Submitted by Daniel McGugin
Iroquois Merchant Services

The growth of non-cash payments shows no sign of abating as more consumers turn to credit and debit cards – rather than cash and checks – for their purchases. Card payment (credit and debit) transaction volume jumped 8.9 percent annually from 2015 to 2018, according to a U.S. Federal Reserve study that was released in December 2019. Total expenditures during that time increased 8.6 percent per year to $7.08 trillion.

Today’s savvy gift shop owners know they must accept multiple forms of electronic payments to grow their business. The challenge most companies face is determining the best credit card processing option that both provides their customers with different payment options and is affordable.

Selecting the best electronic payment processing solution, however, involves more than finding a merchant services provider who charges the lowest fees. Important considerations include the type of product or service you sell, the average purchase price and transaction volume, to name just a few.

Here are the three primary credit card processing options and what to look for when selecting the solution that’s best for your shop:

Zero Cost Credit

One option for retailers is what is commonly referred to as zero cost credit card processing (ZCC). With ZCC, the processing fees are passed along to the customer when purchases are made by credit card, meaning merchants keep 100 percent of the sale. Customers have the option to use their debit cards as a no-fee option.

Businesses that benefit the most from ZCC are those that have a loyal brand following. Their customers value their product or service – much more than any competitor’s – and they are willing to pay for it. B2C examples include favorite restaurants/coffee shops, hair salons/barbershops and bakeries/butcher shops. B2B examples include electricians, plumbers and computer tech repair stores where expertise, relationships and reliability are important in the purchasing decision.

ZCC is not a “one size fits all” solution. Businesses risk losing customers because their clientele might get turned off paying more of their hard-earned dollars just for the convenience of using a credit card.

Flat-Fee Processing

Another option is flat-fee processing, where businesses are charged a fixed amount per transaction.

The simplicity and straightforwardness of flat-free pricing can be appealing to retailers because they can better predict – and budget for – the cost of electronic payment processing. The downside is that retailers could be overpaying at the expense of convenience.

Traditional, Tiered Pricing

Tiered pricing is the most common payment solution option – about 90 percent of businesses use it – but it’s also the most confusing. Merchants pay on average anywhere from 2 to 3.5 percent of the purchase price in interchange fees per transaction. Those fees are determined by multiple factors, including, but not limited to:

  • How the card is taken (card present or card not present (CNP)): This affects the interchange fee, which is directly related to risk involved in taking a card. With CNP purchases, the risk is higher and so is the fee.
  • Type of card: Rewards card, debit card and standard credit cards all have different rates. The fancier the card (more points and rewards), the higher the interchange fee.
  • Brand of card: Visa, MasterCard or Discover (where the interchange rates are nearly identical) or American Express (which charges a higher fee).
  • The type of products or services sold: Card issuers, not surprisingly, view different industries as riskier than others.

Businesses with large transaction volume and low-ticket prices benefit the most from traditional tiered pricing. That said, business owners can find it difficult to figure their monthly credit card processing bill due to the myriad of fees and charges. Additionally, some shady credit card processors will lure merchants with “low prices” and then bury in the fine print of contracts additional, expensive charges for items, such as monthly minimum processing fees or non-qualified transactions. If you opt for this pricing structure, be sure to work with a reliable processor with no hidden fees.

Credit card processing is an important, but often overlooked part of most businesses. Far too many retailers don’t research their product/service sales mix and consumer purchasing behavior when selecting a credit card processor. If you review these three payment solutions – and work with the right partner who delivers superior payment technology, world-class customer service and transparent pricing – you will be on the right path to lowering your fees and growing your business.

Daniel McGugin is president and CEO of Iroquois Merchant Services, a credit card processor based in Nashville, Tennessee. Visit Iroquois at or on Twitter at @IroquoisMS.