The end of the year has passed, and so as part of my annual audit procedures, I was reviewing our credit card fees and deciding if we should switch vendors. Ultimately, I believe our rates through our current vendor are decent (I published what we pay below in case you want to check them against your current rates) and the pain of switching vendors is not worth it for this year, at least.
However, and this is often the case, in my research I did discover one really interesting fact that I wasn’t looking for when I started.
I discovered that if we swipe credit cards instead of keying them in or relying on the credit card numbers that are stored in our scheduling software, we would save an average of 0.6% of the transaction. Apparently, credit card companies charge more for keyed transactions since it isn’t as secure, because the card is not physically present, which means more risk of fraud, so they charge a higher fee on these transactions.
This means that at our personal training studio, where we often have high dollar transactions, we would save $6.00 on each $1,000 that we swipe. So, on our high dollar sales ($1,000 plus), we should take the extra moment to use our swipers. We got out of this habit over the years because it was easier to just key in credit card numbers, and because I thought it only cost us an extra dollar or two per transaction — but 0.6% over the course of a year could add up to real dollars. On a $5,000 sale, we would save $30 just by asking the client if we can swipe their card. It doesn’t cost the client or the studio anything more than an extra moment to complete the transaction.
If we do a million dollars in sales in 2013 (our BHAG – big hairy audacious goal), this could save us $6,000, which would fall straight to the bottom line!
Now, there are many cases each year where it is better to use a stored/keyed transaction. For example, small dollar sales, automated memberships, and cases where a client is ready to buy a new package but didn’t bring their card to the studio. These are all times to just go ahead and pay the extra fee to do a keyed/stored transaction. I would never advocate waiting to close a deal because you might save a few dollars by having the client bring their card in next time!
I’ll let you know how our plan to swipe more cards goes in 2013, and if this indeed brings down our credit card expense line item!
Fitness Together’s Current Rates for Credit Card Processing:
INTERCHANGE FEE: “Cost” to any merchant for processing credit cards and is paid directly to Visa, Mastercard and Discover. This varies depending upon the card and how the card was accepted (Swiped 1-1.5%, Keyed/Stored 1.5-2.2%, Rewards Cards 2.2-2.7%).
DISCOUNT FEE: 0.20% — Percent our vendor charges over interchange on every settled transaction.
AUTHORIZATION FEE: $.10 — Charged for every credit card transaction attempted in the vendor’s software.
MONTHLY MINIMUM DISCOUNT FEE: $15 (Bluefin Payment Systems) — Charged if you do not accrue at least $15 in discount fees.
Jonathan Slain is a fitness business consultant and owns and operates franchises of Fitness Together in Cleveland, Ohio. He can be reached at JonathanSlain@FitnessTogether.com, 877-FIT-OHIO, or www.FitnessTogether.com/ohio.