The impact of COVID-19 on our economy has led to some interesting discussions over the past few weeks. As with any economic downturn, many small business owners and consumers are taking a closer look at their expenses and working harder to stick to a budget.
For example, many business owners are taking time to dive into their credit card processing statement in order to better understand their costs. This is not always a simple task though, as many payment processors lack transparency, have complex pricing programs and their monthly statements make it difficult for business owners to understand how much they are paying and why.
The total amount business owners pay to process electronic payments is made up of a combination of interchange fees, association fees, margin and ancillary fees.
We’ll do a deeper dive into these categories in the near future, but in the meantime I’d like to focus on something that many people often overlook – the merchant’s billing cycle. When I talk about the billing cycle, I’m referring to when a business owner is charged for various fees and expenses associated with their merchant services account.
Credit card processors typically offer two billing options, Daily Discount and Monthly Discount. The difference between the two is the timing of when the fees are deducted from the merchant’s account.
Daily Discount is when interchange fees and the processor’s margin are deducted from the merchant’s daily sales volume – a little bit at a time. With Monthly Discount, the merchant receives the gross deposit from their sales and their credit card processor deducts all fees at once.
The processor deducts interchange fees and
their margin from daily sales volume.
The processor deducts all fees
and margin once a month.
As COVID continues to impact many small business owners’ sales, Daily Discount can be used as a budgeting tool. By having interchange fees and their processor’s margin deducted from each batch, instead of all at once, the merchant doesn’t have to worry about a large lump sum being deducted at one time. It’s about convenience, and can be especially helpful as sales volumes fluctuate during these challenging times.
One thing to keep in mind with Daily Discounting is that business owners will still see occasional monthly or annual fees on their statement. These can be things like other association fees, annual fees, PCI fees or monthly statement fees.
If you have questions about Daily Discount and want to know more about how it can serve as a helpful budgeting tool for your business, reach out to our team.