Lawyers didn’t take credit cards when I started practicing law. Now, of course, we do. And many of us are getting screwed.
Most of my clients pay their legal fees by credit card.
Credit card processors charge for each transaction. They charge a mishmash of processing fees, and their billing structure is nearly indecipherable.
Six Signs You Need to Reconsider Your Credit Card Processor
Here are the warning signs that you’re getting screwed:
- You’re using PayPal (unless you negotiated a special deal);
- You’re using a company that’s incredibly transparent about its fees;
- You’re using a vendor provided by your bank;
- You’re using the same vendor you were using 24 months ago;
- You’re using a vendor suggested by or affiliated with your bar association; or
- You’re using a vendor offering special services to law firms.
It’s readily apparent that the credit card people don’t want us to know what they’re charging. They want us to be confused so we don’t leave and move our business elsewhere.
Of course, some credit card processors are completely transparent. They’re very open about their fees. Square, for instance, is very open about its pricing.
My findings are that there’s a direct correlation between how transparent these businesses are about their fees and how badly they’re screwing you. Openness equals high prices. I suppose people are willing to pay for the simplicity and transparency. I’m not.
Fine print is my friend. After all, what was the point of those years at Wake Forest University School of Law if not to read credit card vendor terms and conditions?
How to Pick a New Credit Card Vendor
We review our credit card payment arrangements about once per year. We dig in. We whip out our calculator apps and our spreadsheets. It’s a geekfest.
We have to factor in swipe fees, software fees, virtual terminal fees, equipment fees, transaction fees, e-check processing fees, interchange fees, and on and on. Each vendor approaches this differently, and it’s a nightmare. I suppose this is how companies like Square are able to convince merchants to pay 2.75%.
We’ve been using Global Pay. We’re moving to FattMerchant. Are we sure we’re making a smart decision? We think so, but it’s tricky. Our analysis reveals that we’ll save nearly $10,000 this year by making the switch. But, you know, those calculations involve math, so who knows.
Picking a vendor based on who someone else is using is likely a bad move. These vendors hand out special deals like child molesters hand out candy. Don’t assume you’re getting the same deal as your friend. You’ll want to negotiate your own deal and compare it to what other vendors are offering you.
The deals vary dramatically based on numerous factors, including the number and size of your transactions. They’re also affected by the type of cards your clients use as well as the presence, or lack thereof, of the card at the time of the transaction. There’s nothing simple about negotiating with these sharks.
But negotiating a new deal—each year—is essential. Even factoring in the cost of switching, including administrative hassle and hardware costs, you’ll likely end up ahead.
Why You Need to Shop for a New Processor Every Year
Each time we’ve made a move, we’ve saved money. Then, within a year or two, we move again and save even more. We’ve been at this for a long time, and yet we’re still spending a fortune. How is that possible? Why aren’t we at zero yet?
Here’s the deal: each year, these vendors change the plan. They increase certain fees, decrease others, add some feature for which they charge you, and then, magically, your overall costs increase. The prices always creep upward.
You’ve got to shop around once per year. You can’t set it and forget it. There’s way too much at stake. Credit card processors know more about credit card processing than we do, and we’re at a serious disadvantage. Unless you’ve changed vendors in the past year, my guess is that you’re likely paying more than you need to pay. It’s time to shop your business and see what you find.
Remember, credit card processing fees come off the top. A reduction of one percent in credit card processing fees (going from 3% to 2%) represents a huge boost to your bottom line. When you boost profits by 1% of revenue, you’re REALLY boosting profits. If you’ve got substantial revenue, there’s nothing you can do this week that’ll increase your profits faster than reducing your credit card processing fees by 1%.
Clients want to pay with credit cards. You want clients to pay. We’ll be accepting credit cards for a long time to come. Be sure you’re getting the best rates for processing.
