Most tradies know their hourly rate and their material margins cold. Ask them what they actually pay in payment processing fees to take a card, though, and you get a shrug. That shrug is expensive, and it’s the reason this episode exists.
After more than 500 episodes, Matt Jones had never once covered payments on The Site Shed. Which is mad, because nearly every listener takes a card on site or fires off an invoice with a pay link. So Matt sat down with Jimmy Moore from FLO Business Solutions, a bloke who’s worked with over 20,000 businesses and helps oversee more than a billion dollars in annual processing volume, to pull the wool back on what those payments really cost.
Here’s the short version: the number on your statement isn’t the number that matters, and most of you are paying more than you think.
Where Your Payment Processing Fees Actually Go
When a customer taps, swipes or keys in a card, the cost splits three ways. Jimmy calls it three hands in the cookie jar. First, the bank that issued your customer’s card, and that’s the biggest bite by a mile, around 70 to 80% of what you pay. Second, the card brands: Visa, Mastercard, Amex, Discover. Third, the processor moving the money into your account, a Stripe or a Square or a FLO.
So when you spot “3.4%” on a Stripe statement and want to throw something, most of that money left the building before Stripe saw a cent. Knowing the split is the difference between negotiating your real cost down and yelling at the wrong villain. In the US the wholesale interchange alone runs about 2% before anyone adds a markup.
Your Effective Rate Is a Two Minute Sum
Forget the advertised rate. The number that counts is your effective rate, and you can work it out on the back of a docket. Take a month of statements, divide total fees by total card sales. That percentage is what card payments genuinely cost you.
If $100,000 in card sales cost you $3,400, that’s 3.4%, fair enough. If it cost $8,200, you’ve got a problem hiding in plain sight while you’re flat out growing. Jimmy told the story of a contractor his team approached who’d paid a million dollars in fees since 2019, running effective rates of 8.4% and 10.2%, and thought they were stuck. They weren’t. They just hadn’t looked. This is exactly the kind of thing that turns up when you get a proper handle on your numbers, and it’s why being financially prepared has to include your merchant statements, not just your P&L.
Passing the Fee On Without Copping a Fine
The biggest trend Jimmy’s seeing is owners who’ve had enough of eating the fee. Fair. But there’s a compliant way and a way that gets you fined. Three methods work: surcharging (add roughly 3% to credit cards only, never debit), cash discounting (list your top price and knock off a bit for cash or cheque), and dual pricing (show a card price and a cash price side by side, the way petrol stations have for years).
Get it wrong and it bites. In the US around 160,000 businesses have already been fined, with secret shoppers checking receipts and signage, and penalties climbing from $1,000 to $5,000 to $25,000. Australia has its own surcharging rules through the RBA and ACCC, and they’re moving, so the lesson travels even if the numbers don’t. Matt’s own preference on smaller jobs is simpler again: build the fee into your price as an operating expense and stop having the awkward conversation at the door.
The Chargeback Nobody Warns You About
This one surprised Matt. Chargebacks cost the average service contractor 2 to 4% of gross revenue a year, and businesses only win 30 to 33% of disputes. Lose a $5,000 chargeback and, once you count the gear you’ve already fitted and the tech you sent out, you’re closer to $8,000 gone. A lot of it is “friendly fraud”, where the customer doesn’t recognise the legal name on their statement, disputes it, and wins because there’s no signed invoice, timestamp or location to fight back with. Even Starbucks cops 25,000 chargebacks a month. The fix is process: the right software captures the proof and you respond before the deadline, which pushes your win rate toward 50%.
Key Takeaways
- Your processing fee splits three ways, and the issuing bank takes 70 to 80% of it, so know who you’re actually paying before you try to cut costs.
- Work out your effective rate every six months: total fees divided by total card sales. Above 4% and it’s worth a hard look.
- If you pass fees on, use a compliant method (surcharge, cash discount or dual pricing), or build the cost into your price and move on.
- Don’t get hinged to one proprietary software with a processor bolted on, that’s where rate creep hides. New gateways now let you keep your CRM and choose your own processor.
- Chargebacks can cost 2 to 4% of revenue a year. The right invoicing and payment records are your defence.
Payments aren’t exciting. Nobody got into plumbing to audit merchant statements. But this is money walking out the door every day, invisible until you go looking, which is the whole point of understanding where your money’s actually going.
Have a listen to the full conversation with Jimmy Moore, then go pull three months of statements.
About the Guest: Jimmy Moore is the driving force behind FLO Business Solutions in Columbia, South Carolina, where he helps field-service businesses get paid compliantly, at a fair cost, without the fee creep. Across his career he’s worked with more than 20,000 businesses and helps oversee over a billion dollars in annual processing volume. He knows the payments world from the inside, which is exactly why he’s good at spotting where trade business owners overpay.
Website: https://flobizsolutions.com/
Free payment processing scorecard & consult: https://flobizsolutions.com/
LinkedIn: https://www.linkedin.com/in/moorejimmy/
Instagram: https://www.instagram.com/floforbiz/
