Choosing a Restaurant Credit Card Processing System
We speak with many restaurateurs who feel that paying credit card processing fees is like paying for another utility service. Or with others who continue to use the first recommended processor through a restaurant affiliate program.
As a restaurant owner, the best way to filter this is to understand the fundamentals of credit card processing so you can make more informed decisions about your payments.
The bottom line: Credit card processing fees for restaurants vary widely. The difference? A good payment processor pays for itself with the insights it offers.
Challenge Your Restaurant Payment Processor With These Questions
Choosing to accept credit card payments at your restaurant may seem like a no-brainer. After all, today 81% of transactions are done without cash.
However, that decision, if made the wrong way, could end up costing you thousands of extra dollars a year in restaurant payment fees.
How to understand your investment
A decision that has such an impact on your income should not be taken lightly. However, many business owners view credit card processing the same way they view electricity bill payments – a necessary expense to fix and forget.
Think about this: On average, the commission for a $ 100 transaction can be as high as $ 3. That’s $ 3 every time someone swipes your card through your business.
What are you achieving with that investment?
Ask the right questions
If you don’t ask yourself questions, you aren’t giving your decision enough thought. And when the decision is as important as credit card processing, your list of questions should be exhaustive.
- What commissions will they charge me?
- What kind of customer service do you offer?
- What features do I get besides payment processing?
- Do they integrate perfectly with the POS of my restaurant?
If the processor you are considering doing business with cannot answer these questions with answers that make you happy, then it is time to take your business elsewhere.
How to Avoid Hidden Fees When Choosing a Restaurant Credit Card Processor
As a small business, you depend on your payment partner for cash flow. And, as with most services, you have several options.
Find the best partner for your business by learning more about those options and the commissions you can control. Here are the most common hidden fees and tips to avoid or minimize them.
The first and most important step is to understand how the payment processor evaluates your commissions. Some payment processors do not fully disclose their charges because they can be complicated to explain and unnecessarily rich.
The second step is to evaluate the value you are getting from your payment service. If it simply helps you move money, you deserve more. TowersPay helps merchants accept payments, as well as track customers, and increase revenue. In this way, processing becomes the engine under the hood of your business that unlocks your data and powers smarter marketing programs.
As a starting point, always review your payment processor’s agreement thoroughly before signing it and ask questions about anything you don’t understand. This allows you to see where your money is going and gives you the opportunity to negotiate with your payment service before committing.
Three ways to avoid hidden fees
- Learn to analyze the commissions of your payments. Once you know what you are being charged, you will have a much better starting point for negotiation.
- Be careful with variable commissions. Avoid signing a contract that has variable cancellation rates and stick with a fixed rate instead.
- Do not trust companies that can increase the rate at any time. Make sure your contract states that your rates will not increase.
Common additional fees
Most of the processing fees can end up at the card-issuing banks (the banks whose logos appear on their credit cards) through Interchange. The rest of the fees you pay should help your payment partner cover the cost of servicing your account and, more importantly, the fund-building technology that helps turn your store data into new revenue.
To better understand your processor’s profit margin on Interchange, check out this list of common additional fees to watch out for. Unfortunately, most of them are standard among payment processors and should be clearly stated in your contract. If they aren’t, don’t be afraid to ask, and find a partner who will honestly communicate rates to you and minimize unnecessary surcharges.
- Annual / Monthly Fees: A monthly or annual fee for the operation of your account. We have seen fees of up to $ 99 a month, and others that accumulate if a minimum monthly sales are not reached.
- Minimum monthly fee: A minimum amount that you must generate each month. If your monthly payments are less than this minimum, then you are charged the difference.
- Payment gateway fees: This charge applies if you use an Internet payment gateway instead of a software or terminal.
- Chargeback / Recovery Fees: Fee charged when a customer disputes a transaction and contacts their card issuer to request a refund. They are usually priced between $ 10 and $ 25 per item.
- Cancellation/withdrawal fees: An additional fee charged for the termination of your contract is standard, but beware of fees that are variable, not fixed.
- Surcharges: Enhanced Reduced Recovery (ERR) plans offer a base or teaser rate, but can add hefty surcharges to 40% of transactions if they are downgraded (subject to a higher average or unrated rate).
- Statement / Customer Fee: Typically $ 5-20 per month. This is simply one way to get more income from you.
- Lot heading rate: Most traders do a lot once a day. It is usually priced between 5 and 20 cents per batch but can increase if you make several batches a day.
- Recovery fee: Although rare, this fee occurs when the cardholder inquires about a card transaction. A typical charge ranges from $ 2 to $ 10.
- Restaurant Payment Processing Fee Breakdown: 3 Places Your Money Goes To With Every Hit
Have you ever wondered what happens every time your customer swipes their credit or debit card?
A percentage of that transaction goes toward processing fees – the cost of accepting cards and doing business. These fees are sent to three different places: the card-issuing bank (Exchange), MasterCard, and Visa (Fees), and lastly, the processors/acquirers (the only partner any merchant can choose from).
You may be surprised to learn that about 80% of those fees do not go to your processor, but go directly to banks and MasterCard, and Visa in the form of interchange and appraisal fees.
