One of the best decisions you can make as a salon or spa owner is taking credit card payments for your business. It’s a convenient way for your clients to pay for products and services rendered. However, the convenience of salon credit card processing comes at a cost.
The process of payment processing is a bit complicated and can be overwhelming to most small business owners. And navigating the credit card processing options and their costs can be confusing. Almost like you need a Ph.D. in credit card processing!
Before diving head-first into options for salon credit card processing, you’ll first need to understand the fees involved in the process.
To help you make the right choices that best suit you and your business, we have put together the following information about salon credit card processing fees.
What are Salon Credit Card Processing Fees?
Credit card processing fees, in simplified terms, are the costs that a business owner (in this case, your salon or spa) pays to accept credit card payments.
These processing fees can add up quickly. That’s why it’s essential to understand the various parties involved in determining how much you will ultimately pay for the convenience of payment processing using credit cards.
3 Types of Salon Credit Card Processing Fees
There are three main types of fees involved in the overall process of accepting credit cards: transaction fees, monthly processing fees, and incidental fees.
Transactional Fees
Fees that you’ll pay for each credit or debit card transaction that you process. These fees include the interchange rate, the assessment fee, and the payment processor markup. For example, 2.55% + 15 cents refers to credit card transaction fees of 2.55% of the overall sale plus 15 cents for the transaction. So, for a $100 sale, you would pay $2.70 total to process the payment.
Monthly Processing Fees
These are the fees that you’ll pay, typically monthly, for using the services of a merchant services provider.
Incidental Fees
These are fees charged by your payment processor or merchant account provider due to instances such as chargebacks.
Credit Card Processing Fees: Transactional Fees
Out of the three types of fees mentioned above, transactional fees have the highest cost. This is because there are several players involved in the overall cost per transaction. Every time your customer makes a purchase with a credit card, these entities are involved:
- The credit card network* is one of four major companies in the United States: Visa, Mastercard, Discover, and American Express.
- The issuing bank* is the institution that supplied your client’s credit card.
- The receiving bank collects the funds from the issuing bank and deposits them into your bank account.
- The payment processor is the liaison between the issuing and the receiving banks. They can be a merchant service provider or a payment gateway, in web-based processing like with eCommerce. Either entity handles cardholder verification and manages any transaction disputes.
* A non-negotiable fee
Each of these parties above gets a portion of the transaction fee involved in credit card processing.
Most of the fees are controlled by the card brands (Visa, Mastercard, Discover, and American Express) and the issuing bank (the bank that gave your client a card). These industry fees comprise most of your total cost of acceptance for processing credit cards and are non-negotiable.
Payment Processor Markup
This is the fee that your payment processor charges your business, and the markup will depend on the individual payment processor and its pricing plans. The good news is that you do have some control over this cost. Do your research and compare programs so you can use that information to your benefit.
Typically, payment processors sell their services in three packages:
Tiered Plans
The associated cost of processing a credit card transaction is one of several tiers. Each level is associated with the amount of risk assumed by the processor for every purchase. Tiered plans may be easier to understand; the processor is the one to determine which tier each sale belongs to, which can prove expensive in the long run.
Interchange-Plus Plans
With these plans, you’ll pay the card brand’s interchange fee plus a set percentage and/or an additional fixed fee per transaction. While this type of plan provides more transparency into future costs than a tiered plan, the downside is more complicated statements, and you may or may not end up saving money.
Flat-Rate Plans
Flat-rate plans are when the processor charges the same fee regardless of the type of card used or whether or not the customer is present for the sale. These plans usually work to your advantage over time as they shield you from interchange fees increases.
Credit Card Processing Fees: Flat Fees
To accept credit cards, you pay a flat fee to your processor to utilize their service. The fees, typically recurring monthly or annually, vary from one payment processor to another. Your payment processor might also charge one-time, flat fees for certain services.
Recurring Flat Fees
Some payment processors charge the following flat fees, which may be considered junk fees:
- Account fees: A recurring monthly or annual charge to keep your account open and run your payment processing through them.
- Minimum processing fee: Some processors have a minimum monthly fee. In cases that you don’t reach the required minimum amount of charges that month, you’d pay the difference between the processing fees and their monthly minimum.
- Terminal lease or rental fees: Some payment processors require you to lease or rent a credit card terminal.
- Withdrawal fee: A processor may impose a fee if you move funds from your payment processor account into your business bank account.
- Statement fee: Some processors charge a fee to provide paper or online statements.
- IRS reporting fee: In some cases, processors add a fee to report your transactions to the IRS and provide you with the required tax reporting forms.
- PCI fee: A set of data storage requirements that most major card companies insist businesses adhere to. Some states have even adopted them into law, and failure to comply can leave a company open to penalties, legal action, and even audits. A payment processor might charge a fee to cover the cost of compliance and/or for being non-compliant.
