Restaurant Merchant Account Services
Payment card usage in restaurants continues to grow as the USA transitions to a cashless society. Higher ticket value sales have traditionally been paid for with a bank card, but even this trend is shifting. Today, transactions valued at $10 and more are overwhelmingly paid for using either a debit or credit card. Transactions over $100 are even less likely with less than 10% of transactions using cash. Many business owners do not want to offer restaurant credit card processing services. Many of these owners do realize customers prefer using payment cards, justifying the use of restaurant merchant account services.
Customers like the convenience factor of not having to carry large amounts of cash and being limited to their cash on hand. Merchants do not like the fact that restaurant payment processing services charge fees, but these fees do provide benefits. Customers paying with a credit card generally spend more than someone paying with a debit card or cash. This can help merchants justify the acceptance of credit cards and their intrinsic fees.
Restaurant Credit Card Processing
A majority of restaurant transactions will be paid for by credit or debit cards this year. Partnering with a credit card processor that specializes in restaurant merchant services can help lower the fees charged for payments. Most merchant processors can work with the restaurant or complimenting food businesses, making the search both easier and more complicated. Knowing what is needed to help your business and understanding many of the fees of a merchant account can help keep costs to a minimum.
The largest fee charged to merchants is known as interchange. Determined by the customer's card bank, the fee is assessed to the card association taken from the merchant's settlements. Debit cards generally charge a much lower fee than credit cards, where interchange fees can start at well over 2%. Finding the best option for a restaurant merchant account can help businesses lower fees while improving profits.
There are 4 types of payment structures used by restaurant merchant processors today including:
- Interchange Plus
Pricing models can significantly affect the costs paid by a restaurant. Depending on the size of sales and the types of sales, some structures can provide large savings verse another.
Tiered Restaurant Pricing:
All types of cards, regardless if it is debit or credit, premium rewards or no rewards will be grouped into a predetermined pricing tier. Depending on the payment processor, tiers per restaurant merchant account can vary from 3 to many more. The most common tiers are qualified, mid-qualified and non-qualified where most debit cards will be qualified and most rewards cards will be non-qualified.
Payment processors offering tiered pricing will usually advertise their qualified tiered rate as a teaser to entice merchants. Unfortunately, few transactions will meet the requirements for the qualified tier and be downgraded to a more expensive level. Since it is hard to determine the actual fees paid on a transaction, but for higher ticket businesses generally accepting credit cards, this can be more expensive.
Interchange Plus Restaurant Pricing:
Widely viewed as the most favorable of the pricing structures, it is generally considered to be a consistent and fair system. Under this pricing structure, the payment processor passes through the interchange price and adds their markup to each transaction. This is where the term interchange plus or sometimes referred to as cost-plus pricing originates from.
The fees of lower-cost payment cards will be passed through to merchants, preventing the need to qualify for a pricing tier or charged a flat fee. This scheme has helped merchants receiving high levels of debit cards to reduce the cost burden. Merchants will always know the markup being charged for every authorized transaction, providing merchants with transparent pricing.
Blended Pricing for Restaurants: This is a common pricing model used by most of the wallet and payment service providers operating online today. Charging a single flat fee, all transactions billed the same, regardless if the cards are credit or debit. Many merchants like the simplicity that these systems offer while making payments.
These systems provide merchants the best examples of transparent pricing, they are not always the best solution. The flat fees offered are generally on the high side and force merchants to pay significant premiums for certain card types. Understanding the option can help merchants make well-informed decisions that can potentially help them reduce their costs.
Membership Pricing for Restaurants: One of the newest models for pricing merchants, the membership has taken off by offering merchants a new take on fees. By charging merchants flat yearly or monthly fee, the payment processors allow businesses to access their payment network without additional fees.
Merchants like knowing their one price will handle all these transaction fees, but this pricing does come with limitations. Many of these membership payment processors set transaction limits for their tiers, charging large fees for overages. Similarly, processing under these thresholds can equate to significantly higher fees verse an interchange plus merchant account.
Restaurant POS Systems
The restaurant industry has seen a shift in the hardware and software designed for their businesses. Point-of-Sale systems developed for the restaurant industry have helped streamline management while helping keep operating costs lower.
Startup or smaller merchants might not want to put the money out to purchase a full POS system. If a merchant has existing hardware, verify with the new payment processor if the existing hardware can be reprogrammed. If so, this can save merchants significantly on startup costs.
If the hardware is not reprogrammable, merchants can inquire about a new POS terminal or system. Today, many of the restaurant payment processing companies offer free or drastically reduced POS terminals for restaurants. Merchants operating on a tight budget can really benefit through one of these programs when starting out.
These offers are not limited to startup merchants. Existing merchants with older hardware should also be looking into obtaining free or reduced cost hardware instead of purchasing their own. As PCI Compliance remains one of the most import security concerns for restaurants, maintaining current and updated terminals is very important.
New hardware and software might not only make the business run more efficiently, but it might also lower costs. Whether its better deals from another payment processor or a perceived lower risk by using a new terminal, POS equipment can help merchants save money. Some of the time it can be worth it to see what other processors are offering while other times the costs are prohibited.
Finding the right Restaurant Payment Processor
Working with a merchant processing company familiar with the restaurant industry can help merchants in a number of ways. By understanding the needs of the industry, payment processors can better prepare merchants for handling their customer needs.
As customers continue to shift towards cashless payments, merchants need to be prepared. Whether it is supplying new equipment or offering restaurants lower fees, a specialized payment processor is essential for restaurant merchants to succeed in the future.
Merchants needing help comparing merchant services can speak to Allied Payments. By understanding your restaurant and business, we can determine the potential savings in credit card processing fees.