Tag Archive for: free atm placement

How Much Are Credit Card Processing Fees Costing You?

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Have you noticed signs on the counters of local restaurants offering a discounted price for cash payments? On the counters of local retail shops? What about at the pump? And maybe you’ve seen the opposite: notices that credit transactions will incur an extra fee. Maybe in the drive-thru windows of your favorite fast food joints? Why is this?

Merchants are charged credit card processing fees every time someone swipes their card. Basically, it costs money for the credit card processing company to communicate with the network and complete the transaction. To help cut costs, many companies are attempting to minimize these charges by encouraging more cash transactions. Or, they just pass the cost onto the customers.

So, cash is not becoming obsolete as some might have previously thought. This is good news for the ATM industry. It’s good news for you, too, if you are in or looking to enter the ATM machine business. 

But if you are a store owner, how much are credit card processing fees costing you? How much are they costing you as a consumer? Keep reading to learn more about credit card processing fees and how to avoid them.

What Are Credit Card Processing Fees and How Do They Work?

Credit card processing fees are the costs businesses pay to accept credit card payments. These fees cover the services of processing transactions, ensuring security, and transferring funds from the customer’s account to the merchant’s account.

When a customer makes a purchase using a credit card, the payment information is sent through a payment processor to verify the transaction. The card network (Visa, Mastercard, etc.) and the issuing bank approve or decline the transaction based on available funds and fraud checks. Once approved, the funds are transferred from the customer’s bank to the merchant’s account, minus processing fees.

Merchants are typically responsible for paying credit card processing fees. But while they absorb the initial cost, many try to recoup the expense by passing some or all of it onto the customer. 

How Much Are Credit Card Processing Fees Costing You?

Businesses

Credit card processing fees are generally 1.5% to 3.5% of the transaction ($1.50-$3.50 for a $100 sale). There are a number of factors that determine the cost including payment processor, card type, and transaction type.

Payment Processor

There are many different payment processors businesses can use to accept digital payments. Each processing company, such as PayPal, Stripe, Square, etc. sets its own rates and fee structures.

Card Type

Credit card companies like Visa, Mastercard, American Express, Discover, etc. are independent companies responsible for setting their own credit card processing fee amounts. Amex, for example, is notorious for charging slightly more than the other three major card brands.

Transaction Type

Furthermore, fees vary according to transaction type: card-present (in-person) or card-not-present (online, phone, or manually entered). This is due to differences in security, fraud risk, and processing costs.

For example, swipe, chip, and tapped transactions will be charged a lower credit card processing fee because they are more secure—the card is present. EMV chip technology and PIN verification also reduce fraud, minimizing the risk.

Online, phone, or manually entered transactions will experience higher credit card processing fees due to higher fraud and chargeback potential (disputes where the customer claims fraud or purchase errors). The higher cost also helps cover extra security measures like CVV verification and fraud detection tools.

For these same reasons, debit card transactions will experience lower credit card processing fees than credit card transactions. They are lower risk and cost less to process. 

First of all, debit transactions are lower risk for banks. There is no borrowing involved. Debit transactions pull funds directly from the customer’s bank account, so there’s no risk of non-payment or defaults like there is with credit cards. And since debit purchases use the customer’s actual funds, chargebacks are less common compared to credit cards.

And debit transactions cost less to process. Because they often use a PIN-based network, they are more direct and secure which reduces fraud risks and the need for extensive fraud prevention measures. Plus, when a debit card is used, the money moves directly from the customer’s bank to the merchant’s bank, eliminating the need for a credit extension or underwriting, which adds costs to credit card transactions.

You can use this calculator provided by NerdWallet to calculate your monthly credit card processing fee cost estimate.

Consumers

Now, while there are charts and calculators to help businesses estimate how much they’ll pay in credit card processing fees each month, it isn’t so easy for consumers. The biggest reason is because there are less transparent ways that businesses can pass the cost onto the consumer such as increasing product and service prices or reducing discounts. 

However, according to the National Association of Convenience Stores (NACS), swipe fees cost the average family $700 a year. Paying with cash can minimize or eliminate this extra cost.

