Subscribe Feed (RSS)Being able to accept credit cards is an essential component of doing business. When shopping for a credit card processing company it is very important to understand the charges so you can get the best value for your money and so you do not get taken in by merchant account providers with bogus fees. Here is a comprehensive list of credit card fees and their costs.
Discount Rates
While discount rate is a type of transactional fee I decided to mention it first because it is one of the largest fees. If someone purchases a product or service from a merchant for $100 and the discount rate is 2.5% then $2.50 is charged to the merchant and subtracted from the total.
There are additional fees that can be tacked on the discount rate such as Partially Qualified Fee, Non Qualified Fee and Surcharge Fees. You can incur these charges if during credit card processing the card info is keyed in rather than swiped or if someone pays using a card with a reward plan. These additional fees can add up quickly so it is imperative to find out how much they are.
The discount rate should be around 2%, it is higher if the business is conducted online due to the additional fees mentioned in the previous paragraph.
Monthly Costs
There are 2 types of monthly fees, monthly statement fees and monthly minimum fees. A monthly statement fee is a fixed fee that is charged for customer service and support. It is typically around $10 a month. A monthly minimum fee is charged based on the amount of business done per month. If the monthly minimum is not met, the monthly minimum is charged. It ranges between $15-30 a month.
Annual Fees
Although some merchant account providers do not charge an annual fee there is a possibility you might have to pay one in the event that you have been provided with a free point of sale machine as part of your contract.
Startup and Termination Costs
These are fees associated with starting or terminating a merchant account. A setup fee is charged to setup the account (it is also known as an application fee). Some merchant accounts wave this fee. When setting up a account you are normally required to sign up for a one or two year contract, it is therefore important to find out what the cancelation fee is if you decided to terminated your contract early.
Transaction Based Fees
These are fees charged per transaction. They consist of address verification fee, transaction fee, and chargeback/retrieval fees.
An address verification fee is charged when a card is not swiped. It prevents fraud by validating the credit card holders billing address info. This charge is normally between 5-10 cents. Transaction fees are charged by the merchant account provider and are typically 20-30 cents per transaction. It is sometimes known as interchange fee, authorization fee or per inquiry fee.
A charge back fee is charged if the customer disputes the charge because they doesn?t recognize the charge, or feel the product was not as described correctly or due to fraudulent use. This fee is normally around $25 per charge back.
Other Fees
Daily batch fees are charged to the merchant for settling the day?s transactions into the merchant?s bank account. This fee is typically 5-50 cents.
Internet credit card processing requires a gateway fee which is paid directly to the gateway service provider. Expect this fee to be as high as $35.
If your transaction needs to be called in you could incur a voice authorization fee, which is in the 75 cent to $1.50 range.
Any changes to the merchant?s hardware or software can potential result in a reprogramming fee.
Bogus Fees
Watch out for low introductory discount rates that spike after a couple of months. Also make sure that the discount rate is applicable to all credit cards.
A good understanding of credit card processing fees and how much they should cost will help you avoid paying unnecessary fees and help you get the best price on your merchant account.
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Tags: credit card processing, finance, merchant accounts, small business
