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Important Information About Merchant Account Fees

Any merchant looking for a merchant account must take the time to really learn and understand everything about merchant account fees before signing up for a merchant account. There is a list of fees associated with any merchant account and most of the time can become overwhelming and confusing to understand. While searching for a merchant service provider always remember to ask about the fees of the offered merchant accounts. We have created this simple merchant account fees guide to help merchants better understand and prepare before contacting merchant account providers. Reading this guide will greatly increase your knowledge and save you a lot of time in picking the best merchant account provider for your business.

Discount Rate - The discount rate is a percentage charged on each transaction. This will usually be the most important fee because it makes up the majority of costs associated with your merchant account. Discount rates depend on the type of transaction. Transactions where the cards are swiped are usually lower then keyed in or Internet transactions.

Transaction Fees - This is the fee charged by your processor on every transaction. Transaction fees are charged on all transactions no matter if it was approved or denied. Transaction fees are lower on swiped cards and are charged on all major credit cards, Visa, MasterCard, American Express and Discover. Wireless transactions will often have a higher transaction fee.

PIN Debit Transaction Fees - This type of transaction fee is only applied to debit card transactions where the merchant is swiping cards and a pinpad is attached to the credit card terminal. This is usually a 70 cent fixed transaction fee, however, a lower transaction fee of about 20 cents can be charged by some processors. In cases with the lower transaction fee, merchants will then be billed the debit network fee which depends on the debit network.

Address Verification Service Transaction Fee (AVS) - The AVS transaction fee is only applied to non swiped transactions. AVS transactions fees are usually grouped with other transaction fees, however, could be charged as a separate line item by some processors. This fee will usually vary between 5 to 10 cents and offers merchants the ability to lookup and verify the cardholders address and zip code as a method of reducing fraud. Visa and MasterCard has made AVS a mandatory requirement on all non swiped accounts.

ACH Fee and Daily Batch Fee - Some processors will charge this fee every time you settle your daily batch and the settled amount is transfered into your bank account. This fee will range anywhere from 5 to 50 cents and will not be charged on days where the merchant didn't have any transactions.

Monthly Statement, Support and Service Fee - This is a fixed fee that is charged monthly by the processor or merchant account provider and does not differ by the number of transactions. This monthly fee offers merchants a monthly paper statement and any toll free customer support included with the merchant account. This is a common fee on every merchant account and is normally around $10 - $15 per month.

Internet Gateway Fee - This fee is only applied to Internet merchant accounts using Payment Gateway like Authorize.net and will not apply to accounts using software or a credit card terminal. The Internet Gateway fee is assessed and billed monthly directly by the gateway provider, but can sometimes be billed by your processor through the merchant account. The monthly fee can range as high as $30 and sometimes the gateway provider may charge additional per transaction fees in addition to the transaction fees charged by your merchant account provider.

Voice Authorization Fee - This fee is only charged on accounts where the transactions are called in to a toll free 800 number. Another common use if when the merchants terminal or software isn't working and authorization needs to be performed. The voice authorization service is set by the merchant account provider and will normally range from 75 cents to $1.50 per authorization.

Monthly Minimum Fee - The monthly minimum fee is the minimum amount the merchant account provider needs to have in fees. This is not an extra fee as long as the merchant credit card fees are higher than this minimum amount. If the monthly fees do not meet or exceed this minimum amount, the merchant will be charged the difference. This is a common fee and can sometimes be reduced if the merchant expects a low monthly volume.

Surcharge Fee, Partially-Qualified Fees and Non-Qualified Fees - These fees only apply on certain card types and are related to an additional discount fee charged on some cards. These fees are applied on some business, corporate, rewards, international cards, and do not apply to the most consumer credit cards. You can notice these fees under any of the three names but they all represent the same fee and can be anywhere between 0.5% to 2.5% determined by the merchant account provider.

Application or Setup Fee - This is a fee that used to be charged on all new merchant account applications when the account was set up. Most reputable providers will no longer charge this fee and merchants should make sure there is not application or setup fee when applying for a new merchant account.

Reprogramming Fee - When a merchant needs to reprogram existing software or equipment a reprogramming fee will be charged by the merchant service provider or terminal and software vendors for the time and effort to program the software/terminal.

Chargeback and Retrieval Fee - If a customer or issuing bank disputes a processed transaction, a chargeback and retrieval fees will be charged. When chargebacks occur, the merchant will receive notice of the dispute by mail, email or fax. A customer will usually dispute a charge if it's not recognized by the customer, the product or service was different than described, or the credit card was fraudulently used by someone other than the cardholder. Following the notice, the merchant can provide a written response and documentation of the transaction in attempt to refute the dispute. Merchant account providers will normally charge around $25 on chargebacks which is quite a reasonable fee for a processor handling the dispute. Merchants will see this fee only as often as customers or the issuing bank disputes a charge.

Annual Fee - This is the annual amount providers and processors charge for a merchant account. Most merchant account providers don't charge an annual fee but a few still might. It's always best to find a merchant account at no annual fee as it will definitely save you money on your merchant account.

Cancellation or Terminal Fee - A cancellation or termination fee of some sort is associated with almost all merchant accounts. Merchant account providers have significant cost in setup and maintenance of merchant accounts. In case a merchant decides to cancel the service, especially in the beginning process, this fee help the provider recover some of those losses. Depending on the circumstances, like if there are issues or unresolved problems, most providers will reduce or remove the fee. We suggest merchants to always be aware of this fee and ask their merchant account provider about their specific cancellation policy before committing to a merchant account. Cancellation and termination fee is usually a fixed amount and not a variation of number of months left on the contract multiplied by the average fees the merchant was paying each month.

Hidden Fees or Junk Fees - Merchants should always be aware of hidden and junk fees that are not mentioned upfront. The most common scenario is for a merchant account provider to offer merchants with what's called a "teaser" rate, which is extremely low. What they neglect to mention is that the rate is temporary and will increase significantly after processing for a few months. Such hidden fees can be mentioned in the agreement that would allow the provider to raise discount rates if the merchant does not meet certain volume targets or sometimes at the providers own will. Another case is offering teaser rates that are only applicable to one specific card type in a specific category, while charge higher rates on other cards and categories. Junk fees are random fees created by the provider and can be found under names like file fee, security fee, conversion fee, excessive transactions fees, audit fees, over the limit fee, billback fees and discount rate fees charged on refunds.

As you search various merchant account providers, it's important to understand merchant account fees and rates included with the offered merchant account. As important as these fees are, they are only a factor in choosing the right merchant account provider for your business. Service, usability, support, attitude and reputation are all equally important factors for a satisfied merchant.

Merchant Guide