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Learn more below about how business payments are made and how to save money on payments in a few easy steps!
There are many ways that businesses can pay and get paid, such as wire transfers, credit cards, checks, ACH and more. We will explain how businesses can save money on two specific types of payments: wire transfers and credit cards.
How to Save Money on Wire Transfer Payments
Wire transfer is one of the most commonly-used transaction methods for B2B payments due to its domestic & international reach and fast transfer time. For these reasons, wire transfer fees tend to be higher than any other forms of money transfer.
Why do wire transfers cost money?
Wire transfer fees are fees that banks charge when you transfer money to a different bank account. They often charge for both incoming and outgoing wires, so there is no way about avoiding it.
These fees are flat fees and usually cost about $15 for local wires. International wire transfers are more costly, with an average wire fee of $43 due to the number of intermediary banks through which the funds transfer that each take a small fee in order to make a profit.
Do banks mark-up foreign exchange rates?
In addition to the wire transfer fees, certain banks charge additional fees for international wire transfers. Banks often hide their fees by marking up the exchange rate for both incoming and outgoing wires without businesses even knowing.
The average foreign exchange rate mark up by banks is about 4% over the mid-market rate.
How do I avoid bank wire fees?
There are a few ways a business can avoid wire fees.
Request Wire Transfers Online
Banks charge different fees depending on how you request the transfer. Requesting wire transfers online is usually cheaper than in-person or over-the-phone requests. You can save $10 or more just just by initiating the transfer online yourself.
Discount-Qualified Bank Accounts or Premium Bank Accounts
If your business has a sufficient cash flow, you may qualify for a premium bank account where your bank might not charge you for incoming wires. They might even give you a few outgoing wires per month for free.
If you are just starting up, look for banks that offer discounts with a certain savings or checking account. Here are some banks that offer such programs:
Chase: Chase Premier Platinum Checking account holders are eligible for free incoming domestic and international wire transfers.
TD: TD Relationship Checking and TD Premier Checking account holders are eligible for free incoming domestic and international wire transfers.
Bank of America: Preferred Rewards members are eligible for free incoming domestic wire transfers (in addition, Platinum/Platinum Honors tier members are eligible for free international wire transfers).
You can easily find out if your bank offers wire transfer discount programs by visiting its website or calling your bank’s local branch. You may also try setting up an ACH account for ACH payments or request your payments via paper checks. You can learn more about How to Avoid Bank or Wire Transfer Fees on this blog post.
How to Reduce Credit Card Fees?
Accepting payments with credit cards is another one of the most common ways that businesses get paid. If your business accepts credit card payments, then you are already likely familiar with credit card processing fees. Here are ways to save and avoid credit card fees.
Choose the Right Fee Structure
There are several different types of fee structures that different credit card processors charge.
Small business payment processors like PayPal or Stripe charge a flat fee pricing structure. An example of this would be a 2.25% charge on every transaction.
Another pricing structure is interchange plus, which combines a flat fee with a dollar amount per transaction. This would look like 2.00% + $0.30 per transaction.
A third type of fee structure is a tiered pricing system, which depends on the total volume of the transaction and has different pricing based on how much is transferred.
Your business should consult with your processor and analyze your own past transactions to see which fee structure is best for your business. If your business makes a lot of low value transactions, then an interchange plus system would be unwise, since you would be paying a dollar amount on every transaction. You would likely be better off with a flat fee pricing structure.
Conversely, if your business has a smaller amount of high-value transactions, an interchange plus system would be better, since the percentage fee is usually smaller given the small dollar amount per transaction.
Negotiate with Credit Card Processors
If you have partnered with your credit card processor for a long time, it is a good idea to discuss lower rates with them. Especially if you have been a reliable business partner and have had a good business relationship with your processor, such a conversation is entirely appropriate and would enable you to potentially save some money on fees.
Reduce the Risk of Credit Card Fraud and Failed Payments
Reducing the risk of credit card fraud, failed payments, and disputed payments can help you save money on credit card processing fees. Here are two ways you can do just that.
Adopt More Secure Technology for In-Person Payments
One easy way for your business to improve the security of your credit card payment process is to change your hardware to only accept credit card payments via EMV chip card, NFC “contactless” payment, or mobile wallet whenever possible.
These methods for accepting credit card payments have been found to be more secure than traditional, “swipe” methods of credit card payment. Improving security reduces the potential for credit card fraud, which saves you money on reconciliation and extra potential fees.
Payment Authorization Software for E-Commerce
Your business can also reduce the rate of failed and disputed payments by using payment authorization software for online purchases.
In addition to reducing failed and disputed payments rates, which saves your business money, using such software also benefits you by shifting liability for fraud from you to the bank and improving customer confidence.
Alternative Payment Methods Other Than Credit Cards & Bank Wires
Credit cards are the single most common payment method for B2B E-Commerce. Unfortunately, they are also quite expensive. And bank wires are similarly expensive, slow, and you never know where the funds are limiting your cash flow. You may want to consider alternative payment methods for your business payments.
What are alternative payment methods?
An alternative payment method (APM) is any form of payment other than traditional payment methods (cash, checks, or a credit/debit card issued by a major bank).
Some examples of common APMs are mobile payments, eWallets, cryptocurrency, prepaid cards, and direct debit bank transfers.
APMs are gaining traction among businesses due to their many benefits, including increased conversion rates, higher security, a more global reach, and more.
ACH Payments
ACH payments, also known as direct debit payments, are a pull-payment method that is an alternative to traditional payment methods.
The recipient instructs their bank to collect funds from the payer’s bank account. The payer must authorize the recipient to initiate a direct debit, and the funds are electronically transferred.
You can check with your bank to see if it offers ACH solutions for your business, but keep in mind that these services often come with a monthly fee. Also, ACH is usually limited to domestic payments limiting your business’ potential for global reach.
E-wallet Payments
E-wallet payments are another APM that many businesses use to make payments and get paid. An e-wallet is a digital wallet that holds funds that you can withdraw from and put money into.
Perhaps the most common e-wallet is PayPal, which allows users to store funds in its digital wallet and make and receive payments from around the world.
The downside to PayPal and other e-wallet payment providers is that, although there is a strong global reach, they are often quite expensive and charge many fees, including currency conversion fees, account fees, hidden fees, and more.
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