point of banking merchant accounts
As a business owner, when you set up a merchant account to enable your customers the ability to pay for your products or services using credit cards (or debit cards with a Visa or Mastercard Logo), you will have some fees associated with the credit card transactions.
The specific fee amounts that you pay will depend on the merchant account provider you select to provide your credit card processing service; however, there is a list of typical fees that the majority of providers charge business owners in exchange for the ability to accept credit as payment.
Visa and MasterCard have what is called “interchange” rates. They range in price- so in order to make it easier, the merchant providers created three categories.
Qualified Discount Rate – a percentage is paid from each dollar charged.
Mid-Qualified Rate – does not apply to merchants that manually enter transactions.
Non-Qualified Rate – added to the qualified rate n certain transactions. Also get billed this higher rate if you don’t use address verification service (AVS) when you manually enter transactions.
Other fees many merchant account providers charge their business customers include, but are not limited to the following:
Reward Cards- most merchant providers charge higher rates if the consumer pays using a reward card.
Transaction Fees- a specific, flat rate that is paid on every sale processed through the credit card processor. (Sometimes the transaction fee is called the interchange fee, authorization fee, or per inquiry fee).
Address Verification Service (AVS)- merchant account providers charge a small fee for the validation service to ensure that the billing address provided in the online checkout process matches the issuing bank’s records. Not using this service will result in hefty charges on the processing of the card for that sale.
Batch Fees- most merchant account providers require that customers close out their transactions a minimum of one time each day. The batch fee pays for expenses for the gateway or software that accesses the credit card processing network. If you don’t have transactions to process, there is no batch fee to pay.
Monthly Statement or Customer Service Fee – most merchant account providers charge a monthly fee in order to cover their monthly costs of operation (paying their customer service team for example).
Monthly Minimum Fee- some merchant account providers require you process a minimum amounts of sales per month, or you pay a monthly minimum. Monthly minimums tend to range between $15 and $40 per month.
Gateway Fees- for some merchant accounts, there are fees for internet and mail order merchants to use an internet gateway service such as Authorize.net, although some merchant providers will cover this fee on their customer’s behalf as part of the package deal. If you are solely an internet business, you’ll want to look for an internet merchant account that includes the gateway service as part of the package.
Annual Fees- often charged by merchant account providers- particularly the merchant account providers that offer free terminal equipment. There are numerous merchant account providers that do not charge an annual fee, so you may want to shop around if the first few you look at require an annual fee. Sometimes it would be cheaper to purchase the equipment than to pay an ongoing annual fee.
Cancellation/Termination Fees- Most merchant accounts require a contract agreement of one or two years and if you cancel early, you are likely to be charged a termination fee.
Chargeback/Retrieval Fees- When a customer requests a refund (or the customer’s credit card issuer requests a refund), merchant account providers typically charge a “chargeback” fee.