By Preston Glenn
A self-storage operation is a big responsibility requiring more management than the average person realizes. Self-storage owners face many of the same challenges as those of other businesses: managing staff, customer turnover, marketing and advertising, and day-to-day site maintenance. One area in which they often have questions is customer payments.
With the multitude of payment types now available and widening consumer demand, it’s more important than ever to understand the complexities of credit cards, recurring payments and e-checks. Here are five things you should know about accepting various payment methods.
What’s the difference between a one-time and recurring payment?
A one-time payment is exactly that: a payment authorized to be made a single time. It’s the kind of payment you make when you buy groceries, clothes and so forth. It’s possible to accept one-time payments in self-storage. While it allows the customer to pay with a different method each month if he desires, it also creates a lot of overhead for you and your staff.
A recurring payment is authorized to occur on a repeating basis—for a set amount, on a set schedule, against the same payment method. It’s ideal for a monthly bill. The customer must agree to have the payment withdrawn or charged regularly, but once he has, it’s largely a “set and forget” situation. Because there are no reminders necessary to take these payments, and no concern about missed payments, they’re ideal for businesses like self-storage.
Are there alternatives to credit cards I should consider?
There are many ways to pay for products and services besides a credit card. In addition to traditional options such as paper checks and cash, there are alternative payment types. But many of them, such as Bitcoin and mobile payments (Apple Pay, Google Wallet, etc.), aren’t the best fit for the self-storage industry. Rather, operators should focus on those that allow for recurring payments.
An ideal alternative for self-storage is an electronic bank-account debit, also known as an e-check or automated clearing house (ACH) payment. This allows offers the convenience of recurring payments and has lower processing fees than credit cards.
What fees are associated with accepting credit cards and e-check/ACH payments?
Credit cards are relatively painless way for a customer to pay for his storage rental, but that ease of use comes at a price for the facility operator. How much your business will pay to process credit card transactions depends on several variables, such as which card is used and your agreement with your credit card processor. Rates will likely include:
- The interchange rate from the credit card company
- A flat per-transaction fee
- Assessment fees
- Processing costs
- Payment card industry fees from your processor
You also have to consider the cost and any monthly fees for your card readers.
When looking for a merchant-services provider, know how many transactions you expect to complete in a typical month as well as the average cost of each transaction. This will guide you to the best account type with the most appropriate fees for your business. E-checks, for example, usually have a low flat fee, typically between 25 cents 55 cents per transaction. Processors may also charge a daily processing or monthly fee, which will affect the per-transaction cost.
How do I deal with declined payments?
You might eventually deal with a declined card. If it happens, treat the customer with respect. There are many reasons a card may be declined. If the customer asks why, explain that for his own security, banks don’t inform merchants of the reason. Encourage him to contact his bank. It could be a simple fix, such as approving a previous charge or confirming the current charge isn’t a fraudulent transaction.
With credit cards, there could be many reasons why a decline occurs, including suspicion of fraud, or expired or re-issued cards. This can be a hassle for merchants who don’t have time to keep up with changing card information. For many who accept recurring payments, investing in an automatic updater is a great solution. This tool checks databases for changing card information and closed accounts, updating the tokens on file for you.
Consider asking your customer to set up a recurring ACH or e-check payment, especially in the case of someone who’s experienced multiple declines. E-checks come straight from his bank account and are directly deposited into your company account. As long as the customer has the funds, the payment will go through.
Do I need fraud protection?
Credit card fraud is a real and large problem, especially in the United States, where fraud rates are higher than almost anywhere else. In 2014, credit card fraud resulted in more than $16 billion in losses. Card issuers and merchants take the largest hit. According to the financial-advisor website WalletHub, 62 percent of that $16 billion was absorbed by card issuers, with merchants carrying 38 percent.
For small- and mid-sized businesses, fraud loss can carry a hefty price. To protect your self-storage operation, ask your payment processor about its fraud-management practices and ensure you’re taking advantage of every system in place. If you don’t feel the processor has satisfactory protection, there are many outsourced firms that will work directly with merchants to guard every transaction and guarantee there are no chargebacks.
Credit cards have the highest fraud rate of all the payment options. Accepting e-checks can help reduce your risk. While no payment method is completely free of danger, e-checks are one of the safest options, thanks to reduced handling of payments and fewer fraud opportunities.
Remember, prevention begins with you. Here are some helpful tips:
- Understand the common means of fraud for the types of payments you accept.
- Train your staff on the numbers credit cards should start with, depending on the card issuer.
- Always verify signatures on cards and swipe them through your terminal for every transaction. This proves the card was actually used at your business.
- If you’re taking a card number over the phone—what’s known as a “card not present” transaction—get the cardholder’s full contact information, including billing address, as well as written authorization to charge the card. Get the three- or four-digit verification number from the back of the card as well.
- Ensure your company name appears on transaction receipts as well as your customer’s statements to prevent confusion around charges and potential chargebacks. Also provide your business phone number on receipts so customers can call with questions about charges.
Preston Glenn has been with Forte Payment Systems for nine years. He launched and managed the company’s the Strategic Partner Development Team, growing it from one to seven people. During this time, Forte’s revenue more than tripled. Preston has been recently promoted to oversee the inside-sales and account-executive teams. For more information, call 866.290.5400; visit www.forte.net; or follow @FortePayments on Twitter.