While it may not occur to consumers who go through life using their credit or debit card to pay for their everyday purchases, millions of small business owners know that the costs associated with accepting credit cards is often considerable, and adds up quickly over the course of a month or year. These days, many entrepreneurs may fret over the added cost that comes with such transactions, and the effect it often has on their bottom lines.
Many owners know full well that the cost of simply accepting credit and debit card transactions every day can add up to thousands of dollars or more annually depending upon the size of their firm, and advocates say that one of the biggest reasons for this is that there’s little competition or transparency in the payment processing market, according to a report from the Detroit Free Press. Today, Visa and MasterCard dominate the game, handling about 80 percent of all such transactions nationwide, and can set the fees they take from doing so more or less at will, and without much wiggle room for negotiation.
What can small businesses do?
The problem for many small businesses, of course, is that in many cases they simply don’t have any other choice, the report said. The companies that process card purchases are giants of their industry and few if any alternatives exist in the traditional sense.
However, a number of competitors have cropped up in the last few years and could constitute something of an alternative for small businesses. These startups usually charge a per-transaction fee up front and then take a percentage of the total purchase price as well, but even these two combined could save companies in comparison with traditional payment processing. In addition, small business obviously also have the option to simply not accept card payments. This is something many do, but experts generally warn against it because the U.S. in particular is slowly moving toward being a cashless society, meaning that more things are being paid for electronically, and those that can’t keep up with consumers’ payment preferences will often find themselves left behind.
Owners who want to save their companies money overall, though, have options for doing so by cutting expenses in other ways. For instance, by finding more affordable small business insurance, including policies for commercial insurance, firms can often save thousands annually.