Explanation Of Merchant Account Fees
When you choose to accept credit cards, you must also choose to pay what are known as merchant account fees. On the bright side, being able to offer credit cards will do wonders for your business and will make your customers happy. On the downside, these merchant account fees are numerous and can be quite costly, especially if you have not taken the time to research possible processing providers.
Below is an explanation of some of the fees you can expect to pay. Keep in mind that the specific fee you would pay in each case will be determined by the provider you choose.
Transaction Fees
One of the fees you'll be paying most frequently is the interchange rates. This is the cost you pay per buyer transaction. These come in three different rate levels. To get the lowest rate - known as the Discount Rate - you need to allow customers to swipe their credit cards. If you have to manually enter the numbers and information, you will be charged either the Mid-Qualified Rate or the Non-Qualified Rate. The latter rate is charged if you do not use address verification services when entering the information yourself. Keep in mind that address verification services will cost you extra per transaction.
Additional Fees
Of course, transaction fees are only part of the charges you can expect to face from your provider. You may also have to pay a batch fee which covers the cost of accessing the provider's network in order to close out credit card transactions. This should be done daily but when you have no credit card transactions on a certain day you don't have to pay the fee.
Most providers also charge a monthly fee that is intended to cover the costs of their staff and overhead. Sometimes the fee is referred to as a customer service fee because that can be a large expense for the provider. Some providers charge annual fees as well but many do not. Shop around to find the ones that do not but also look for affordable monthly fees. Also, many providers require that you process a minimum amount of transactions per month. If you fail to meet the minimum, you must pay an additional fee. Try to avoid these fees or to find the lowest minimum requirements possible.
Another fee you might run across is known as a gateway fee. If you need to use an Internet gateway service to accept online credit card payments, you may be charged a separate fee. However, as this becomes increasingly popular, you can find more and providers cover the extra fees or combining them with other charges. If this is something you need to be concerned about now or in the future, look for a company that will not charge extra for this feature.
Other Fees
Two other fees you may need to be concerned about are the cancellation and the chargeback fees. Most providers do ask for at least a year commitment with a merchant. The former fee is charged if you break that contract. The latter fee is charged when customers ask for a refund through their credit card on charges made to your company. These fees are usually non-negotiable but do pay attention to their amounts before making a decision about a provider.