If you do a lot of Business-to-Business transactions, you might be drowning in the high costs of accepting Corporate, Purchasing, and Business cards. These cards have the highest “interchange” rates compared to all other non-international card types. The rewards business customers earn are actually paid by you–the money for those reward points redemption has to come from somewhere. Merchants can reduce the cost of doing business with other businesses in several ways. We will share some tips with you that will even allow you to eliminate fees in some cases.
1. Using Level 3 Processing Can Slash Costs by over 25%
The “Interchange” rate is a fixed cost for processing each unique type of credit card issued by card brands such as Visa, Mastercard, Discover, or American Express. These fees are regulated by the Federal Reserve and are modified in April and October of each year. There are literally hundreds of different rates, determined by the type of card and the issuing bank such as Wells Fargo, Bank of America, or Capital One. The card brands publish their rates on their websites, and every credit card processor pays the exact same posted fee. Using Level 3 processing can slash those Interchange costs significantly. In many cases, the rate is lowered below the fees charged for a traditional consumer or rewards cards. If you accept Business, Purchasing, and/or Corporate cards and aren’t qualifying for Level 3, chances are you are paying way too much in processing costs.
2. Large B2B Tickets = Large B2B Savings
Business-to-Business transactions tend to be larger than consumer transactions. While making a big sale always feels great, paying huge credit card processing fees can suck the wind out of your sails. With Level 3 processing, merchants accepting a payment higher than $7,500 are eligible for “Large Ticket” discounts, depending on the card type and dollar amount of the transaction. Merchants can save between 25-75% of the total cost of the transaction by lowering the risk associated with these transactions. Best of all, there are solutions that can do this seamlessly on the backend, with no additional work from you.
3. You CAN Surcharge in Most Cases
If you’ve ever felt like the cost of accepting a credit card for a large transaction is eating away your profit, you might be able to change that feeling with a surcharge. Surcharging, also known as “cash discounting,” is legal. For companies with slim margins, 2-3% can make the difference on receiving a small profit or no profit. There are, however, strict regulations about who can and cannot surcharge as well as signage, rates, and notifications that merchants need to follow. If you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, unfortunately state laws ban surcharging credit cards (with some exceptions). Companies in any other state, though, can add a surcharge that can over the cost of credit card transactions.
4. Using ACH
Accepting cards, even with Level 3, can still be expensive for B2B companies, and surcharging doesn’t work for everyone. Some businesses might scoff at it and take their business elsewhere. Automated Clearing House (ACH) payments and other bank-to-bank transfers have come a long way, and there are even new solutions that make accepting ACH payments as simple as accepting credit cards. If your business accepts paper checks, ACH can dramatically increase your cash flow with a fraction of the fees charged for accepting credit cards. As a bonus, you can avoid the downsides of card acceptance like fraud and chargebacks.