How Can You Avoid Credit Card Processing Fees?

Businesses

If you feel like you are spending too much money on credit card processing fees, you can strategically choose a processor with lower markups or negotiate rates with a current processor. Sidestep avoidable fees by looking for a processor that doesn’t charge statement fees, minimum monthly processing fees, etc. And try to keep your chargeback rate to a minimum to reduce your perceived risk. High rates of chargebacks can cause providers to increase your transaction fees.

But obviously, the less credit card transactions you process, the less credit card processing fees eat into your revenue. Debit card transactions charge lower fees than credit card transactions. But you can’t really control the card type a customer uses where cards are accepted. So offer discounts for cash payments to promote cash over credit transactions.

You can also pass fees on to customers. However, there are some states (like Connecticut and Massachusetts) that have laws against credit card surcharges. In these states, it is unlawful for a retailer to add a fee to a credit card purchase to cover the processing fee. But every state allows for cash discounts. Cash discounts are protected by U.S. Code, so retailers can encourage customers to use cash over card.

Consumers

It goes without saying that if you don’t pay with a card, you, in many instances, pay less. It is not uncommon to see a discount for paying with cash or an extra charge for paying with a card. 

For example, according to a 2022 study conducted by NACS, 29% of participating convenience stores said they were offering consumers discounts for paying in cash. Convenience stores have noticed the impact the overall rising costs of goods and services have had on consumer buying behavior. “While sales and traffic have slowed as gas prices climbed, retailers continue to seek out innovative ways to provide value at the pump and inside the store to help their customers extend their paychecks and weather this period of inflated costs,” said Jeff Lenard, NACS vice president of strategic industry initiatives. 

Add to that the fierce gas price competition, and it’s no wonder we’ve started seeing two different prices at the pump: one for cash and one for card. KVUE reported that “NACS has repeatedly surveyed customers about their price sensitivity at the pump and has found that nearly half of all consumers would change their behavior to save 5 cents per gallon.”

According to convenience retailers surveyed by NACS, credit card processing fees average more than 10 cents per gallon. Therefore, not all businesses are passing the entire cost of credit card processing fees onto the customer but might, in some cases, simply be sharing it.

ATMs Can Help!

Want to encourage more cash transactions in your store? Want to transition to cash only? Both are possible by installing an ATM in your store or business. We make it easy to get started. 

You can purchase a machine for your location and earn the surcharge fee on withdrawals on top of avoiding credit card processing fees. Or, we can match you with a professional who will place and operate an ATM in your location hassle-free—for free! If you’re ready to save money on credit card processing fees, click here to get started today.

ATM Machines, A Buyer’s Guide (part 3)

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A Buyer’s Guide (Part 3)

ATM Machine Buyers Guide image of Cash

If you’ve read part 2 of the [intlink id=”2013″ type=”post”]ATM Machines, A Buyers Guide[/intlink], you’re ready for part 3. Now you know if you want an automatic teller machine at your place of business or if you want to own and operate ATM machines as a business.

Let’s say you own a local brick and mortar business, but you don’t want to purchase the machine outright, you basically have three alternatives: leasing the ATM or arranging payments over time, opting for a free ATM placement program, or partnering in an ATM co-op program.

First, Leasing: Hardly anyone leases an ATM anymore. Most sales reps that try to lease ATM’s are looking for big commissions. It’s difficult to get a lease on a $2500 piece of equipment so they have to jack the price way up to get a leasing company to even consider it and then you’re paying them big commissions. It’s actually easier, cheaper and better to pay for the ATM with a credit card or to ask your bank for an equipment loan to include other equipment you may need in your business and to include the price of the ATM in the loan

First, if you really want to lease an ATM, (I’d like to talk you out of it) but you may need to search the Internet (or the yellow pages) for leasing companies located reasonably close to your business or get a recommendation from the vendor. Try sampling a few such companies to find the most favorable leasing terms – each company’s agreement will be different to some extent, but most leases go 5 years. First, and most importantly, you want to figure out who’s offering the lowest cost for a lease. Also, who determines how much your customers will have to pay in ATM fees to make your lease payment each month so you don’t have negative cash flow. Leasing companies will rarely over fund the equipment lease to give you extra cash to fill the ATM. Some business owners think this is a great idea, but the cost of that extra cash is very high and not worthwhile.

