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Credit Card Processing Fees

This is a guest post from Manshu of OneMint. If you like what you see here, please consider subscribing to his RSS feed.

Have you ever noticed that some retailers don't accept certain credit cards? For example, while Visa and MasterCard are widely accepted, American Express card are often turned away. The reason for this is simple…

When you use your credit card to make a payment, the retailer doesn't get to keep 100% of the transaction amount. Rather, they pay a "merchant discount fee," which can vary based on the type of card involved.

For example, whenever you use your Visa card, the retailer loses as much as 3% of the transaction amount in fees. In fact, these sorts of fees apply to credit cards, debit cards, and even prepaid cards. While the calculation of these fees* can be quite complex, a simple example will shed some light on how it works.

Consider a scenario in which you go to the grocery store and use your Visa card to buy groceries costing $100. From that $100, the retailer might get $98 or so. Of the remaining $2, about $1.75 would go to the bank issuing the credit card (the so-called "interchange fee"), about $0.20 would go to Visa, and the remainder would go to the retailer's merchant account provider, who initially processed the transaction.

Interestingly, these fees get collected on a per-transaction basis. Thus, even if you never pay a penny in interest or fees to your credit card issuer, they're still making money when you swipe your card. Among other things, these fees help to pay for cash back and/or other rewards programs.

Not surprisingly, retailers are sensitive to these sorts of fees, and often choose whether or not to accept certain types of cards accordingly. Indeed, as I noted above, American Express is less widely accepted than Visa and MasterCard, and one of the main reasons for this is that they charge higher fees to merchants.

*Note: Here's a link to a description of the fees charged on a Visa transaction.

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10 Proven Methods to Decrease Your Shopping Cart Abandonment Rate

Moving customers through the checkout process effectively is a critical element toward closing any sale online. Providing your customers choose to order directly from your website rather than over the phone, the information you present to them during checkout is ultimately what will help them decide whether or not to complete the purchase.

Throughout this process you will need to continually reassure them, providing them with the necessary elements essential to developing trust and security. These elements are commonly called customer assurances. Their job is making the customer feel comfortable enough to complete the intended action (i.e. buying your product.)

Cart abandonment is a problem that all eCommerce sites see in some degree. The rate at which your visitors abandon depends on how effective you have structured the checkout process. Shopping cart abandonment is an important statistic that needs to be tracked as it could mean the difference between a profitable eCommerce store and a potential loss.

According to industry publications, average shopping cart abandonment rates are between 60% - 70%. Put in to sample numbers, if you have 100 people start the checkout process and 65% abandon it, you just lost 65 sales. To take that further, if your average order value is $49 you lost $3185 in revenue.

To further demonstrate the hit your business just took, not only have you lost revenue but you lost 65 potential new customers as well. This translates to an undeterminable amount of future recurring revenue through repeat orders.

Many factors that contribute to cart abandonment are out of the merchant's control; however there are a number of factors you can concentrate on that will help reduce the overall effect on your store.

1. From a technical perspective, make sure your cart is working properly and is free of bugs. As elementary as this may sound, it is a vital component that often is not given the weight it deserves. Simple logic tells us that if a cart is not working correctly it will prevent a customer from being able to order. To alleviate this potential problem you should go through your order process and ensure it is free of bugs and works as you expect. It would be a good idea to also have others go through and test it periodically - especially after any updates to code or structure have been made that involve the checkout process.

2. Keep your pricing competitive. Customers are also shoppers. What I mean is they are always searching for and comparing similar products prices. Unless your product is totally 100% unique and not easily duplicated, you must be aware of the price you assign to it. With the increase use in shopping comparison sites by consumers and in light of the current state of the economy, competitive pricing is more critical than ever. If your prices are out of the ball park your customers won't stay to watch the game.

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