Choosing a Payment System: Part 2

Amy Saunders

woman holding tablet at table

Last week, we began our series on how to select the perfect payment partner for your salon or spa. In that article we went over the top factors you should consider before selecting a payment partner - so, let's pick up where we left off. This week, we'll go over all of the fees that are often associated with joining forces with a payment partner. 

Credit card fees: Where does the money go?
Every time you run a customer’s credit card, you’re sharing the sale with a bank, a credit card
company and a 
payment processor.

No matter which payment processor you use, these three parties will take a percentage of your earnings. The fees are only a small percentage but they add up. For example, the average cost per $100 transaction is $2 - $3. Over the course of the year, the cost of credit card processing can amount to thousands.

Here’s what those charges entail...

Interchange fee: 
The bank that issued the customer’s credit card takes a percentage of each sale, plus a transaction fee. Neither businesses nor payment processors can control bank fees, but most payment processors include the interchange fee as part of their rates.

Card brand fee:
Fees from credit card companies like Visa or MasterCard, also calculated by a percentage of the sale plus a transaction fee, are another constant that won’t be affected by your choice of payment processor.

Processor fee:

To facilitate the transfer of funds to your business from your client’s bank account, payment processors charge a fee — this is the only one you can control with your choice of processor.

Payment processing fees are typically structured in one of three ways.

  • Interchange plus pricing: Processors add their fee to the bank’s charge, tacking on a percentage amount and a dollar amount.

  • Flat rate pricing: Processors charge the same percentage on every transaction, a rate that’s easy to calculate but tends to be higher than interchange pricing.

  • Tiered pricing: Payment processors charge different, predetermined rates based on the type of credit card used and risk level of each transaction.

Processor fee:
A payment processor might quote you a low rate for each transaction — but there are other fees that may show up on your monthly statement that you should be aware of.

You may also need to buy or lease a payment processing device, along with software to
run your point-of-sale system. Other possible fees include:

• Monthly statement fees
• Sign-up fees
• Activation fees
• PCI compliance fees
• Customer service fees
• System integration fees
• Cancellation fees

In next week's article, we'll go over all the necessary steps you need to take to maintain credit card security when choosing a payment partner. 






About the Author

Amy Saunders

Amy is a content marketer who gets both the content and the marketing. As a reporter and editor turned marketer and business owner, she creates blog posts, e-books, website copy, emails, and social posts that simultaneously serve business goals and actual people. She built the foundation of her career as a reporter at The Columbus Dispatch, where she was named best feature writer in Ohio by the Associated Press. Since then, she has worked for a leading content marketing agency, where she wrote and edited health care content for hospital systems, and for the SaaS company Infusionsoft, where she focused on digital marketing advice for small business owners. She brings those strategies to life in overseeing all marketing for Strolleria, the baby-gear retailer she and her husband started in 2016. Whether she's writing about technology, health, strollers or anything in between, she translates complex topics into engaging content that helps people make sense of the world around them.

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