I won’t make any friends in the banking industry for saying this, but here goes.

If you already have a deal which is bad or average then it’s worth shopping
around now. You could save money, as your bank may be taking advantage of you.

A good credit card rate is between 1% and 1.5%.
An average credit card rate is between 1.4% and 1.9%.
A bad credit card rate is 2% and over.
(These rates are indications based on PDQ and virtual terminal. They will
be good for most B&Bs, guest houses, cottages or hotel businesses.)

So how do you do get the rate down ?

The first rule of dealing with bank credit card handling fees is negotiate. The second rule is negotiate and the third rule is negotiate. When it comes
to card charges, banks will try and get the highest charge they can
get away with. You can easily end up being charged 2.5% instead
of 1.5%. It’s a big difference and, let’s face it, in these times it pays to be
smart with costs. Who could ever feel bad about squeezing a bank?

We have been dealing with banks and their credit card charges for more
twelve years, so here are a few tips. I hope they lead to reducing your charges:

1. When it comes to card charges, feel free to play banks off each against other. They
   all provide a similar service, so get at least three quotes from different banks.
2. Let each one of them know you are shopping around for a good deal on your
   card business. If they want your account then they need to give you their
   best possible rates.
3. Don’t feel you need to stick with the same bank you use for other services. Card transactions are mostly handled by completely different sections. They
   won’t do you any favours since card handling is mostly treated as an independent
   service.

What factors do they look for in calculating their charge ?

Risk: The lower your risk in the eyes of the banks the better rate they give and each bank
assesses risk differently (all the more reason to try different banks).

So what are the main risk factors?

1. Time and Money: The time between taking payment and providing the service is a risk period to them. If you take a deposit in advance rather than full payment it will be a lower risk. Make sure the bank knows you are low risk (if you are). The more payment you take a greater time from arrival the higher the risk.
2. Method: How you take the payment. If you use chip and pin, customer present, the risk is very low.  Taking payments over the phone – so-called card holder not present transactions – are a higher risk. Online card transactions are an even higher risk, but using online 3D secure can reduce the risk. You can expect a higher charge for online card transactions.
3. Reputation: A good long trading history with a healthy set of accounts will reduce the risk that the bank sees in you and hence your charges.

Turnover: the higher your turnover the better the deal you can get. This is a simple volume calculation. If the bank can get 1.7% on 50,000 and your turnover increases to 70,000 you could get them down to 1.5% or lower; it’s worth a try.

Competition: They all have targets to meet and if they know you are shopping around for the best deal they won’t be tempted to over charge you and risk losing your account.

If anyone has any other tips or stories I would love to hear them. Happy hunting.

(feel free to re tweet or link to this blog)