Tag Archives: credit card processing

Three Common Arguments against Accepting Credit Cards

A look at the cost of not accepting credit card payments in your small business

Our previous article looked at three specific cost advantages to accepting debit card and credit card payments in your small business. Equally important is the financial risks you might incur if you don’t accept credit card payments.

There are three seemingly strong arguments I hear small business owners use, reasons that, at first blush, seem compelling, but that ultimately end up costing their businesses more money than if they had accepted credit card payments. Let’s take a look at these.

Argument #1 The old-school way is working just fine, thanks.

This argument usually takes one form or another, such as:

“I’ve been taking checks for classes for the last 20 years.”
“My parents always pay by cash or check, and I see no reason to change or pay the extra fees with merchant processing.”

This is something I hear from time to time from prospective ClassJuggler clients. The truth is that the “old school” ways of bringing in money can be much more expensive.

A good question for that studio owner is, “Have you actually talked to your customers and asked them how much they enjoy writing you a check each month?”

The reality is that the overwhelming majority of parents would find it much more convenient to have their credit card billed automatically each month rather than write you a check. Seriously, who even carries a checkbook around with them anymore?

Argument #2 – “The fees and complexity are just too much.”

Here is something I’ve heard more than one prospective ClassJuggler customer say: “Merchant processing is expensive and complicated; I just don’t have time to figure this out.”

While merchant processing and its associated fees can be confusing and complicated, when it is fully integrated into your studio management software, it becomes trivial to use.

As to costs, I encourage you to take a moment and answer the following questions, and see how this adds up:

How much time do you spend chasing down late payments?
How much time do you spend collecting cash or check payments each month, either at the front desk or by mail?
How much time do you spend organizing deposits and visiting your bank branch?
How much in time and cost is wasted on NSF bounced checks?
How much time do you spend monitoring your checking account to see when checks clear and are deposited so you can pay your bills?

The reality is that most business owners do not take into consideration their own efforts spent on these time-intensive tasks. They don’t understand the real costs of their current payment process. And they often discount or ignore the inconvenience to their own customers.

After answering the questions above, add up the time. Typically, it adds up to at least 4 hours, usually much more. If you could save 4 to 8 hours monthly on payment collection, how much would that time be worth to you? That time could be turned into more classes taught, or time to better market your business, or time to plan that big open house event to promote your business.

Time really is money and saving 4, 8 or more hours monthly more than pays for the costs of accepting credit and debit cards.

Argument #3 – “Many of my customer’s aren’t online”

Statistics from June 2017 show that 88% of North Americans and 80% of Europeans are now internet users. The International Telecommunication Union estimates that about 3.2 billion people, or almost half of the world’s population, would be online by the end of the year.

I.e., your customers are online.

Accepting credit and debit card payments, particularly online, is a competitive necessity these days. Ultimately all dance, gymnastics, tennis, swim, martial arts, and music schools are, and must be, 100% customer service oriented. You want all of your students to have the best experiences and education you can give them, right? Why not continue that experience in how you interact with their parents, or with the student who is also the paying customer?

Think about this: If you lived near two identical grocery stores that had similar pricing and similar items but one store only accepted checks and the other only accepted credit or debit cards, which one would you visit? Can you imagine running to the store for a last-minute item you needed for a party and having to stop, pull out a checkbook, fill it out, wait for them to enter and scan your check and check your ID before being able to check out?

Pennywise and…?

Many businesses only look at the costs associated with a merchant account and consider it “money out the door.” They maintain their old policies of cash and check only payments. While they may save money on the costs of accepting credit and debit cards, they aren’t really saving money when you factor in the costs of not accepting cards as payment.

ClassJuggler offers schools and other class-based businesses the ability to accept credit cards easily and affordably. When you let customers pay for classes online with a credit card, you get paid fast, and without the hassle or expense of collecting payments at your business, manual mailed billing, or check processing!

Setting up customer accounts and processing payments is simple. We’ve integrated these features right into our acclaimed ClassJuggler interface. Our affordable merchant payment processing option integrates account management and credit card processing technologies within ClassJuggler, making payment and processing as easy as a few mouse clicks.

