The city is coming off a successful Super Bowl week, with estimates indicating over $1.1 billion in economic impact to the greater Las Vegas region. While I’m sure we all agree that more business was inherently a good thing for the region, it can also lead to more expenses for businesses on the backend. In turn, rises in customer traffic and credit card volume mean even more processing and interchange fees on your monthly card statements.
While these charges are a necessary cost of doing business, they are often inflated—72 percent of merchants are overcharged on their monthly card statements. While the Super Bowl has passed, Las Vegas is ripe for future influxes of sports-related traffic, from F1 races to another impending playoff run for the Golden Knights to the potential arrival of the Oakland Athletics in later years. Moving forward, there are changes that businesses can implement to reduce fees and benefit themselves in the months and years ahead.
1. Understanding card processing fees
Credit card processing fees are a reality for businesses that accept card payments. Every payment goes through a series of steps from the point-of-sale system to the bank that allows businesses to be paid, and each step has its own cost. Some fees are unavoidable, but you can examine your merchant statement to figure out exactly how much you’re paying and make sure fees are legitimate.
Third-party auditors are often the best resources for understanding the credit card processing ecosystem, as processors often hide fees and make calculation errors in needlessly confusing monthly statements. It’s also normal for them to raise rates three to four times per year. Without due diligence and knowing how to read these statements, fees add up quickly.
2. Evaluating payment processors and POS systems
Different processors offer varying fee structures, and selecting the right one can make a significant impact on your bottom line. Look for processors that provide transparent fee information and offer competitive rates. If you are integrated or considering an integrated system, research what the processing offering is. Typically, these software companies work exclusively with one processor, which can make it challenging for a practice to secure optimal rates on their own.
3. Considering a cash discount or surcharge program
These two methods are becoming popular options for businesses nationwide to offset the impact of inflation and rising credit card processing fees. Offering a discount when paying with cash is the easier option when done correctly. This can be achieved by simply raising your prices (no need to involve the processor who is just going to take a cut) and offering a flat discount to customers paying in cash.
Surcharging programs must be implemented carefully and in compliance with state and card brand regulations. Nevada law dictates that businesses must have clear signage present at the point of entry and the point of sale that clearly explains the surcharge policy, and the surcharge may not exceed how much you pay to accept the card.
Surcharge programs need to be run through a point-of-sale system that can determine if the card is credit or debit before applying the fee, as surcharges are illegal on debit cards.
On the back of Super Bowl LVIII, local business owners must use the experience as a learning experience to capitalize on a future influx of tourism. Effectively managing credit card processing fees is a crucial aspect of optimizing operations and ensuring financial success and can be even more vital for Main Street businesses where every transaction counts.
Eric Cohen is the CEO and founder of Merchant Advocate.
