How does the decrease of credit cards and increase of debit cards affect your business?
CNN Money reported this week that the next generation has a different method about how they will spend their money. Due to the recession and credit issues, 20-29 year olds are using almost only debit cards. Most own only one credit card. This change coupled with a migration of other generations to debit cards during the recession has seen over a 500% increase in the use of debit cards for payments since 2008.
To clarify debit cards are any card that directly ties to a bank account. Every business that accepts credit cards does accept debit cards. Most debit cards can be run with a pin, creating a pin debit transaction. If it is run without the pin it will process just like a credit card. Many times the merchant doesn’t even know they just processed a debit card.
This is a major change for payment processing. So how does this affect your business?
Well it is great news! Debit cards typically process for at least half a % lower than credit cards. They have fewer issues with funding and rarely take 72 hours to process. Your business should save overall and get your money faster.
The only way to take advantage of this saving is to have either a debit payments tier or pass through processing. Basically, if you have “one low rate” you are paying to much.
For example lets say you are paying 2.75% per swipe. When a customer pays with a debit card the interchange starts around 1%. That means your fixed rate almost tripled your processing cost.
Additionally many processors charge an additional fee on debit cards. This was a practice started because debit cards can have a higher per transaction cost (not to be confused with the % of volume cost). While this is typically only $0.05 processors do add it on beyond the already large mark up of a fixed rate.
Basically, if you haven’t reviewed your pricing lately it’s time. Contact Us and we will be happy to help.
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