restaurant bill on the table

We speak with many restauratuers who feel like paying credit card processing fees is just like paying another utility. Or others who are still using the first processor recommended through a restaurant affiliate program.

As a restaurant owner, the best way to sift through that is to understand the basics of credit card processing so you can make more informed decisions about your payments.

The bottom line: Credit card processing fees for restaurants vary greatly. The difference? A good payment processor will pay for itself with the insights it delivers.

Challenge Your Restaurant Payments Processor with These Questions

Choosing to accept payment via a credit card at your restaurant may seem like a no-brainer. After all, 81 percent of transactions nowadays are cashless.

However, that decision, if made incorrectly, could end up costing you thousands of extra dollars a year in restaurant payments fees.

Making Sense of Your Investment

A decision that has this much impact on your revenue should not be taken lightly. Nonetheless, many business owners look at credit card processing in the same way they look at paying the electric bill: a necessary expense to set and forget.

Consider this: On average, the fee for a $100 transaction could be as much as $3. That’s $3 every single time someone swipes their card in your business.

What are you getting out of that investment?

Ask The Right Questions

If you’re not asking questions, you’re not putting enough thought into your decision. And when the decision is as big as credit card processing, your list of questions should be thorough.

  1. What fees will I be charged?
  2. What type of customer service do you offer?
  3. What features do I get beyond payment processing?
  4. Do you integrate seamlessly with my restaurant POS?

If the processor you are considering doing business with can’t answer these questions with answers that make you happy, then it’s time to take your business elsewhere.

How to Avoid Hidden Fees When Choosing Restaurant Credit Card Processor

As a small business, you rely on your payments partner for cash flow. And like with most services, you have a number of options.

Find the best partner for your business by learning more about those options, and which fees you have control over. Here’s a look at the most common hidden fees, and tips on how you can avoid or minimize them.

The first and most important step is to understand how your payment processor assesses your fees. Some payment processors don’t fully disclose their charges because they can be complicated to explain and unnecessarily rich.

The second step is to assess the value you’re getting from your payments service. If it simply helps you move money, you deserve more. Upserve helps merchants accept payments plus track customers and grow revenue. In this way, processing becomes the engine under the hood of your business that unlocks your data and powers smarter marketing programs.

As a starting point, always review your payment processor contract in depth before signing and ask about anything you don’t understand. This enables you to see where your money will be going, and gives you a chance to negotiate with your payments service before committing.

Three Ways to Avoid Hidden Fees

  1. Learn how to analyze your payments fees. Once you know what you’re being charged, you have a much better starting point for negotiation.
  2. Look out for variable fees. Avoid signing a contract that has variable cancellation fees and stick with a fixed fee instead.
  3. Look out for companies that can increase your rate at any time. Make sure your contract states that your fees will not increase.

Common Additional Fees

The majority of the processing fees you pay end up at card issuing banks (the banks whose logos appear on your credit cards) through Interchange. The remaining fees that you pay should help your payments partner cover the cost  of servicing you account, and more importantly, fund building technology that help turn your store data into new revenue.

To better understand your processor’s markup on Interchange, check out this list of common additional fees to look out for. Unfortunately, most of them are standard among payment processors and should be stated clearly in your contract. If they’re not, don’t be afraid to ask and shop for a partner that communicates fees honestly and minimizes unnecessary surcharges.

  • Annual/Monthly Fees: A monthly or yearly fee for running your account. We’ve seen them as high as $99 a month, with more fees that accrue if you don’t meet a monthly sales minimum.
  • Minimum Monthly Fee: A minimum amount that you’re required to generate each month. If your monthly fees are less than this minimum, then you are charged the difference.
  • Payment Gateway Fees: This charge applies if you are using an Internet payment gateway instead of software or a terminal.
  • Chargeback/Retrieval Fees: A fee charged when a customer disputes a transaction and contacts their card issuer for a refund. These are typically priced at $10 to $25 per item.
  • Cancellation/Termination Fees: An additional fee charged for terminating your contract is standard, but watch out for fees that are variable, not fixed.
  • Surcharges: Enhanced Reduced Recovery (ERR) plans offer a teaser or base rate, but can add hefty surcharges to 40 percent of transactions if they are downgraded (subject to a higher mid or non-qualified rate).
  • Statement/Customer Fee: Typically $5 to $20 per month. This is simply a way to get more revenue from you.
  • Batch Header Fee: Most merchants batch one time per day. Typically priced at 5 to 20 cents per batch, but it can add up if you batch multiple times per day.
  • Retrieval Fee: While it’s rare, this fee occurs when a cardholder queries a card transaction. A typical charge ranges from $2 to $10.

Breaking Down Restaurant Payment Processing Fees: Three Places Your Money Goes With Every Swipe

Have you ever wondered what happens every time your customer swipes their credit or debit card?

A percentage of that transaction goes to processing fees—the cost of accepting cards and doing business. Those fees are sent to three different places: the card-issuing bank (Interchange), MasterCard and Visa (Assessments) and, finally, processors/acquirers (the only partner any merchant can handpick).

You may be surprised to learn that around 80 percent of those fees don’t go to your processor; they go directly to banks and to MasterCard and Visa in the form of Interchange and Assessment fees.

Let’s talk about how each transaction is divided.

Interchange drives 75 percent of the cost of accepting credit cards at your business and the Interchange rate is set by Visa and MasterCard. This money goes directly to the card-issuing banks (the logo on your credit card). Dozens of signature, premium and platinum cards all charge different fees. Wondering why? Those platinum customers can cost upwards of $200 a head to acquire in marketing costs. Interchange pays their acquisition bill.

