Are you finding that your business expenses have significantly increased in 2023? If so, you’re in the same boat as many other businesses. The main factor behind this trend is inflation, or the general increase in prices over time. Inflation tends to hover around 2% per year, but when it starts going up, it becomes a major issue for businesses and the economy at large.

Inflation boils down to three key factors: an increase in demand for goods, a decrease in the supply of goods, and changes in the value of money. These effects keep inflation going full circle, which is why most inflation cycles can go on for years. Read on to learn more about how to deal with inflation and how this whole situation affects credit card processing.

How Inflation Affects Merchants

The effect of inflation is different for every business. For instance, if your business operates in an extremely competitive market, your competitors may want to keep prices steady, decreasing the pressure on you to raise your prices. On the other hand, if you’re in a niche market, you may be able to raise prices without worrying too much about losing customers.

The goods and services you sell are another key consideration. During inflation, customers tend to cut back on luxury items first, which is tough if you’re running, say, a jewelry store. Another issue is that non-essential items aren’t as resistant to price increases. At the same time, selling products people can’t live without like gas gives you added protection during inflation.

Finally, there’s the matter of your brand. A strong brand is an underrated quality when it comes to inflation, as many customers buy the brand behind the product. Studies show that 73% of customers are willing to pay more for a brand they trust.

Inflation and Credit Card Processing

Even with the above considerations, it’s impossible to completely shield yourself from the effects of inflation. For example, one factor that could hit all businesses is the increase in credit card processing costs. As banks try to recoup their losses, they may increase processing charges. These increases then get passed on to merchants in the form of higher processing fees.

Needless to say, this puts merchants in a tough position. Though you’re not the one in charge of increasing fees, your bottom line could be affected. One way to mitigate these fees is to take advantage of services like our Consumer Choice Program. Increases in processing fees won’t really impact a businesses profits because the program is designed to reduce processing costs, and in some cases, eliminate them altogether.

Another thing you should consider is switching to a different pricing model. Between interchange plus, flat rate, and tiered pricing, there’s a decent chance you’re processing transactions at a bad rate. Switching may greatly lower your monthly fees and markups.