Don’t Let Swipe Fees Steal This Holiday Season

Every holiday season, retailers look forward to a surge in consumer spending — only for swipe fees to barge in like the well-known green grouch, swiping away hard-earned profits one tap, insert and swipe at a time.

With consumer spending expected to jump by 7 percent, the average shopper is ready to spend an impressive $1,638. However, with 47 percent of shoppers reaching for debit cards and 35 percent opting for credit, retailers will feel the weight of those sneaky swipe fees with every single purchase. On average, swipe fees range from 1.5 percent to 3.5 percent of each transaction, depending on card type, transaction volume and some additional factors.

U.S. merchants paid a record $160.70 billion in processing fees to accept $10.589 trillion in payments from credit, debit, and pre-paid cards in 2022, according to Nilson. With swipe fees now ranking as the second-largest operating cost for retailers (right after labor), it’s time to make sure we’re not throwing holiday profits down the chimney.

Understand Credit Card Processing Fees

Tackling swipe fees begins by understanding how they work. The structure of credit card processing fees is similar to a holiday trifle — full of layers, including interchange fees, assessment fees and, of course, processing fees. There can also be a sprinkle of other fees, like chargeback fees, monthly minimum fees, early termination fees, and junk fees. Understanding these fees and their structure can help retailers manage costs more effectively and uncover potential savings.

Choose the Right Pricing Model

An easy way to cut down on credit card processing fees is to roll out a cash discount program. Offer customers a discount if they pay with cash but charge the full price for card payments. Think of it as a holiday bonus for both parties — retailers get reduced swipe fees, and cash customers save a little extra. This method incorporates processing costs into the pricing, helping retailers maintain their profit margins regardless of how customers pay.

A cash discount program reduces the number of credit card transactions, which means fewer swipe fees and significant savings over time. Retailers can offset up to 100 percent of their processing fees and retain a larger revenue share, leading to higher profits. Now that’s a happy holiday season.

Guard Against Credit Card Fraud

The No. 1 way to ruin the holiday season is credit card fraud. Fraud risk raises processing costs and chargeback fees. However, deploying a few smart tools and practices can help combat fraud. Use address verification systems, require CVV codes for card-not-present transactions, and ensure Payment Card Industry (PCI) compliance to keep these expenses low and bolster security. It’s the digital equivalent of putting out milk and cookies for Santa, ensuring your profits stay safe all season long.

By taking these steps proactively, retailers can slash credit card processing fees and retain more revenue. That’s a gift that keeps giving and a great way to prevent swipe fees from stealing this holiday season.

Austin Mac Nab is CEO and founder of VizyPay, a provider of payment technology solutions for rural small businesses across the U.S.