It is very difficult to survive in the business world – with so many fees for everything. If you ever doubt they add up, just do the exercise for one month. Just add all of them up. Just for one month. They will be in the hundreds. Multiply that by twelve. That’s now thousands. Now multiply that by the odd 30-40 years your business will run. It’s not a pretty picture. These fees can be quite gutting when it is so hard to generate a profit these days.
One of these fees is the credit card processing fee.

So, why do owners ignore them? The answer is that they think the fees cannot be lowered. But that could not be further from the truth. Some merchant processing companies can lower your fees by 40 percent, offering transparent monthly fees and no contract. That should start helping the bottom line a little. And for no effort on your part too.

Let’s face it. Customers love any flexibility they can get. Accordingly, they love payment flexibility. Payment options keep being created at an unprecedented rate. Keep an eye on ways you can reduce fees associated with all those new ones too.

Surcharges are an interesting one. That’s where businesses add an additional charge to their customers’ transactions to cover the cost of processing card payments. However, bear in mind that this is regulated. In fact, businesses cannot add a surcharge that is greater than the cost of accepting a payment by card. Furthermore, the surcharge can only be a percentage, not a flat rate. Some companies can assist with this process but ultimately the merchant is responsible for managing their surcharging process.

This process was instituted by the Reserve Bank of Australia (RBA). It was designed to protect both the merchant and the end consumer, ensuring neither party was being abused.

Basically, as a business, you need to be careful not to exceed your cost of acceptance, which includes elements like your merchant service fees. You can also add your EFTPOS machine rental fee as well. It is then considered excessive if your calculated surcharge exceeds your cost of acceptance for each designated payment type you use.

The RBA has a guide in terms of the size of the charge i.e. around 0.5 per cent for eftpos. Visa or MasterCard debit transactions can be around 0.5-1 per cent of the transaction value. That’s for debit cards. Credit cards cost more, costing anything between 1-1.5 per cent for Visa, MasterCard and up to 2 percent for American Express cards.

Costs of acceptance are not uniform across businesses, generally dependent on the business sizes e.g. a smaller business may have higher costs that these guidelines suggest.

Not everything is allowed as a cost of acceptance. The RBA standard lists them. These can include:
– Merchant service fees
– Rental fees and maintenance fees for payment card terminals
– Other fees from processing card transactions e.g. cross border ones, switching fees or fraud chargeback fees (not the actual charge backs themselves)

They need to be itemised by the specific type of card they are associated with i.e. not an overarching cost that is applicable to all the payment methods being accepted. These need to be somewhat auditable as contracts or invoices need to be verifiable for charges incurred.

Like with all facets of cost control, business owners (or their café bookkeeper) need to be acutely aware of all these different cost components to transactions. This will enable them to make better decisions when choosing which way they process payments. They need to be very proactive in avoiding extra fees, markups or hidden costs and fees. Furthermore, they need to ensure that their provider is also keen on cost reduction and shares the same focus they do. That’s at the transaction level.

However, business owners need to also watch out for the total sum of their fees, as these individual transactions can quickly add up to a detrimental sum.

At Brunch & Books, experts in restaurant accounting, all accounts on our client’s P&L are scrutinised. This also includes merchant fees. In fact, our reviews have unearthed quite dramatic merchant fees and help reduce them. As a solution, we discussed options available to use smarter eftpos providers where surcharges are absorbed by the customer as per RBA guidelines. These clients have now saved thousands of dollars, over the years, instead of having to worry about their impact on their bottom line.