Three Types of Savings You Get by Accepting Credit & Debit Payments

1. Decrease the time spent on your monthly billing cycle

A typical small class-based business, such as a dance studio, gymnastics school, or swim school of, say, 100 students can expect between 5% and 15% of their accounts to be late each month.

That may not sound like much, but that adds 4–8 additional administrative hours or more each month, chasing down payments from customers. Those hours cost you money and lost business opportunities. It also leads to grumpy studio owners.

Accepting credit cards for your business can reduce time spent on chasing down late payments by 50 to 80 percent. Think what you could do with an extra 4 to 8 hours each month!

2. Reduce uncollected debt

Another cost of running a small class-based business is uncollected debt. When a parent who could not afford your classes gets too far into debt, they are likely to never pay you back the full amount.

Shifting responsibility from your studio to the customer’s credit card company allows you to collect those fees even if the customer defaults on paying their credit card bill.

3. Keep your administrative costs down

As your business grows, you will likely add instructors and more class types to bring excellent services to your students and their parents. But at the same time, you don’t want your administrative costs to skyrocket.

Rather than adding additional admin staff to deal with customers, take those savings and invest them back into your classes and instructors by empowering customers to pay their bills to you online, unassisted by you.

In our next article, we’ll also look at the cost of NOT accepting credit card payments.

The Costs of Accepting Credit Cards

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If your business isn’t accepting credit cards for payments, the efforts to do so may seem daunting. Is it worth it? Before you can know the answer for your business, it’s critical to understand the fees involved in accepting credit cards.

Let’s focus here on the e-commerce aspect as we evaluate what it takes, cost-wise, to make online payments via credit cards or bank cards available for your customers.

As we reviewed in earlier articles (see Merchant Processing 101 and The Top 5 Benefits of Merchant Processing for Your Business) a merchant account is actually the combination of two things: a gateway service and a merchant account.

Those two entities represent the primary costs of owning a merchant account – the foundation for accepting credit cards for customer payments.

Gateway costs

The most popular payment gateway service in the U.S. is authorize.Net. It is used by many of the online software companies, including ClassJuggler. It’s pricing model is very simple. Typical pricing looks like this:

$15 to $25 monthly
Small per item fee of 6¢ – 10¢ per transaction

Merchant processing gateway costs

The merchant account is one of the most complicated kinds of accounts to understand from a pricing standpoint, because:

It can contain so many different elements.
There are so many different providers.

Looking at a monthly merchant statement is just as much fun as looking at the details of your cell phone bill with all of the crazy little regulatory, network, and other surcharge fees. Let’s explore the four major elements to your merchant accounts cost:

Interchange rate fees

The card networks – Visa, MC, Amex, Discover – all have tables of rates that are assigned to each and every credit and debit card available. Some of these tables contain hundreds of card types each with its own rate. These published rates are referred to as the Interchange rate for a card.

Think of it is the base cost of that card transaction. That interchange is what Visa and MasterCard make in profit on each transaction you run.

Discount rate fees

The discount rate is a tiny percentage (usually between 30 and 80 hundredths of one percent) added to the Interchange rate and represents the “profit” component that the merchant account reseller makes on your business for each transaction.

Per item rate fees

Each transaction has a “per item” fee. It represents a baseline fee for any transaction so that, if the transaction is particularly small, say $5, the reseller will still cover its costs.

Per item fees generally run between 5 and 15 cents per transaction with an additional 5 and 15 cents often added for address verification services.

Other fees

On top of all the fees mentioned above, there are additional fees added on to your monthly bill, for things like

PCI compliance
Statement and management fees
Government regulatory fees, network fees
Monthly minimums
Foreign transaction fees

Many of these fees are often obscure and hard to understand and may remind you of the bewilderment you feel when looking at your phone bill.

These other fees typically add an additional $10 – $20 or more to your monthly fees. And while these represent a small part of your overall bill, they are usually constant.

So Exactly How Are Merchant Accounts Priced?

