4 Transaction Fees You Don’t Need To Worry About
The more you sell, the more profit you generate. As a small business owner, transactions are synonymous with revenues. However, no transaction comes for free. Therefore, whether you want to sell your craft arts or establish yourself as an online shop, you’ll need to be familiar with some of the most common transaction fees. Managing and understanding the cost of each transaction can help you define your strategy to break even and create a positive margin.
Below, we’ve listed the four most frequent types of fees and how to best prepare for each of them.
#1. Sales taxes
Sales taxes need some careful management as they can drive significant tax issues for your business. To define your sales tax, you need to understand the relevant taxing jurisdictions for your business. This is typically done through your nexus, which determines your obligation to collect and pay on sales in your specific state. You will typically do that by establishing your physical presence. Small business owners can find it confusing, but you can work closely with a tax or financial advisor as you set up your business to organize your data and accounts ahead of tax filing. With sales taxes, the most challenging part is to create a safe and reliable record for your sales and profits.
#2. Foreign currencies fees
If you are importing overseas items for your business, you may need to pay additional transaction fees. Indeed, paying with foreign currencies will generate conversion and transfer fees. These may not seem like much but if you rely on foreign imports as part of your small business, you will soon struggle to maintain your cash flow. That is precisely where an international payment solution such as a virtual visa card can help keep fees to a minimum. A virtual card enables payments in international currencies with no conversion costs. Alternatively, you can also consider the creation of an international bank account if you liaise with the same overseas partners.
#3. Payment gateways fees
If you are receiving payment online, you need to be familiar with the best gateway platforms to process the transactions. There is no secret. Online payments cost the business owner a fee. Typically, merchants are charged anywhere between 1.4% and 3.5% for processing cards. If you opt for a merchant account, you can reduce transaction fees against a monthly fee. Paypal is a favorite for e-commerce vendors and auction websites. It can enable digital transactions from a Paypal account and also the process of some cards. With a competitive pricing system, it’s a great solution for new businesses.
#4. Credit card processing fees
Is there a transaction fee in-store? The answer is yes. Credit card processing fees range from 1.3% to 3.5% , on top of which you might have to pay the payment processor’s cut, interchange fees, and assessment fees. American Express cards tend to have the highest fees, while Visa is in the lowest range. Some merchants explicitly ask their customers not to use American Express cards for payments. Additionally, the processing method will also affect the fees. For instance, merchants don’t pay the same for inserted cards vs contactless payments.
As a business owner, you can’t always eliminate transaction fees. However, you can build a solid understanding of the fees that are relevant to your business operations and work closely with financial advisors to keep these to a minimum. Knowledge is power.