My Merchant Account Blog

Transaction Fee

Monday, February 14, 2011

This fee can actually be two-fold: a merchant can be charged a transaction fee from the merchant account provider and the electronic payment gateway. Since this fee is a flat rate and not a percentage of the sale, this is where it can hurt some merchants - especially when the transaction is only a few dollars.

Internet Merchant Accounts

If your business is online (Internet Merchant Account) or Telephone / Mail Order Merchant Account (MOTO), you will need an electronic payment gateway. Some electronic payment gateways might give you a certain number of free transactions and then charge the merchant anywhere from 5¢ - 50¢ per transaction. Other electronic payment gateways (like the Quantum Payment Gateway), does not charge a transaction fee.

When applying for a merchant account, the merchant needs to know what payment gateways are compatible with the provider. Sometimes, when applying for an Internet Merchant Account, the merchant might need to sign another contract with the payment gateway provider. Before signing the contracts, make sure to see what the transaction cost(s) will be. The merchant account provider might charge you 25¢, the electronic payment gateway might charge you an additional 5¢ - 50¢ per transaction, and the merchant probably also be charged an Address Verification Service Fee (AVS) which usually is 5¢ - 10¢ per transaction.

This means that the merchant could potentially be charged anwhere from 35¢ to 85¢ on the transaction. So on a $5.00 transaction, the merchant could be paying around 10% just on this fee alone.