I’m here for all of the savings we can find. But when it comes to credit card processing, I’m often surprised at our clients’ approach. Many times, I see our clients implicitly or explicitly encouraging their customers to pay with a method other than credit card (cash, check, etc.). Ostensibly they’re doing this to avoid the credit card processing fees— with the intention of making more money. Unfortunately, however, I think that discouraging their customers from using credit cards actually costs them money in the long run.
Charging a Credit Card Processing Fee
Some event rental businesses explicitly discourage their customers from paying via credit card by charging a “Convenience” or “Processing” fee* on any transactions that are paid by credit card. While this may help defray the cost of the credit card processing on a transaction-by-transaction basis, in effect, it acts as a disincentive. Just like using discounts to get people to do what you want in your event rental business, this credit card fee influences your customer’s behavior.
From the customer’s perspective, they are “punished” or “penalized” for choosing to pay via credit card. As a result, they will either choose to pay by another method (to save on the fee) or will pay the fee because it is worth it for them. In essence, however, it will reduce the number of customers who pay by credit card.
The Real Cost of Credit Card Processing
If we knew empirically that transactions paid by credit card actually had higher costs associated with them, it would definitely make sense to influence our customers to pay by another method (all other things being equal). However, we have to take a hard look at the actual costs of credit card processing and the actual costs of processing other payments.
These numbers will be different for every event rental business but it can be a worthy practice to do a time study.
For instance, let’s imagine an order paid by check in your rental business. Here are the steps:
- Send the Order PDF to your customer via email
- Wait for the check and the signed contract to arrive in the mail
- Open the envelope
- Scan and save the signed contract
- Scan or deposit the check in the bank
- Record the Payment within RW Elephant
- Confirm the Order within RW Elephant
- Send confirmed Order to customer
- Send reminder email to customer when second deposit is due
- Wait for check to arrive in the mail
- Open the envelope
- Scan or deposit the check in the bank
- Record the payment within RW Elephant
- Send final Order (with final payment record) to customer
And the steps only increase if we have to send reminders to the customer between steps 1 & 2 and 9 & 10. Or, if they send a payment without the contract or vice versa, we have additional steps.
Whether you’re doing all those steps yourself as the owner or you’re paying your staff to process a check payment, that time adds up.
Let’s contrast that with the process of having a customer pay online via RW Elephant’s integrated credit card processing.
- Send the Order PDF and payment link to your customer via email
- Wait for the customer to pay and sign your terms & conditions in one step
- RW Elephant automatically records the payment, confirms the Order, and sends the confirmed Order to your customer
- If customer opted to auto-pay their second deposit on their final balance due date, RW will automatically run the charge on that date and send them an email receipt
We estimate that the average rental company can save approximately 40 hours per year in man hours by using credit card processing exclusively rather than processing checks, cash, or collecting credit card payments outside of RW Elephant. That’s a week of vacation!
At RW Elephant, we’ve obviously got a stake in this game. We want you to use our integrated credit card processing because we think it is great, but also because we benefit from it too. For every transaction processed through RW Elephant’s integrated credit card processing, we make 0.25%. So, if you charge your customer $100, we get $0.25. We want to be transparent about that because we’re biased here.
However, we had a hunch that credit card processing was beneficial for our clients beyond just the time savings and chaos reduction listed above. So we did some research.
At the beginning of 2020, we conducted a study of our clients’ data from all of 2019. Here’s what we found.
- RW Users who enable Integrated Credit Card Processing have an 8.8% higher closing rate on their Proposals than those who don’t
- Orders paid by Credit Card close 11 days sooner than those paid by other methods
- Clients who use Integrated Credit Card Processing have 5.7% more Confirmed Orders per year
- Orders paid by credit card had a 17% higher collection rate
- On average, RW users who enabled Integrated Credit Card Processing generated $85K more revenue than those who didn’t
What do all these numbers mean? Basically, if you want to improve your closing rate, encourage your customers to pay by credit card. If you want to improve your cash flow, encourage your customers to pay by credit card. If you want to improve your collection rate, encourage your customers to pay by credit card (and use the auto-pay feature). If you want to generate more revenue, encourage your customers to pay by credit card.
Our data doesn’t necessarily show causation, only correlation. However, the other thing the data shows us is that discouraging credit card payments (and incentivizing your customers to pay by other methods) actually costs you money. You aren’t just paying for it in the labor. Preferring other forms of payment leaves money on the table with your customers.
Shape the Path for Your Customers
So, how do we actually save money with credit card processing? First, you have to make sure that you’ve enabled integrated credit card processing within your RW Elephant account.
Secondly, shape the path for your customers to pay by credit card as your preferred method. When you send over your Proposal, be sure to include the online payment link and encourage them to use it (as well as auto-pay). Explain that when they pay online with this link, they’ll also be able to sign your Terms & Conditions online.
Helping your customer see exactly what steps they should take will give them clear direction. It will prevent you from ever having to touch their sensitive credit card information (we store it securely for you). And you’ll start seeing more money in your bank account.
As Michael Scott would say, it’s a win-win-win.
*Be sure to check your credit card processors’ terms & conditions as well as state and local laws. According to many agreements and in some jurisdictions, it is actually unlawful or against the agreement to charge an additional fee for purchases made with credit cards.