Assessments are all the little annoying fees like international fees and per-item fees that comprise 5 percent of the costs of accepting cards. These are also called association fees and are set by Visa and MasterCard. Think of these as being like the fees on your cell phone bill: Anytime you go outside of your plan, by using extra minutes or by roaming, you get more fees tacked on. Some processors mark up assessments, but at Upserve we pass on these fees at-cost to merchants, never a penny more.

Restaurant credit card processing fees are the only negotiable fees within transaction costs. If you want to reevaluate your processing fees, you’ll want to find a processing partner who offers competitive pricing, but, equally important, also delivers you the most value for what’s too often treated as a commodity service. To start to understand what you pay for processing today, ask your partner what pricing model they use. There are three possible models:

  • Tiered: Groups Interchange programs into different tiers or buckets, usually with little explanation about why certain card types are grouped in certain tiers. Processors can change tier groupings and rates whenever they like.
  • Enhanced Reduced Recovery (ERR): Offers a teaser or base rate, but can add hefty surcharges to 40 percent of transactions.
  • Interchange Plus: One simple rate for all transactions that’s also called pass-through pricing. This includes the exact Interchange fee set by the Visa, Mastercard and Discover (the lowest possible rate). If that fee ever drops, you’ll save automatically and will never have to renegotiate your rate to realize those savings.

Next Generation Restaurant Credit Card Processors Are Transforming Restaurant POS

Who has time to become a restaurant POS and credit card processing expert? You’re busy running a successful restaurant. But here’s the thing about that: A savvy restaurateur like you knows that if you’re paying for a service, you should get the most you can out of it.

That’s called value and our guess is you’re not getting enough from your current POS and payments processor.

What is Next Generation Restaurant Credit Card Processing? 

Credit card processing is traditionally viewed by merchants as a utility – like your electricity or gas – something you set up then forget about for as long as you can. That’s the old way of doing business and it’s doing damage to your bottom line.

Today there’s a new batch of next-generation processors making waves in the industry and changing the way restaurants think about credit card processing. They aren’t utilities, they’re technology companies constantly innovating and finding new ways to add value to your business.

That is, if you’re working with the right one.

Traditionally, negotiating the rate you paid to process credit card payments was the only place you could get added value for your business. That’s still important, but you shouldn’t just be concerned with how much you pay per swipe, you should also be asking:

What additional value can I get from my processor?

Credit card reader EMV

Turn Your Restaurant Credit Card Processing Into an Investment

Much like rent or utilities, credit card processing fees are another basic yet necessary expense for a restaurant.  It’s a pretty simple service; your restaurant pays a fee for the ability to receive funds through customers’ credit cards, and then those funds are deposited into your bank account.

How Can Credit Card Processing Help Your Restaurant Grow?

Restaurants need solutions that will help them serve their guests, create a better overall experience, be more efficient, and help them make more money. While a credit card processor’s main purpose is to help your restaurant accept payments through your restaurant POS, there is so much more a processor can do for your business.

Quicker, Safer Checkout

The most common case of credit-card fraud in a restaurant occurs when servers take a guest’s card away from the table and swipe it at the register. To mitigate the risk of fraud in your business, hand guests a tablet so they can self-checkout. This way, their card doesn’t leave their sight, also increasing the transparency of the process.

Another benefit to using an iPad restaurant POS is the guest can authorize the cost of the meal and the tip in one transaction, which reduces your number of authorizations and fees. This cuts the time it often takes for the card and bill to return. Guests will be happy with the faster service, and you will be happy when your restaurant can serve more meals per day parts.

Identify New Versus Repeat Guests

Each transaction that your restaurant POS processes provide your restaurant with valuable restaurant analytics. Data is created by a guest’s visit, and each guest is either a new patron or returning patron.

In order for a restaurant to last, it must maintain a healthy mix of new versus repeat guests. Examining the patterns in your transaction history over time allows you to gain insight into this ratio. If the ratio of new guests versus repeat guests is high, this could be an indication that you are not building loyalty within your restaurant.

Customer Loyalty Programs

The average American household is a member of 18 loyalty programs – with the restaurant industry claiming 9.7 million of those members. Restaurant customer loyalty programs allow restaurants to collect information about guests and use it to increase revenue through those who visit most. However, you need people to actually sign-up for your program; its benefits and rewards will determine whether or not it seems worthwhile.

While most loyalty programs offer a discount, you can set your restaurant apart by offering cash back – or, in this case, credit back – using a guest’s credit card transaction. If your processor offers this type of loyalty program, it will allow your business to put money back on a guest’s card after a transaction pushes them past a certain monetary threshold. The instant gratification of the program will please your guests and help build your repeat business.

Our Challenge to You: Get More out of Your Processing

At Upserve, we think every business owner deserves access to added value beyond processing. So be honest with yourself when you respond to the questions about your processing, the answers have real consequences for the success of your restaurant. If you want the best restaurant credit card processing available, Upserve can help you get more insights, efficiency, and profits.

Credit card processing just got smarter. Get a demo of Upserve Payments.

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In a perfect world, Theresa would spend her days reading good books and writing all the time... and she'd own all the shoes her heart desired. When she's not on the hunt for shoes, you can find this Rhode Island transplant on the hunt for food that comes close to "Long Island". Her favorite? Caffe Dolce Vita in Providence's historic Federal Hill.