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How to win at cards

Merchant fees boosted bank coffers by $1.8 billion in 2010. Effie Zahos says it’s high time small businesses clawed some of that money back.

Getting customers to pay by credit card is certainly less messy than handling cash, but it’s not without its costs. In today’s ‘pay-by-plastic’ economy, a whole raft of merchant fees is eating into business profits – and the bite is getting bigger. In 2010, financial institutions collected $1.8 billion in merchant fees in Australia, three quarters of which was paid by small businesses. Trimming the cost doesn’t have to mean asking your customers to pay by cash only. But an important step in reducing merchant fees is knowing exactly what you’re paying for. A range of charges may apply, from EFTPOS charges and card interchange fees through to equipment and even stationery costs. Having a clear idea of the costs improves your chances of getting better value.

Who’s paying what?

ePal, which runs Australia’s EFTPOS network, has imposed a new 5 cent fee on a merchant’s bank for each EFTPOS transaction over $15 since October 2011. While some financial institutions are passing this cost directly on to merchants, others are not.

The Commonwealth Bank of Australia, for instance, has pledged to absorb the rise in EFTPOS charges for existing customers. If you’re not happy with the way your bank is handling EFTPOS fees, it could be time to take your business elsewhere.

Try another EFTPOS company

Another potential money-saving solution is to switch your EFTPOS provider altogether. Australian company Tyro (www.tyro.com) is offering an alternative service to ePal. It promises lower costs for small businesses including a zero joining fee (for ventures with a prior EFTPOS facility) and reduced ongoing charges: for example, it has a $0 chargeback fee (when a card holder disputes a transaction) compared to the market average of $27.

Cut your card interchange costs

Credit card surcharges, or interchange fees, which apply when a customer pays by credit card, can be pruned by being selective about what credit cards you accept. Only take those cards you believe offer you the best value. The website of each major credit card sets out the interchange fee that applies to your type of business – it’s worth reading this information to see if the cost is worthwhile compared to the revenue each card generates.

Could PayPal save you money?

Businesses relying on web-based sales have the potential to reduce merchant costs by offering PayPal as a secure online payment method. PayPal charges 2.4 per cent plus $0.30 per transaction. Businesses turning over $5000 or more with PayPal each month are eligible for reduced rates as low as 1.1 per cent of each transaction.

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