Several weeks ago, I wrote about options for small businesses that want to obtain their own merchant accounts so they can accept customer credit cards directly rather than having to go through a payment service like PayPal. Once you are able to process credit card payments yourself, there's another important consideration: You still have to deal with the fees charged by the companies that process credit card transactions.
Most small business owners don't know which credit card processing companies to approach, and may not realize they have the ability to negotiate fees to get the best rates. They need to get up to speed on the terminology and the dizzying variety of processing rates, which vary by card type and whether the transaction is a physical card swipe or an online payment. That's where a service called FeeFighters comes in. FeeFighters provides a platform in which credit card processing companies bid for the right to process your transactions. The company that bids the lowest processing rates wins your business.
FeeFighters, for its part, doesn't charge you for its service - the winning credit card processors pay FeeFighters its own fee for getting your business.
Daphne Wong sells everything from aprons to plush food toys (that's not a typo) at a brick-and-mortar store called Hungrybunny located in the Russian Hill neighborhood of San Francisco and from her own website, Hungrybunny.com. To Daphne, FeeFighters was the "Holy Grail" of "honest, thorough information" about credit card processing that she'd been looking for.
"As I was getting ready to launch Hungrybunny online a year and a half ago, I scrambled to decipher the basics of credit card processing, merchant accounts, payment gateways, etc., etc," she explains. Her own bank (Chase) was less than helpful. She initially chose a merchant account reseller "based on a rudimentary comparison of rates and fees that I recognized: setup/application, authorize.net, per transaction, discount, monthly minimum, etc. I just needed something, and hoped they wouldn't steal my money." She turned to FeeFighters when she opened her brick-and-mortar store a year later. She found the site and its customer service team especially helpful.
For Lucy Fairweather of Santa Monica, CA, who sells surprise gift packages online through her Web-based store fair ivy (fairivy.com), FeeFighters was a good alternative to eBay's payment service PayPal. The problem wasn't PayPal's transaction fees, however. "PayPal had trouble with subscription orders - you had to actually sign up for an account to purchase from us, which may have turned customers away. Also there was no way to organize my customer data."
For Sean Harper, CEO of FeeFighters, the impetus to start the company was his own experience with high processing fees. He was running a satellite radio ecommerce website called TSS Radio when he started shopping for a credit card processor. He was frustrated by the difficulty of making "apples to apples" comparisons between different providers.
After a long search, he settled on what seemed to be a good deal. A year later, he analyzed his credit card processing fees and found that he had overpaid by about $40,000. He started a blog and then launched FeeFighters to help other business owners understand processing and find a reputable processor.
Chicago-based FeeFighters has helped about 10,000 business owners comparison shop for credit card processors. The company's clients have businesses that accept credit cards, either through a brick-and-mortar facility or online - or both.
"Small to mid sized businesses tend to be ripped off by credit card processors the most since they don't have the resources that large corporations have to hire an expert to negotiate fees down for them," says Sheel Mohnot, Director of Business Development. "FeeFighters is able to save most businesses of that size an average of 40 percent on their credit card processing fees quickly and easily. For small business especially, this is a huge boon."
Daphne Wong isn't sure if FeeFighters is saving her 40 percent on processing fees or not. It's clear from her comments that she doesn't have time to track her transactions and compare this service to her previous processor. She does know that she is able to get Interchange Plus pricing, which is a lower rate than she got from her first processing service.
For a Visa consumer debit card purchase through her brick-and-mortar store, Wong is being charged .9 percent by her FeeFighters processor. For ecommerce purchases, she is being charged 1.79 percent for Visa consumer debit card purchases. Her previous processor charged 2.1 percent for ecommerce transactions (additional transaction and other fees apply in each case).
Fairweather estimates that her fees with FeeFighters are about 1.5 percent of the price of each sale, or typically, 40 to 50 cents per sale.
Wong adds that besides lower rates, another advantage of using FeeFighters is the fact that they have vetted processors and chosen ones that are reputable, saving small business owners the burden of shopping and evaluating on their own.
That's a good thing, because many credit card processors don't have the primary goal of saving businesses money, says Mohnot. "You'd think that since they are all selling similar products, there would be similar fees, but credit card processing is an extremely lucrative business if you're willing to rip off your customers," he says. "Credit card processors make 90 percent of their revenue from businesses that represent just 35 percent of national sales revenue. In other words, they can make money from business owners who don't realize they are getting ripped off."