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Defusing fees

Learn how to navigate credit card and banking fees.



Question:

Can I mandate a fee that’s passed on to my customers to account for excessive credit card fees?

Answer:

In my research, merchants are restricted in charging any additional fees to customers specifically to recoup merchant processing fees charged by bank processors. Simply put, merchants have to bury the fees charged in the sale prices of menu items as an overhead cost. Lately, some merchants have started providing a cash discount of up to 3% for customers who pay cash for their menu items. This allows the customer to decide whether it’s worth saving the extra discount by avoiding using a credit card.

I’ve taken some time to research this area of fees and can offer a couple of pointers. First, have your account statement analyzed immediately. Credit card companies are now so competitive and computerized that the fees charged are not for customer services but are basically a commodity—no different than cheese being bought and sold. Also, since the industry is so regulated, many of the improprieties have been flushed out of the system. Credit card processing has become a buyer’s market as long as the merchant service provider has a track record and processes through one of the top five processors on the back end. 

Therefore, have a few merchant service processors or agents explain the fees you’re being charged on your current statement; then, approach your current provider for any possible adjustments. Most credit card companies provide an adequate toll-free number to contact for any questions on processing,
as well as online access to allow you the ability to review all transactions processed, normally for free, 24/7. 

Second, create a system to monitor the fees being charged to you on a monthly basis, comparing the original contract of scheduled fees to the resulting monthly account statement after transactions have been processed. Many times, there are hidden per-transaction fees when customers use a corporate card, additional batch processing fees, or statement fees—and the list goes on. Most merchants are not trained to monitor these fees, and since restaurants run on less than a 4% to 6% net income margin, a 3% to 4% credit card fee can be the difference in making a profit for the day!

Question:

How can I protect my bank account from fraudulent transactions?

Answer:

I’ve been advising restaurateurs to install a system to check banking transactions daily due to so many fraudulent transactions taking place—small-amount transactions that, if gone unnoticed because they’re not materially causing concern to your bank balance, can add up to thousands of dollars in total at the end of a month. And if your bank does not alert you to unusual activity, this can go on for months. 

You want the ability to electronically download a file to import into your accounting software that represents the total cleared transactions from the bank in a given date range. Most banks provide this service for free and enable the restaurant owner to monitor discrepancies in charges on a daily basis. Also, having the ability to view pending banking transactions allows you to stop the potentially fraudulent transactions before they become a cleared transaction. 

Inquire with your current banking institution about the online tools available regarding electronic capability of retrieving cleared transactions and its procedure of notifying you of irregular or unusual pending transactions based on your purchasing habits established over time. Many banks will have two services: direct connect, which is fee-based on a monthly subscription basis, or a Web connect feature, which is normally free but requires a few extra steps to retrieve the data. 

For example, I notify my bank before I travel in and out of state so that any transactions made at retail establishments or vendors that are not in proximity of my travel area are placed on hold via email or text until I phone the bank to confirm the unusual pending transaction. This simple check has saved me headaches and lost cash flow at least once a year over the past few years.

Have a question for Mike? Send it to editor@pmq.com

Michael J. Rasmussen is the owner of Rasmussen Tax Group in Conway, Arkansas. Visit rasmussentaxgroup.com for additional insight into restaurant-specific tax strategies and technology programs.

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