This Secret (They Don’t Want You To Know)
Will Lower Your Fees Forever
Ok…Ok… We know, it’s THE BEST HEADLINE the cheesiest click-bait title money could buy.
The truth of the headline is one simple metric: Average Ticket
Why does this matter?
The largest impact on your effective rate is to understand Interchange fees and how your average ticket will drastically impact your margin.
We introduced 3 important terms in the last few sentences. Let’s define:
- Average Sale or Average Ticket is simply your gross sales divided by your number of credit card ($100,000/5,000transactions = $20)
- Effective Rate is your fees divided by your gross ($2,000/$100,000 = 2.00%)
- Interchange Fees are the fees your payment processor pays the cardholder’s bank and card network every time a transaction takes The fees are made up of a per transaction fee and a percentage of sale fee.
“Do I really have any control over what my customers want to spend?”
Glad you asked.
(This table tells the story perfectly.)
Let’s look at 2 C-stores which both have $100,000/mo in credit card processing but very different strategies in running their store.
- Positioned as “Premium Choices”
- Less patrons who spend more
- Layout encourages impulse purchases
- Emphasis on promotions (i.e. Buy 2 get 3rd free)
- Processes $100,000 on 2,500 transactions at a $40 average ticket
- Effective Rate 1.65%
- Positioned as “Lowest Prices”
- More patrons who spend less
- Layout determined by vendors
- No Promotions
- Processes $100,000 on 10,000 transactions at a $10 average ticket
- Effective Rate: 3.00%
Store 2 will pay $16,000/yr more in fees just because of a lower average ticket!
This is a small and powerful nuance to operating your store with higher margins and paying lower fees. If you want to find out more, please check out our recent BTL Webinar on the basics of card processing
For more information,
contact KC Cook