You’re an expert in your field, and people used to persistently seek you out. But, things have changed and you just don’t yet see how technology can benefit your business practices. Sure, you may have the latest and greatest computers and super-fast Internet access, but you haven’t yet really sought out to understand and embrace technology for your business methods. Which would be okay if your progressive, tech-savvy competitors weren’t soaring past you.
But, they are.
Truth is, there are businesses out there that have figured out how to work around the system, and turn the tables with technology. They’re paying less for merchant services and attracting more customers.
While many business owners are reluctant to change, it’s time for a shift.
Let’s look at an example.
On average, merchant services generate over 3 billion dollars in fees every year. Most small business owners don’t know it, but they are paying an average of 6% in merchant service fees, just for the privilege to accept credit cards. Sad thing is, they think they are paying 3%, but once all the fees are properly factored into the equation, the figure is much higher.
Think of it this way, 6% in merchant service fees means:
$6 for a $100 transaction
$60 for a $1,000 transaction
$600 for a $10,000 transaction
$6,000 for a $100,000 transaction
Yikes. Small business owners are mindlessly trusting that these larger credit card processing companies actually care about their business, and are acting honestly and fairly. Well, let’s be real. They’re not.
Credit card processing companies regularly embed hidden fees, and make decisions on the behalf of unknowing business owners. They do the research, and are pretty pleased that you’ve decided to trust them so completely. In exchange for their decision-making on behalf of your business, they take a larger percent of your earnings than you ever signed up for. Much of the money you work so hard to make never ends up in your hands.
Some small businesses do a little better with an online merchant service provider, such as PayPal, where you’ll spend 2.9% plus $0.30 per transaction. But, PayPal isn’t the best solution. That’s still a lot of money, and they can choose to hold your funds for up to 6 months at their discretion, all while they accrue interest on your money.
But, there’s an even better way. Did you know that there is actually a way for you to make money from merchant service providers?
The Durbin Amendment
In 2010, an amendment was passed called the Durbin Amendment, placing limits on the fees that could be collected by banks for debit card transactions. Unlike credit cards, under the Durbin Amendment, big banks could no longer collect tremendous merchant service fees from debit card purchases. This means, that merchant service companies pay less to the banks when processing debit cards.
It would have been kind if they passed the savings on to small businesses, but they didn’t. Even though processing a debit card only costs the processing company about 1%, they still charge small businesses the same fees they would if it was a credit card, earning them a profit of up to 5% every time a debit card is used. It really adds up, especially in light of a recent study that showed that 60% of all online transactions are paid by debit card.
So, how can small businesses benefit from the Durbin Amendment?
By using a new online merchant service provider called Square Cash, and a cash back debit/credit card.
Square Cash is a simple to use merchant service platform, and you can get started in 3 quick steps.
Download the “Square Cash” application on your smartphone. Note: this application is different that the traditional “Square” app.
Sign up for a free business account. All you’ll need to sign up for a business account is a business debit card to link to the account.
Choose an online “Cashtag” website to accept debit card payments.
Give your customers your “Cashtag” website.
Now, when customers visit your “Cashtag” website, they will be prompted to enter their debit card number. You’ll pay a flat rate of 1.5% for all transactions that are processed through “Square Cash,” and your money will be available immediately for withdrawal from your business bank account.
Cash Back Debit/Credit Card
Then, the next part of the savings-equation is to open a cash back debit/credit card. I highly recommend either the Citi Double Cash back rewards card, or the Fidelity Visa Signature card, as they offer 2% cash back on all purchases.
This is good news. Think about it, if you’re paying 1. 5% to process all of your transactions, and are getting 2% cash back each time you make a purchase on your card, you are effectively turning the tables on credit card companies and profiting. 5% by accepting payments, rather than paying out 6% or even 2.9%.
Don’t qualify for the cash back credit card? No problem. PayPal offers a business debit card that offers 1% back on all purchases without any type of credit check, so all you need to do is transfer your earnings from your business bank account to your PayPal business account and use the PayPal Debit Card to make all of your purchases. While you won’t profit from this, you will still cut the fee that you’re paying down from 1.5% to.5%, which could potentially save you thousands of dollars every year.
At this point, you’re intrigued. Well, there’s more where that came from. Learn valuable tactics to take back control of your business by signing up for my free e-newsletter.