Processing fees of all kinds nickel and dime us all the time. Here's how to reduce them …
Let's start off with something we can all agree on: Fees suck.
Late fees. Overdraft fees. ICANN fees. Service fees. Fees, fees, fees.
Credit card companies forbid merchants from passing on merchant fees to their customers. Charging fees makes you look like the bad guy.
Processing fees: Fees for … accepting my money?!
OK, now that I've gotten that off my chest, I feel a bit better. 🙂
The particular kinds of fees that can be reduced a bit are processing fees, which are sometimes called payment fees or convenience fees.
To be fair, accepting money does cost money. It could be an employee that's paid to accept a check or credit card from a walk-in customer. Or it could be a third party like a bank or credit union that has the systems in place to transact.
And for whatever reason, some businesses tack on fees explicitly for accepting payment, or doing other normal transactions.
Some processing fees you can control
The good news with these kinds of fees is this: Now that they're in the open, you have more control over them.
As an example, my daughter's swim team raises funds by offering scrip. It's basically like buying discounted gift cards but instead of getting cash back, part of the money goes toward what we pay for the team. Some of the merchants, particularly our local gas station, issue a physical store card that can be reloaded through the scrip site.
Each time we buy anything electronic from the scrip site, whether it's a reload on a card or an electronic code, we get charged a convenience fee of $0.15.
Now, fifteen cents isn't the end of the world, but the kickback to our daughter's account for buying a $25 reload is only 3%, or $0.75. If that's all we buy, the convenience fee eats up 20% of the benefit.
However … the convenience fee if $0.15 regardless of what we reload. So, I'm sure to reload the card to the maximum I'm allowed, which is $100. Now, the processing fee is only 5% of the kickback. Much better!
Bigger savings on processing fees
We have several policies through our insurance company: auto, homeowners', and umbrella liability. The last two we have to pay in one shot, but the auto insurance we have the option of paying in one shot, or over several months.
Paying the auto insurance over several months costs more than paying it in one shot because of … processing fees! Each time we make a payment, we're charged $5.00. So paying over ten months costs an extra $45.00.
Is this the same thing as raising the payment amount by $5.00 each time? Yeah, probably. In a way, it's a bit easier to spot where the extra cost is when it's wrapped in a fee.
In a nutshell …
The way to spend less on (fixed) processing fees is to either (a) buy more in each transaction, or (b) make bigger and fewer payments.
Being able to do this, of course, means that you have the money available to buy more at a time to reduce the fees, or to pay for a year's policy all at once to avoid paying the monthly payment fees.
Armed with this knowledge, go forth and pay fewer processing fees.
Because fees suck.
