You may be paying more than you need to when your customers tap their cards onto your EFTPOS terminal. Merchant Choice Routing may be an option that could save your business money.

With most payment providers, the transaction fees for credit cards are higher than for debit cards.

But did you know that when customers tap their Visa or Mastercard debit card on your EFTPOS terminal you’ll be charged the credit card rate – unless you have activated Merchant Choice Routing (also known as Least Cost Routing).

What is Merchant Choice Routing? 

Merchant Choice Routing is an optional feature that your payment provider can activate to allow your EFTPOS machine to process contactless Visa and Mastercard debit cards through the EFTPOS debit network, instead of the credit network.

“The standard setup is that when a customer taps your terminal with their debit card and pays out of their cheque or savings account, it’s charged as a credit card transaction so the business pays a higher fee,” says Keenan France, Merchant Specialist at ANZ Worldline Payment Solutions, a partnership between ANZ and Worldline, Europe’s leading payment and transaction provider.

Depending on the type of business you have and the average transaction value, Merchant Choice Routing could save you hundreds if not thousands of dollars a year in card fees.

What types of businesses benefit from Merchant Choice Routing?

Merchant Choice Routing suits can benefit some businesses more than others, according to Keenan.

For an auto repair shop, hair salon or clothing store whose average transaction value is between $100 and $200 (the threshold where in-person contactless payments are no longer eligible and customers have to insert their card and select credit, cheque or savings), Merchant Choice Routing could be a good option.

Say the average transaction value of this type of business is $100 and the credit card fee is one per cent, you as the merchant will pay $1 if a customer taps their debit card. If it goes through Merchant Choice Routing, you’ll pay the EFTPOS processing fee of just 20 cents. So it makes sense for a business like this to activate Merchant Choice Routing.

But if you’re a coffee shop whose average transaction value is $10, the credit card fee at one per cent would be 10 cents and thereby cheaper than the standard debit rate of 20 cents. So this type of business may not benefit from Merchant Choice Routing.

“For businesses in the service industry where there’s a bigger range of transactions it can be tricky to tell if Merchant Choice Routing will be beneficial or not,” Keenan tells Kochie’s Business Builders.

How to work out if Merchant Choice Routing is good for you

Merchant Choice Routing’s benefits are based on the average value of your transactions. Image: AdobeStock.

The key to figuring out if Merchant Choice Routing will work for you is to understand your average transaction value.

“Look at your merchant statements to see how many transactions you take and your total transaction value,” explains Keenan. “Then divide the total transaction value by the amount of transactions and you’ll get your average transaction value. You should already know your credit and debit card fees so you can figure out if Merchant Choice Routing is good for you.”

If you’re unsure, ask your payment provider and they can advise you.

Track your transaction fees daily

By keeping an eye on all your transactions each day, you can see if your average transaction value is going up or down and this can influence whether or not you activate Merchant Choice Routing.

Using a payment services provider that offers same-day settlement, such as ANZ Worldline, makes this easy. On your billing statement you can view all the transactions made through your EFTPOS terminal, eCommerce store or point-of-sale systems.

As well as working out if Merchant Choice Routing will have a positive effect on your contactless transaction fees, tracking your daily reports and having all those transactions hit your bank account at the end of each day helps you to run your business more efficiently.

You can pay staff, bills and suppliers on time and save on costly interest rates of taking out a loan or putting those expenses on your credit card.

Find out how ANZ Worldline Payment Solutions can help your business with payments here.

For a limited period, ANZ Worldline Payment Solutions is offering free terminal rental for 12 months to new customers. Apply before 16 December. Terms and conditions and eligibility criteria apply.

This article is brought to you by Kochie’s Business Builders, sponsored by ANZ Worldline Payment Solutions.

ANZ Worldline Payment Solutions means Worldline Australia Pty Ltd ACN 645 073 034 (“Worldline”), a provider of merchant solutions. Worldline is not an authorised deposit taking institution (ADI) and entry into any agreement with Worldline is neither a deposit nor liability of Australia and New Zealand Banking Group Limited ACN 005 357 522 (“ANZ”) or any of its related bodies corporate (together “ANZ Group”). Neither ANZ nor any other member of the ANZ Group stands behind or guarantees Worldline.

This publication is intended to provide general information only and should not be relied on in substitution for professional legal or financial advice. Any opinions, conclusions or recommendations are reasonably held, based on the information available at the time of publication, but are subject to change without notice and Worldline Australia Pty Ltd makes no representation as to the accuracy, reliability or completeness of the information. Any projections, forecasts or forward-looking statements contained in this publication are based on a number of assumptions and estimates, are subject to contingencies and uncertainties and may not eventuate. To the extent permitted by law, Worldline Australia Pty Ltd will not be liable to any person for any error or omission contained in the webinar or for any loss or damage suffered by any person relying on the information contained in the publication.

Feature image: AdobeStock