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Why Online Credit Card Fees Don't Really Matter For Small Business

Hand holding credit card.Small business owners often worry about credit card fees.  Having set up hundreds of small businesses with all kinds of payment systems, I can tell you that credit card processing fees don't really matter.  If that sounds crazy hear me out....

First lets establish what the possible range of credit card fees is, it's not zero.  When a small business is offered a credit card processor the fee is usually between 1.2% and 2.9%.  This is important, because the best negotiation or deal from a credit card processor will only save you 1.7%. Realistically unless you're a non-profit the best savings a small business can get is 1.0%.  Then there is the hidden cost....

Every payment processor needs to be integrated.  On a website that means connected to the shopping cart. In store that means hardware.  Either way user experience is impacted, the better the experience the more sales you make.  Plus you'll have to deal with reporting, for taxes, for accounting, and for inventory.  Again from experience you'll drop $100 an hour to integrate a custom payment processor, get your accountant to analyze your reports, or file your business taxes.  For example, 5 hours of developer time, accountant time, and tax consultant time, will cost your business an extra $500 each.  Why is this important when considering the processing fee?

In every situation I've seen, you get what you pay for.  That 1% savings in fee will cost you time and setup dollars.  Let's say you go with a more expensive payment processor that integrates into your website in one click.  That saves you $500, your small business would have to process $50,000 to justify the custom integration of the lower processing fee.  Let's say your payment processor integrates with your accounting service, saving you another $500, now you're up to $100,000 in required sales to justify the lower fee. Most small businesses, real small businesses, dream of hitting $100,000 in sales their first few months.  Long story short, fees aren't the only cost you have to worry about when picking a credit card processor.

This is true especially for websites, where user experience is key to increasing sales.  For example, our product AwareLabs provides built in marketing tools for every site that easily boost sales by 20%. The payment processor we use charges a 2.9% and you can set it up yourself in three mouse clicks. Aside from saving you hours of work, the marketing tools ensure your site will sell 20% more, making the processing fee irrelevant.  You'll make more money if you don't obsess over the processing fee, there are more valuable aspects of your business to worry about.

Written By: Paul Kenjora

Paul Kenjora is the Product Manager and founder at AwareLabs, a company that provides the next generation website builder for small businesses. He has 10+ years product development experience, has launched sites netting millions of visits a day, and has consulted for fortune 500 companies.