What are Credit Card Declines Costing Your Club?

Club Automation

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August 1, 2020

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category

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August 1, 2020

Did you know that 1 in 3 members will terminate their membership within 30 days of being contacted regarding returned payments from expired or invalid cards? Financial conversations are some of the most uncomfortable communications you have to have in the health and fitness club management profession, and in our current reality with COVID, we know that clubs are having to navigate this situation even more frequently than normal. Member cards decline for a variety of reasons -- from insufficient funds (NSF) to unexpected card expirations.

But when a card decline drives a member to terminate, your club loses more than just that membership revenue. Let’s consider all the other costs associated with credit card declines, including labor costs and decline fees.

Labor Costs

A large cost most organizations don’t consider when analyzing how credit card declines are affecting their club are the labor costs associated to staff members tracking down members with outdated payment information.  Because you are likely paying your staff members by the hour, every minute they spend making phone calls and sending emails that will ultimately go ignored adds up to hours of mismanaged time for your club.

Let’s do the math.

  • How many hours per week, on average, does your staff member spend managing credit card declines? For this example, we will use 17 hours per week.
  • What is the hourly rate for this team member? For this example, we will say $15 per hour.

If this team member continues managing credit card declines 17 hours per week for an entire year, with the hourly rate of $15 per hour, the yearly labor costs of managing credit card declines is $12,240! Wouldn’t you rather your team spend their time engaging members? That’s just the labor cost; we need to continue on with this example of decline fees and membership revenue costs.

Decline Fees

When a member doesn't have the funds available in their account to pay for the transaction that’s prompted by their membership at your club, a decline fee is evaluated. Your team can work to recover the membership charge along with the decline fee, but of course, there’s no guarantee. That’s the cost of doing business, so you want to make sure you do everything in your power not to let an expired or invalid card stay on file. Decline fees typically range from $0.06-$0.10 per credit card decline. This is another cost most organizations do not consider when evaluating how credit card declines are impacting their bottom line

Let’s do the math.

  • On average, how many credit card declines are due to invalid or expired data? For this example, we will say 46 card declines per month are due to invalid or expired data.

If we pay $0.10 per decline, averaging 46 card declines per month, our estimated yearly costs of fees charged for declined cards due to invalid or expired data is $55! That’s on the low end of fees per decline. We still have lost membership revenue to calculate before we can truly see how credit card declines are impacting our bottom line.

Membership Revenue

Membership revenue is what your club banks on. This line item is what most organizations review when looking at retention numbers and the cause of lost revenue. But looking at this line item alone is an inaccurate representation of lost revenue.

Let’s do the math.

  • On average, how many members terminate their membership when their credit card is declined due to invalid or expired data? For this example, we will say 16 memberships per month.
  • How much does your average membership cost per month? For this example, we will say $55 per month

If we lose 16 memberships per month due to invalid card data, with our membership cost being $55 per month, we will lose $10,560 in membership revenue per year. That’s a significant amount of revenue, but it’s less than half of the total cost of credit card declines for your club. Because when we bring all of these line items together, our estimated yearly cost of credit card decline management is $22,855!

Proactive Account Updater

Financial conversations with members are uncomfortable. Armed with the information that 1 in 3 members terminates their membership within 30 days of being contacted about a returned payment, you see how important that financial conversation with the member is. At Club Automation, our Proactive Card Account Updater reduces the number of declined cards with a 40% recovery rate, preventing decline fees and drastically cutting down on staff time spent contacting members with invalid and expired credit cards.

Interested in how Club Automation can help improve your bottom line and member retention with Proactive Card Account Updater, a feature of  Full Service Billing? Click below and let a team member complete a free payments analysis today.

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A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

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A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

A rich text element can be used with static or dynamic content. For static content, just drop it into any page and begin editing. For dynamic content, add a rich text field to any collection and then connect a rich text element to that field in the settings panel. Voila!

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