Let’s talk about how each transaction is divided.
The exchange represents 75% of the cost of accepting credit cards in your business and the exchange rate is set by Visa and MasterCard. This money goes directly to the banks that issue the cards (your credit card logo). There are dozens of signature, premium, and platinum cards that charge different rates. Are you wondering why? Acquiring platinum clients can cost more than $ 200 per head in marketing costs. The exchange pays its acquisition invoice.
Fees are all the pesky little fees, such as international fees and per-item fees, which account for 5% of the card acceptance costs. Also called association fees, they are set by Visa and MasterCard. Think of them as the rates on your mobile phone bill: Every time you go out of your plan, using extra minutes or roaming, more commissions are added to you. Fees are set by some processors, but at TowersPay we pass these fees on to merchants at cost, never a penny more.
Restaurant credit card processing fees are the only ones negotiable within transaction costs. If you want to re-evaluate your processing fees, you will want to find a processing partner that offers competitive pricing, but just as importantly, also offers you the most value for what is often treated as a basic service. To start understanding what you pay for processing today, ask your partner what pricing model he uses. There are three possible models:
Tiered: Groups trading programs into different tiers or cubes, usually with little explanation as to why certain types of cards are clustered at certain tiers. Processors can change tier groupings and rates at any time.
Enhanced Reduced Recovery (ERR): Offers a basic or initiation rate, but can add heavy surcharges to 40% of transactions.
Exchange Plus: A simple fee for all transactions that are also called a transfer price. Includes the exact interchange rate set by Visa, Mastercard, and Discover (the lowest rate possible). If that rate drops at some point, you will automatically save and never have to renegotiate your rate to achieve those savings.
Next-generation restaurant credit card processors are transforming restaurant POS
Who has time to become an expert in restaurant POS and credit card processing? You are busy running a successful restaurant. But here’s what happens: A smart restaurateur like yourself knows that if you’re paying for a service, you should get the most out of it.
That’s called value and our assumption is that you are not getting enough of your current POS and payment processor.
What is the Next Generation of Restaurant Credit Card Processing?
Traditionally, merchants consider credit card processing a public service, like electricity or gas, something that is installed and forgotten for as long as possible. That’s the old way of doing business and it’s hurting your bottom line.
Today, there is a new batch of next-generation processors wreaking havoc in the industry and changing the way restaurants view credit card processing. These are not utility companies, but technology companies constantly innovating and finding new ways to add value to their business.
That is if you work with the right one.
Traditionally, negotiating the fee to process credit card payments was the only place you could add value to your business. That is still important, but you shouldn’t just worry about how much you pay for each transfer, you should also ask yourself:
What additional value can I get from my processor?
Turn your restaurant credit card processing into an investment
Like rent or utilities, credit card processing fees are another basic but necessary expense for a restaurant. This is a fairly straightforward service: Your restaurant pays a fee for the ability to receive funds through customers’ credit cards, and those funds are then deposited into your bank account.
How Can Credit Card Processing Help Your Restaurant Grow?
Restaurants need solutions that help them serve their customers, create a better overall experience, be more efficient, and help them earn more money. Although the primary purpose of a credit card processor is to help your restaurant accept payments through your POS, there is much more a processor can do for your business.
Faster and more secure payments
The most common cause of credit card fraud in a restaurant occurs when waiters remove a customer’s card from the table and swipe it through the cash register. To mitigate the risk of fraud in your business, give customers a tablet so they can pay themselves. In this way, your card is not lost sight of, also increasing the transparency of the process.
Another advantage of using a restaurant POS with an iPad is that the customer can authorize the cost of food and tip in a single transaction, which reduces the number of authorizations and commissions. This reduces the time it usually takes for the card and invoice to arrive. Customers will be happy with faster service, and you’ll be happy when your restaurant can serve more meals a day.
Identify new vs. repeat customers
Each transaction that your restaurant POS processes provide your restaurant with valuable analytical data. The data is created by a customer visit, and each customer is a new customer or a returning customer.
For a restaurant to last, it must maintain a healthy mix of new versus repeat customers. Examining the patterns in your transaction history over time allows you to understand this ratio. If the ratio of new customers to repeat customers is high, it could be an indication that you are not building loyalty with your restaurant.
Customer loyalty programs
The average American household is a member of 18 loyalty programs, and the restaurant industry has 9.7 million members. Customer loyalty programs allow restaurants to collect information about customers and use it to increase revenue through those who visit them the most. However, you need people to actually sign up for your program; its benefits and rewards will determine whether or not it seems worth it.
While most loyalty programs offer a discount, you can differentiate your restaurant by offering a refund – or, in this case, a credit refund – through the customer’s credit card transaction. If your processor offers this type of loyalty program, it will allow your business to return the money to the customer’s card after a transaction causes you to exceed a certain monetary threshold. The instant gratification of the program will please your customers and help you increase your business volume.
Our challenge to you: Get more out of your processing
At TowersPay, we believe that all business owners deserve access to added value beyond processing. So be honest with yourself when answering the questions about your processing, the answers have real consequences for the success of your restaurant. If you want the best restaurant credit card processing available, TowersPay can help you gain more insight, efficiency, and benefits.