One-Time Fees
Open to negotiation, a few of the most common flat fees include:
- Account setup fee: Some payment processors charge to open a merchant account with them.
- Cancellation fee: A penalty for early termination of your contract.
Credit Card Processing Fees: Incidental Fees
Incidental fees result from a specific occurrence. The fees you’re charged and the particular instances that trigger these charges vary with the processor.
Common incidental fees:
- Cardholder dispute fees: Fees for when a customer disputes a charge.
- Chargeback fees: Fees are charged if there is a disputed transaction.
- Batch payment processing fee: Fees for every time your business submits a batch of purchases. Some processors pass these fees to you, and others may absorb this fee.
Junk Fees
Fees of any type that some processors tack on to increase their profits. Be especially wary of fees such as:
- “Online Reporting” or “Statement Fee”
- “Service Fee”
- “PCI Annual Verification” (can be $120+/-)
- “PCI Non-compliance Fee”
- “Gateway Fee”
- Some “Surcharge” fees
The Metrics That Matter
As a salon owner, offering credit card processing is simply a minimum requirement to support your clients. Unfortunately, what you don’t know could literally be costing you hundreds to thousands of dollars.
A critical Metric that Matters to you should be your Effective Processing Rate.
Why is this a critical metric?
Your Effective Processing Rate is the true cost you are charged for processing each transaction. Whether you have a daily deduction or a monthly ACH debit from your account, you will want to better understand this cost because you are likely overpaying for credit card processing or unknowingly being taken advantage of.
When determining a company to serve as your merchant processing partner, you should ideally start with a company you know and trust since that processor will directly affect your net income. This metric, your Effective Processing Rate, is a simple subtraction calculation:
Standard Rate Example: For illustration, let’s assume you have 100 tickets with an average of $100 per ticket per month. Therefore, your monthly volume is $10,000, and the annual volume is $120,000.
Standard Rate (2.55%) = $255 (2.55% x $10,000)
+ Per Transaction ($0.10) = $10 ($0.10 x 100)
Total Monthly Cost = $265
To calculate Effective Processing Rate, divide Total Monthly Cost by Total Monthly Processing Volume:
Divide Total Monthly Cost $265
Processing Volume $10,000 (Assumes 100 tickets of $100 each)
Your Effective Processing Rate = 2.65%
Custom or “Interchange Plus” Rate Example: $1.8 Million Annual Volume
Start with “Estimated Card Pass-through”(Non-negotiable V, MC, AMEX, DSCV)
+ Processing Rate (Negotiated with Merchant Processor)
+ Fee/Transaction (Based on # of tickets)
+ ALL Monthly Fees (Watch for junk fees)
Total Monthly Cost
Card Pass-through = 1.45% (industry average is 1.60%)
+ Processing Rate = 0.85
+ Per Transaction = $0.10 (Assumes 1500 tickets of $100 each)
+ Monthly Fees (No Junk) = $19.95
Total Monthly Cost
Card Pass-through (1.45%) = $2175 (1.45% x $150,000)
+ Processing Rate (0.85%) = $1275 (0.85% x $150,000)
+ Per Transaction ($0.10) = $150 ($0.10 x 1,500 tickets)
+ Monthly Fees (no Junk) = $19.95 Monthly Processing Volume ($150K)
Total Monthly Cost = $3619.95
To calculate Effective Processing Rate, divide Total Monthly Cost by Total Monthly Processing Volume:
Divide Total Monthly Cost $3619.95
Processing Volume $150,000 (Assumes 1500 tickets of $100 each)
Your Effective Processing Rate = 2.4%
Additionally, there are indirect costs, soft costs that most salons never calculate, including the time it takes to reconcile from your daily gross tickets to your daily deposit. There is a significant benefit if you can process through your salon software because reconciliation is virtually built-in.
Do you have any of these issues with your payment processor?
- New fees seem to pop up every month
- Bank deposits are not what you would expect
- Paying too much and not what was promised
- Batching and reconciliation is a hassle
- Statements are difficult to understand
- You don’t know who to contact for support
- You never get the answer you want from your processor
We’ve solved all of these problems by using our SalonRunner Pay platform, tightly integrated with SalonRunner software, and supported by the same team of experts you contact for SalonRunner software support.
- Flat-rate pricing
- No hidden fees, monthly or annual
- Fully integrated payments, reporting, and reconciliation
- Automatic batching
- All the information you need in one place
- Full SalonRunner POS, CC storage, memberships, and more
- You contact SalonRunner (Rosy) for ALL of your support needs at no cost
Here’s the Deal
- Flat 2.55% flat rate + $0.10/transaction
- No monthly or hidden fees
- All of the advanced SalonRunner processing features plus future updates
- Unlimited setup assistance and support from SalonRunner
- Custom rates are available if processing more than $10,000/month
Whether you’re a salon owner looking for a full-service salon software solution or salon credit card processing, we’ve got the answer!
Click here if you’re interested in giving us a chance to beat your current rate.
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