Credit or debit? How many times a day do we ask and answer this question? If you’re a bookstore employee and you’re not asking this question, you should be.
I think most of us know, it’s cheaper to ring up sales as debit cards, but do we know why? Well, yes and no. Yes, because you can see the savings when you look at your bank’s monthly merchant service statement. And, no, because sometimes those statements are very hard (deliberately, I feel) to decipher. If you want to understand more how complicated the Visa and Mastercard fee structure works, read the following article from the New York Times.
Businesses don’t necessarily need a separate keypad for an additional monthly fee, they can just turn the machine around and have the customer punch in their PIN on that. Ours is actually fun to use because the cord isn’t long enough so folks have to get right next to it, but nobody minds. For most customers it’s cheaper to use their card as a debit, too. So it’s a win-win for everyone.
By having customers input their PIN number at the register, I save a lot of money. Here’s the breakdown with Visa and Mastercard: rung as credit cards. my discount is 2.04%; with those same cards rung up as debit cards, the discount falls to 1.690%. It may not sound like much, but for every $100 I ring up as debit I save .35 cents. That’s a savings of $3.50 per thousand. I know it doesn’t sound like much, but do the math at your store, and you’ll be shocked how much you can save. This is just the discount savings. Every card comes with its own special fee structure, and again, any card used as a debit saves more, every time. At mininum it’s ten cents per debit saved, sometimes the savings is as high as fifty cents, per transaction. The saving potential is truly staggering.
Not sure what to do? Have a review with your credit card processor, and go over your statement, line by line, with someone from the bank so you really understand it. Ask what the savings would be if you added the PIN input option. They give you a real estimate, based on your past history, what savings you might reap by using debit cards all the time. Update your equipment. Talk to your bank about lowering your fees. If you don’t already have your credit cards processed through the ABA, I urge you to check out this service. It’s amazingly low cost, and in 13 years, I haven’t paid for one roll of paper or shipping on that paper.
Every once in a while, I’m going to present small things a bookstore owner or manager can do to save money this year. Together, by cutting costs here and there, I hope we’ll all make a little, maybe a lot, extra money at the end of the year.
Is your store doing anything different this year to save money? Please share!
As a bookstore customer, I try to pay with cash; when I can’t, I pay with a debit card. I’m glad to know it saves my bookstore a little bit of money.
Credit card companies being misleading?? How could we *ever* believe that?? ; ) I try to always use the debit option, especially at small businesses, as I know it saves them money. The problem is that most people manning the registers aren’t the owners, and don’t care. It would help to train your people (that’s a general you, not Josie specifically), so that they can gently suggest debit as better for their business. No-one really wants to give the credit card companies more money, so simply saying ‘It costs us less in fees if you use debit,’ would do the trick for most people!
Using the debit option may save stores money, but most customers will safe on debit card fees by using their cards as credit (no fee) transactors.
Great article! Another easy way for bookstores and other small businesses to save money on credit card processors is to comparison shop for them using TransFS.com. Much like you shop for plane tickets on Expedia, bookstore owners can get a variety of bids from processors with an average savings of 40%. Also, check out the Credit Card Processor Directory to see what other business owners are saying about processors -like restaurants reviews in Yelp.
Following on Steve’s comment–a lot of people I know get cash back on purchases with credit cards (if you pay your balance in full each month). So although I’d like to help out my local bookstore, I like to help myself out too, esp in this tough economy!
I love the money-saving ideas. Here are two things I did recently and am saving about $150 per month: changed liability insurance carriers after getting competetive quotes, and switching our payroll to once a month instead of twice a month.We’re considering sharing garbage service with a next-door neighbor to save another $50 per month. Every little bit helps!
I think every store should take a close look at their statements and pay attention to how both debit and credit cards work for their specific situation. In our case a debit card is a flat fee versus the credit cards having a percentage. I figured out that purchases at under around $25-$30 it is cheaper to use the card as credit because the percentage is less than the flat fee. Purchases over that $30 are better for me to be processed as debit. This figure may be different for other people, it will depend on your merchant agreement.