There are a few essentials to doing business in the modern economy and credit card processing is one of them. Portfolios of all sizes should review this expense regularly. For large operators, even small changes in credit card processing can mean sizable differences when it comes to the bottom line. For smaller operators, these differences can be even more apparent.
Depending on your operation, this may be a new subject for you. I’m happy to say that the self storage industry has many credit card processing vendors that are nothing less than professional, courteous, and open to discussing this topic. Feel free to ask questions. You know what they say, you don’t know what you don’t know!
I’ve spent more time than I’d like to admit researching this subject on behalf of myself and others and it is my hope that what follows is useful to the self storage community at large. If you have a tip regarding credit card processing that isn’t mentioned here, please share it in the comments.
- The first step when auditing your current credit card processing agreement is to identify how long you have utilized your current processor. Much like we raise tenant rates after a certain amount of time, so do some credit card processors. Not all, but this is something to be mindful of especially if you have used the same processor for many years.
- Review your credit card processing fees on an annual basis. Set a calendar reminder to pull the statement every year and confirm with your processor that you are getting the best rate possible. If you have questions about the language of the “fees” – shop the statement. Most, if not all, processors in our industry will give you a free statement analysis and will explain what each charge is to you. Different processors may charge different fees, so it does not hurt you to take that same statement and shop it to a few providers.
- In the past, standard processing agreements tended to have three-year terms. Becoming increasingly more common is the request for a 12-month commitment with the option to go month-to-month with no automatic renewal if you do not provide written notice. Be sure to take some extra time and read carefully to avoid the three-year commitment and any automatic renewal provisions. Another common term to look out for is an increase in fees for going month to month. Be sure to nail these details down ahead of time as it can be quite costly to terminate an agreement.
- Banks tend to be a bit more expensive than direct credit card processors as they have additional middlemen and fees. Often, banks will bundle your loan, banking, and credit card processing for consolidation and ease of use, but that may not be the best option for you financially. As your business grows and more tenants request to pay by credit card, your transaction fees may increase.
- Speaking of increasing transaction fees, offer ACH payments on your website and in person. They are significantly cheaper than credit cards and provide a convenient solution for your tenants that automatically debits their bank account each month. Additionally, studies show that people change their bank accounts far less often than they do credit cards which can decrease the frequency in which your autopays are declined or become delinquent.
- Whenever possible, it is important that your managers always remember to swipe credit cards when tenants pay in person. Keying in the card numbers often increase expenses by incurring a “card not present” fee. Review your standard operating procedures and make sure this action and its explanation are clearly taught to your management team.
- If during credit card or batch reconciliation, there is an address/information mismatch for the tenant’s credit card, prompt your managers to call/text/email the tenant to get the updated information each time. Again, this would be a great time to revisit your operating procedures. Create a phone script, preformatted text and email template that your management team can use to request this information. This is a use case that occurs often enough to be made as easy as possible. Failure to take care of these inaccuracies can cause additional expenses the longer the inaccuracy sits.
- Companies that sell self storage property management software sometimes attempt to require the use of their credit card processor. My advice is to only agree to utilizing their credit card processing option if it are the most cost effective for you.
We have many great options available to process our customers’ credit cards. All of them cost money, but any good service does. I think you will find the time involved in going through the tips above somewhat painless and financially rewarding. At worst, you can rest easy knowing you have the right solution for your portfolio.