You should also compare the economics of leasing versus buying to be absolutely sure that you’d prefer to lease. Specifically, you should weigh the following factors:

  • If you’re planning on leasing a machine for a long time it would save you a lot of money in the long run just to purchase one.
  • If you can take out a loan at your bank verses leasing, that is the next best option instead.
    • Note that some vendors offer short term funding options such as 60 or 90 days. Since most ATM’s these days are typically under $2400 most business owners pay cash or use a credit card, however, we have seen deals where a merchant is able to put 50% down on a credit card and float the balance for 30 days.
  • Would buying an ATM allow you a substantial tax deduction – or could you get more tax deduction mileage out of deducting the annual costs of leasing an ATM?
  • Does it seem as though you’d stand to make a lot of money from ATM surcharge fees? If so, then owning an ATM might be the more lucrative proposition.

Second, Free Placement Programs: The next option for you as a business owner may be to consider entering into a free ATM placement program. If you’ve never heard of this option, you should know that free ATM programs have been around for a long time. What you have to do is find either a local or national ATM vendor that runs such a program and fill out an application.

Free placement programs typically require  that your business needs to be attracting a certain number of customers each day in order for you to earn acceptance. If you’re accepted, the vendor will ship an ATM to your business, install it, maintain it and service it as needed. Some free programs even take care of restocking the cash in the cash dispenser for you. In addition, you may qualify to receive some portion of the surcharges that the ATM collects, which the vendor will send you either through direct deposit or in the form of a check.

All in all, a free program is, no doubt, the easiest way for business owners to obtain an ATM. However, the profit potential from such a system, obviously, is much lower. Note, too, that companies offering free placement ATM’s will require a substantial amount of information about you and your business (they will even be delving into your bank account figures) before they approve you for such a program. While the free placement program sounds great, it takes the longest to get approved and returns the least amount of profit.  The pros are that you don’t have to deal with the ATM machine at all.  It may be easier to get approved from a small local company verses a large national company if you can find such a local entrepreneur willing to take on your business as part of their ATM portfolio.

Third, Co-Op Program: The last option to consider and a bit newer, is to enter into an ATM co-operative program. Under such an arrangement, you’d buy half the ATM and load the cash. That is, you’d be co-owner of the machine, paying for half of the upfront cost and half of all the operating and repair costs.

An ATM vendor, the other co-owner, would pay the other half of those costs. In a way, this kind of program splits the difference between owning an ATM yourself and getting a free placement or owning the ATM outright.  That is, you get a much larger share of the profits verse a free placement program would allow, but you also have more maintenance responsibilities. And, you’d get a lot less than if you owned the ATM outright yourself.

While co-op agreements, like leasing agreements, can vary widely, if you’re in such a program you’ll probably have to replace the receipt paper, load the cash as necessary and provide first line maintenance (FLM). FLM includes clearing a paper receipt jam or a cash jam. The co-op deal is more suited to a hands on business owner or manager who doesn’t necessarily have enough cash to purchase the machine outright. By the way, it’s your own cash that will go into the machine. And you’ll have to decide if you want o install any security features – a new camera or an alarm, for example or if you’ll just remove the cash from the ATM each evening like a cash register.

An extra benefit of the co-op program, however, is that the ATM vendor can figure out where to place the machine within your business, and can also provide you with helpful advice when you’re still a novice at ATM operations. That way, you can really maximize the profits you’ll get from your ATM. In some instances you can agree to a buyout over time if the vendor is in agreement.

Once you decide if you want to own the ATM or have someone else do it, it’s time to decide who is going to load the cash.  We’ll talk about that in the next ATM Machines, A Buyer’s Guide in the near future.  Have questions, [intlink id=”509″ type=”page”]contact us[/intlink].