THE DEALER PROFIT ONION

Credit Card Transaction Fees & Rates Too High? There is an Alternative

Here are some questions, guidelines, and suggestions for adopting the best way for your dealership to offer credit card transactions to your customers.

Before You Sign a Contract With a Credit Card Company, Ask:

• What are the sign up and or annual fees?
• What are the transaction fees?
• Are there batch fees?
• Are there statement fees?
• Is there a monthly minimum?
• What is the length of the contract?
• What is the base rate?
• Is the rate different for debit cards?
• Do you offer cost-plus pricing?
• Does it work with my existing equipment?

Keep an Eye on the Real Cost of Fees
You should be aware of predatory companies that will tell you that your rate is 1.79 percent, because this usually only applies to cards that are swiped at the point of sale. Let’s face it, however, in this day and age of cashless transactions, consumers want to pay when and where it is most convenient for them. Anyone who wants to pay with a credit card would rather just give you the information over the phone and let you run the transaction. When doing so, credit card companies charge you a higher rate because it is a ‘keyed” transaction -- and, if you are keying a corporate rewards card, the rate is even higher because, “Hey, somebody has to pay for all those free airline miles.” As a merchant, you do not want to discourage a purchase by saying you are unable to accept a particular form of payment, but you need to keep your costs down.  

There are alternatives to using a
Merchant Account
An alternative to credit card processing is ACH payment processing. You may have heard of it referred to as “checks by phone,” or “automated payments,” or ‘web checks.” These transactions cost a fraction of what a merchant pays in monthly card discounts and are just as safe as card transactions. ACH payments are usually entered by a cashier or operator at the location or by the consumer on the merchant’s Website. These transactions take less than half the time of processing paper transactions and, in some cases, guarantee to eliminate loss. 

Maintaining Constant Cash-Flow
In the automobile industry, merchants are faced with big-ticket items on a regular basis. I recommend offering to automatically debit a customer’s checking or savings account through an automated payment module. These transactions are more effective at maintaining constant cash-flow and provide more accurate cash-flow projections. There are just as many ACH payment processors out there as credit card processors. So, how do you choose the best one?

Before you Sign a Contract with an ACH Payment Processor, ask:

• What are the set up, annual, and/or monthly fees?
• Is there any software/equipment to purchase?
• Is it compatible with my existing software?
• What is the cost per transaction? Per returned transaction?
• What do you need to get started?
• What is the underwriting period?
• Do you offer same/next day settlement?
• Do you offer guarantee service?
• What are the system requirements?
• What do you offer for support?
• What type of reporting is available within the system?

Now pick the best solution for your dealership. Whether you’re looking for a credit card processor or an ACH payment processor, these questions should help you pick who to use to process your transactions. You have many options when it comes to processing transactions. Be sure to pick the right one.