We just looked at the four cost components of a merchant account, but this doesn’t account for how they are priced by the reseller. There are generally two ways merchant accounts are priced for consumers:

Bundled or tiered pricing

This type of pricing takes large groups of credit card types and rates and groups them together into tiers for simplicity. These tiers represent the percentage and per-item costs you will pay per transaction.

This allows the processor to classify interchange fees under its own rate structure by assigning individual interchange categories to its pricing tiers.

Each reseller can bundle these tiers any way they want, which can be good, neutral, or bad for merchants, depending on how the groupings are determined. These tiers are usually referred to as Qualified, Mid-Qualified, and Non-Qualified.

Interchange plus, cost plus, or pass-through pricing

Another way of pricing merchant accounts is what is often called interchange plus, pass-through or cost+ pricing.

Cost+ pricing ensures that every card transaction is processed at its exact cost as established by the card industry. The reseller then adds their discount (or profit) to each transaction plus their per item fee to calculate the final cost. This makes this pricing model easier to understand.

One Example of Bundled or tiered pricing

The table below shows how a processor might organize nine common Visa interchange categories under a tiered pricing model for a retail business.

So, for example, if a customer paid me $100 with a Rewards I card (in this example), it would be considered a Mid-Qualified level transaction. So 2.25% plus 31 cents, or $2.56 of my $100 would be paid back in fees.

Another example of Bundled or tiered pricing – how costs can increase even with the same rates!

Tiered pricing also makes it possible for a processor to increase your processing cost without increasing your rates.

“What?? how is that possible?”

Take a look at this chart. The card types and tiered pricing is exactly the same as the previous example, but if we move two of the card types that were in tier 2 pricing into the third tier, it ends up costing you more to accept those types of cards. I’ve highlighted those changes in red. Note the change in markup in the 4th column:

So using the same example, a customer pays me $100 using their Reward I level card. I would end up paying 3.35% + 31 cents, or $3.66 cents instead of the $2.56 in the previous example.

That’s $1.10 more for every $100 you receive!

Processors accomplish this by routing a greater number of interchange categories to the more expensive mid and non-qualified pricing tiers. And as a merchant, it’s almost impossible to understand how a reseller has structured their tiered pricing – the pricing itself is simple, it’s the details that matter.

Interchange plus, cost plus or pass-through pricing

Another way of pricing merchant accounts is what is often called interchange plus, pass-through, or cost+ pricing.

Cost+ pricing ensures that every card transaction is processed at its exact cost as established by the card industry. The reseller then adds their discount (or profit) to each transaction, plus their per item fee, to calculate the final cost. This makes this pricing model extremely easy to understand.

The table below shows three of the most common card categories along with their Interchange cost. Note how the discount, or profit, is the same regardless of the card used.

You can see how much simpler it is to calculate your cost. Simply add the discount to the published interchange rate and that’s your fee.

So, if a customer pays me that same $100 using their platinum cash back Visa, I would pay 3.65% plus 25¢, or $3.90 for that same $100.

Understanding costs is important, and now you understand a heck of lot more. But is it all worth it? will you be better off if you do accept credit cards than if you don’t? Believe it not, in spite of the fees and the mental circus of fee, most businesses conclude that it is.

In our next article on merchant processing for small business owners, we look at the savings or benefits you can expect from accepting credit cards.

Merchant Processing 101

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Understanding how to accept credit/debit cards in your business

Merchant processing and the software and network providers that make it all work is a complicated topic. As a school/studio owner, you simply don’t need to know all the mumbo-jumbo mechanics of merchant processing.

You are busy enough teaching classes and running your business! So we simplify the basics right here, outlining the steps you’ll take to process a credit card payment from a customer. And if you want to simplify getting set up with merchant processing even more, contact us – we can help!

The basics

Generally, people say “merchant account” when they are talking about credit card processing. But normally, there are 3 pieces involved in merchant processing that give you the ability to take a payment from your customers:

The Front End – The person making the payment
The Middle – The gateway that is authorizing and verifying the payment
The Back End – Your merchant bank who moves the money into your account

These three pieces are not necessarily things you have to purchase or manage individually. Think of them as one virtual process that is mostly invisible to you. But let’s look at each.

