By not accepting credit cards, they are limiting their audience, but by taking them, they also have to face processing fees that cut into their profits. However, with millions upon millions of consumers regularly using credit cards, the potential gains can be so much more than the losses.

Credit cards can allow you to increase your customer base, improve customer satisfaction, compete against rival businesses and offer improved efficiency to both your business and the customer, making the processing fees worthwhile.

By regularly accessing your monthly processing fees vs the added advantages that accepting credit cards provides, you can calculate whether the fees can be considered ‘harmless’ and just an essential part of doing business.