Four (4) Reasons NOT to Pay Credit Card Fees

Many Farmers operate on thin margins and many Farmers prefer to avoid credit cards altogether, as card fees cut into profits. We asked ourselves what Farms might be ideal to avoid credit card fees altogether, while also identifying the potential value of accepting credit cards. In other words, when does it make sense to accept credit cards?

If your Farm is online or accepts digital payments, including credit cards or bank to bank transfers, then you are necessarily paying some form of transaction fees. If a Farm chooses to accept digital payments online, there will also be costs to set up and maintain your online store. 

While most Farmers may presume moving online and accepting digital payments is a good idea, there are many Farms who are ideal candidates to stick with offline, cash and check sales only.

1. The Total Value of your Farm Products is Too Small

For Farmers selling less than $25k of products annually, the fees associated with setting up, maintaining an online store and accepting credit card payments may not make sense (as a proportion of your overall sales). Fewer sales are fewer customers to manage, and while it will takes more time to hand-process individual orders, that might be a worthwhile trade-off. 

The average small business will spend about 5-8% per year (on the low side). If your Farm is grossing less than $25k per year, then absorbing the costs to build and maintain your online presence and pay credit card fees is proportionately outsized.

2. Your Average Order Value (AOV) is Too Small

For Farmers selling a small amount of low value products, the costs of accepting credit cards can be prohibitive and erode your profit margin. For example if your Average Order Value (AOV) is only $6, then the typical credit card fees (2.9% plus $0.30 for each transaction) would amount to $0.47 or 7.9% of your total order. However, if your AOV is $100, then your card fees would amount to $3.20 or 3.2% of your total order.

For Farmers with an AOV that is greater than $50.00, it will be worthwhile to absorb credit card fees. However, when your AOV is less than $10, it can be hard absorb those costs, or to pass them on to your Buyers.

3. Your Order Volume is Small or Infrequent

Time is money. If your Farm has less than 10 transactions per month, then it does beg the question if accepting card fees is a good idea at all. A typical phone or email order will take a Farmer about 15 minutes to complete and 4-5 interactions (when factoring in the time to respond, confirm and complete the order). 

On the flip side, a large amount of small orders can be overwhelming, leading to death by a 1000 paper cuts. If your Farm is completing 100+ transactions per month (regardless of the size), then the value of the “time savings” to manage and handle the ordering process, collect and remit payment, can readily justify the costs to move your Farm business online and accept fees (to save time and be more organized).

4. Your Sales are 100% Wholesale on Contract

If your Farm business sells to a small subset of wholesale customers on a contract basis to provide a Product allotment, then moving online may not make sense. This is not uncommon for certain Farmers who have a standing order for their Products every week or month with a few Grocers, Distributors or School Districts (e.g. 500 gallons of Milk per week, 200 dozen of Eggs per week). These relationships are often paid by “hard check” on a net-15 or net-30 paper invoice.

However, if a Farm sells to a number of wholesale buyers with changing orders (e.g. numerous restaurants, grocers, schools), then moving online is highly recommended to provide real-time access to your Product inventory. 92% of wholesale buyers prefer online direct access to order and purchase Products from their trusted suppliers. Often, these wholesale transactions can be set up with an electronic invoice and bank-to-bank transfer payments (at a lower cost versus credit cards).

In any event, remember to consider your Buyers’ expectations when making an important business decision for your Farm. If you’re uncertain, set up a simple Google Survey or Facebook Survey and ask your current customers:

• “How would you prefer to place an order from our Farm on a recurring basis?” 

  • Phone

  • Email

  • Online  

• “How would you prefer to pay for purchases from our Farm?” 

  • Cash

  • Check

  • Credit Card

Give your Buyers 3 distinct choices in each case. You might be surprised at the results. 

We are fans of helping Farmers save time, access customers and make money. Farms use Bar2Door to manage their direct sales, including Farmers who accept cash, check, bank-to-bank transfers and credit cards. If you’re curious how Barn2Door could help your Farm build a thriving direct-to-market business, watch this 5 minute video.