The Front End

At the front of every transaction you or the customer directly begin the transaction when processing a payment. The job of the front-end is to capture all of the important information about a transaction so it can be sent electronically for processing.

The front-end can be any of the following:

A physical retail card terminal – where you swipe or insert a chip card for payment. Just like the ones you see at the grocer or a card reader at a gas pump. These are not common for dance studios unless the studio is doing a lot of retail sales.

A virtual terminal – This is simple software, usually found aqs a form on a Web site, that you fill out with all of the details of a payment for a customer to process a single payment. These, too, are rarely used by a studio/school.

A fully integrated software frontend like ClassJuggler, which allows for additional features such as customer account history, secure card storage, recurring batch payment processing, emailed receipts, and more. This method provides the most value, time savings, and features.

The Middle

Sitting in the middle of all transactions is the gateway. An example of a gateway company is Visa’s Authorize.Net. The gateway’s job is to validate every transaction you or your customers process.

The gateway takes the information from the frontend and then contacts the issuing bank of the customer’s credit or debit card and validates a number of important things:

· Address verification
· Checking to see if the card is still active and valid
· Checking expiration date
· Making sure the cardholder has sufficient funds to cover the payment.

The gateway then tells the front-end whether or not the transaction succeeded or failed.

All successful transactions are then held as “pending” by the gateway until the end of the day when all the transactions are “captured” and then batched together and sent to the back-end processor for funding.

The backend

The backend merchant bank or processor is a three-fold job:

The backend bank/processor takes the batch file from the gateway and deposits the funds you have collected each day into your bank account.
The backend processor calculates all of the fees associated with each transaction, and then typically deducts those fees daily, or at the end of each month, for the entire month’s processing.
Finally, the merchant bank provides you with either a printed or online statement showing all activity and fees from your account each month.

If you’re a ClassJuggler customer, you can bring your own merchant processor or use our merchant processing service. Going through us will greatly streamline the process, at a well-negotiated processing service rate, and syncs up with your client data within ClassJuggler. Find out more about our merchant processing tools here.

The Top 5 Benefits of Merchant Processing for Your Business

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Debating whether or not it’s worth your time, expense, or effort to offer credit and debit card payments at your school by setting up a merchant account?

Most who do so find it’s more than worth it! Here are the top five reasons why.

1. Finally begin accepting credit cards and debit cards

While this may seem obvious, the greatest benefit a merchant account delivers is the ability to accept credit cards and debit cards instead of just cash or checks.

Today, it’s pretty much the “norm” that your customers expect to use the plastic in their wallets (, rather than cash or check) for all kinds of transactions. Therefore, to remain competitive as a business, it’s important to provide that payment option to them.

2. Increase enrollment and sales

There was a study performed by The Sloan School of Management at MIT which revealed that customers spend more when given the option to use credit cards over cash. In fact, their research shows that customers can spend up to 100% more!

Think about the impact of this at your school. Such an increase in financial transactions would directly impact sales and overall growth of your business.

3. Enjoy the benefits of better Money management

Accepting credit cards and enabling customers to make online payments for classes significantly streamlines the way your business handles transactions. Instead of counting cash, chasing late payments, and dealing with deposits, electronic payments keep you better organized and allow for better cash flow management and budget forecasting.

Credit card transactions also help prevent customers from building large balances due to your school because of their personal fluctuating income. Instead of you carrying these due balances on their behalf, such parents can now pay their full balance to you and go into a payment program with their credit card company. After all, it’s not your business to act as their personal bank.

4. Avoid bad checks

By using merchant account services and accepting electronic payments, your business completely avoids the hassle and costs associated with bounced checks.

5. Please your customers with the added convenience

A merchant account generates happy (and returning) customers simply because it gives them the flexibility to make purchases in different ways. Whether it’s with credit or debit cards, online payments or recurring billing, your customer can be at ease knowing the payment process is fast and easy!

ClassJuggler’s Merchant Processing Gets Even Better