Running an independent pharmacy comes with plenty of challenges, and one of the more frustrating ones is watching a chunk of your revenue disappear into credit card processing fees. Every time a patient swipes their card for a prescription or over-the-counter purchase, a small percentage of that transaction goes straight to the credit card company. Over time, those fees add up and can eat into your profit margins.
The good news? You can take steps to reduce these costs and keep more of your hard-earned money. In this post, we’ll dive into some practical strategies that independent pharmacy owners can use to lower their credit card processing fees, increase cash flow, and improve overall profitability.
Understanding Credit Card Fees: What’s Eating Into Your Profits?
Before we get into the ways you can cut down on fees, let’s break down what exactly these fees are and why they’re so frustrating for independent pharmacies.
Credit card processing fees usually range from 1.5% to 3.5% per transaction. While that might not sound like much, those small percentages quickly add up—especially for pharmacies where the average transaction amount can be significant. The total fee is made up of several components, including:
- Interchange fees: These are set by the card networks (like Visa or Mastercard) and typically make up the bulk of the fee.
- Assessment fees: These are also charged by the card networks, but they’re generally smaller than interchange fees.
- Processor fees: These are charged by the payment processor you use to handle the transaction.
As you can see, credit card fees are a combination of different charges, some of which are negotiable, and others are not. But even if you can’t control all aspects of the fees, there are strategies to reduce your overall costs.
Shop Around for a Payment Processor
Not all payment processors are created equal. One of the easiest ways to reduce your credit card fees is by comparing payment processors and choosing one that offers better terms for your business. This might sound like a hassle, but the savings can be significant, especially if your current processor charges higher-than-average rates.
Look for a payment processor that understands the needs of independent pharmacies and offers transparent pricing. Some processors specialize in working with small businesses and may offer lower rates or even flat-rate pricing, which can make it easier to predict your costs.
When comparing processors, make sure to ask about:
- Interchange-plus pricing: This type of pricing separates the interchange fees from the processor’s markup, making it easier to see exactly what you’re paying for. It’s often more transparent than flat-rate pricing and can lead to lower fees.
- Monthly fees: Some processors charge additional monthly fees on top of transaction fees. Be sure to take these into account when calculating the total cost.
Switching to a new payment processor may seem like a big step, but the potential savings over time make it worth the effort.
Encourage Alternative Payment Methods
While credit cards are convenient, they’re not your only option. Encouraging your customers to pay with alternative methods—such as cash, checks, or debit cards—can help you avoid credit card processing fees altogether. While you may not want to outright discourage credit card use, creating incentives for customers to choose other methods can make a difference.
Consider offering a small discount for customers who pay with cash or debit. Even a modest discount (like 1-2%) can be enough to encourage patients to make the switch, and it may still save you money compared to the processing fees you’d incur from a credit card transaction.
Another option is to implement a cash discount program, where you offer a lower price for cash payments and keep the higher price for credit card transactions. Many businesses use this approach to offset credit card fees while staying compliant with legal regulations.
Negotiate With Your Payment Processor
One often-overlooked way to save on credit card fees is simply negotiating with your current payment processor. You’d be surprised at how many processors are willing to offer lower rates to keep your business, especially if you’ve been a loyal customer for years.
Reach out to your processor and ask if there’s any flexibility in your rates. Mention that you’re shopping around for better deals (and make sure you actually are). Even if your processor can’t lower the interchange fees set by the credit card networks, they may be willing to reduce their own markup or waive some of the monthly fees they charge.
Some payment processors also offer volume discounts, so if your pharmacy is growing and handling more transactions, it’s worth discussing the possibility of lower rates.
Optimize Your Transactions
Believe it or not, the way you process credit card transactions can affect the fees you pay. By optimizing your transactions, you can minimize the likelihood of paying higher rates.
For instance, card-present transactions (where the customer physically swipes or inserts their card) generally have lower fees than card-not-present transactions (like over-the-phone or online payments). Whenever possible, encourage customers to use their card in person to keep fees lower.
You should also ensure that your employees are following best practices when processing transactions. Simple things like entering the correct billing information and using chip-enabled readers can help reduce your risk of higher “downgraded” fees, which are often applied to transactions that processors deem riskier or less secure.
Avoid Leasing Equipment
Another way payment processors make money is by leasing out point-of-sale (POS) equipment. While it might seem convenient to lease a terminal from your payment processor, this can actually be an expensive option in the long run. Leasing fees can add up to hundreds or even thousands of dollars over time—money that could be better spent elsewhere.
Instead, consider purchasing your own credit card terminal or POS system outright. While it’s a larger upfront cost, it can save you significant money in the long term by eliminating those monthly leasing fees. Just be sure that the terminal you purchase is compatible with your payment processor and meets the latest security standards.
Time to Cut Down on Fees
Reducing credit card fees doesn’t have to be a daunting task. By shopping around for a better payment processor, encouraging alternative payment methods, and optimizing your transactions, you can take control of these hidden costs and boost your bottom line.
If you’re an independent pharmacy owner looking to cut down on processing fees, Waypoint has you covered. We specialize in helping independent businesses save money and thrive. To learn more about how you can lower your credit card fees and explore other cost-saving solutions, visit Waypoint today.
