The number one flaw that costs businesses money is not an incorrectly setup merchant account, nor machine fees, but instead the person punching in the data. The owner, the employee, or whomever either doesn’t know, and often simply wants to expedite the sales process. However it costs money to do.
Here’s how: Credit cards costs a Retail business somewhere around the 1.7% range. A Debit card costs them about 1.55-1.58%. PIN based Debit will cost $0.90 or less. Studies show that if a customer is asked ‘Debit or Credit?’ they will go for credit almost 90% of the time. Why? Most people mistakenly believe this will make their checking/ debit card work like a credit card and will run against a line of credit and their good name rather than a finite dollar amount they have in a checking account. Wrong. Running a debit card as a credit card does two thing: 1) it passes the card through the credit network to check against the money they have in their checking account which means they may manually sign for the sale rather than enter a PIN number. 2) It charges the business more money. Why? Because the transaction is not as safe. If the customer had put in their PIN number to verify the transaction, the risk would have been reduced, and thereby the fees involved would have dropped.
Here’s the rule that you should etch deeply into your business mind-set: The Riskier the transaction, the more your business pays to accept that card. The safer the transaction, the more of your own hard-earned money you keep.
Here’s the better way: Train your employees. Anyone can look at a card and tell whether or not it is a checking/ debit card rather than a credit card. It will say ‘debit’, or ‘checking’, and it will often have the bank name printed on it. Instead of asking “Credit or Debit?”, have the employee look at the card. If it’s a debit card, push the debit button, swipe the card, then hand the PIN-pad to the customer and say, “…Now if you’ll please enter your PIN number…”. Again, studies show that in excess of 95% of people at this point will enter their PIN number. Congratulations, you just saved your business hundreds, perhaps thousands of dollars across the course of the year for that small change.
Is that not enough of a reason? Because, oddly enough I have had business owners say that it’s not worth the trouble. Really? My questions here is always the same: “If you get an electric bill for $170, do you send in a check for $190?” They always look flabbergasted. “Of course not!” Then why would you pay an expense here that you do not have to? A little training goes a long way.