Credit cards are the lifeblood of most businesses. But if you accept credit cards, the costs and challenges accumulate quickly.
Here are five facts that you should know:
The Prevalence of Credit Cards
Credit cards remain the leading source of payment, at 53 percent of all purchase volume, and $5.6 trillion in U.S. transactions in 2023. The pandemic accelerated a shift to digital payments. In 2023, one in five retail sales was online—up 7.6% from 2022.
The Sky-High Cost of Processing Fees
Credit card processing fees can chew a hole right through your bottom line.
Here’s how that looks:
- Visa and Mastercard interchange fees range from about 1.15% to 2.50% plus a flat fee, typically in the neighborhood of 5-10 cents.
- American Express will likely be more expensive, in the 1.43% to 3.30% + a flat fee category
- Assessment fees: Those 0.13% to 0.15%:
- Visa: 0.14%
- Mastercard: 0.1375% for those under $1,000; 0.15% for $1,000+
- Discover: 0.13%
- American Express: 0.15%
- Payment processor fees: The 0.5% to 2%
The Chargeback Challenge
Businesses selling tangible products tend towards chargeback rates at or below 0.6%. Time-based, digital, and service-selling industries more than often present higher levels of chargeback.
Chargeback rates must be monitored. When chargeback rates are above a threshold level, which has traditionally been considered to be about 1%, the processor will penalize the business by charging them more for processing or may close the account altogether.
Changes in Consumer Practice
Younger generations increasingly do not use traditional credit cards. Only 50% of Gen Zers have a credit card, much lower than the corresponding ages for previous generations. For instance, 66% of Millennials have had credit cards when they were that age. While younger generations are indeed moving away from traditional credit cards to other forms of payment, there is no desire to eliminate credit cards. Rather, they employ credit cautiously and strategically due to pressure from finances and the need for flexibility.
Rise of Alternative Forms of Payments
In addition to these, merchants are increasingly accepting alternative payments:
- Digital wallets (Apple Pay, Google Pay, etc.)
- BNPL services
- Direct bank transfers (ACH/eCheck)
- eCash- In this case, for consumers who lack access to a traditional bank or credit card account.
This post was written by a professional by Exzact Business Solutions. TRANSPARENT | AFFORDABLE | SIMPLE Merchant Services, Websites, and Social Media Done Right. https://exzactbusiness.com/ are on a mission to educate local businesses to ensure smiles, savings, and solutions. Exzact clients save an average of 30% on their processing alone. No Contracts, Free Equipment, Local Support, No Rate Increases, and More. Exzact Business Solutions goal is to educate the local business community in order to ensure smiles, savings and solutions. Exzact Business Solutions is an Independent Sales Organization with strategic partnerships dedicated to cultivating reliable and trustworthy relationships in the Payment Card Industry, allowing to tailor products and services to the needs of each merchant. Contact EBS and see what a difference having the right advocate can make!
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