My Merchant Account Blog

Merchant Account Fees

Wednesday, December 28, 2005

Getting a merchant account is very easy - understanding it is a different story. There can be a lot of different fees associated with a merchant account:

• Discount Rate (Visa / MasterCard / Discover Card):  2:15% - 2.39%  
• Transaction Fee -  20¢ - 50¢ per transaction)  
• Batch Fee - Free to 30¢ per batch
• ACH Fee - Free to 25¢ per deposit
• Address Verification Service (AVS) - Free to 15¢ per transaction
• Electronic Gateway Fee  - $10.00 - $100.00 a month
• Statement Fee  - $0.00 - $20.00 a month
• Customer Service Fee  - $0.00 - $20.00 a month
• Monthly Minimum  - $0.00- $50.00 – for example, if your discount rate is 2.5% and you sell $1,000 that month, your charge is $25.00. If you monthly minimum is $25.00, you have met that requirement, and should not be responsible for that amount)
• Application Fee - $0.00 - $1,000.00
• Merchant Account Set-Up Fee  - $0.00 - $1,000.00
• Electronic Payment Gateway Set-Up Fee  - $0.00 - $1,000.00
• Membership or Annual Fee - $0.00 - $1,000.00
• Virtual Terminal  - $0.00 - $25.00 monthly

As you can see, there can be a lot of charges. The two basic components of an Internet merchant account are a credit card processor and an electronic payment gateway. The electronic payment gateway is similar to the point-of-sale (POS) terminal in the grocery store. The main U.S. gateways are Quantum Payment Gateway, Authorize.net, Payflow (owned by Paypal) and LinkPoint (aka YourPay or First Data Global Gateway - no longer support by us due to overcharging). All four of these companies cannot process credit cards without the aid of a credit card processor.

Questions to Ask a Merchant Account Provider:

• Do they provider 24 hour customer support?
• What are the charges of a transaction and monthly charges?
• How much will I be charged if I do not process anything?  (Usually this fee could be anywhere from $15.00 - $100.00)
• What will make the transaction downgrade to a non-qualified rate?
• What is your non-qualified rate?
• If you are a retail business, are you leasing to own or buying your POS terminal?  This lease can be from a third party and even if you cancel your merchant account, you will still need to paying the leasing company.
• Is there a contract or can you cancel at anytime?
• What about the electronic payment gateway and its fees?  (Most payment gateways will charge a monthly fee and maybe a transaction fee.  The Quantum Gateway does not have a monthly fee or a transaction fee.)

 

Whatever they tell you on the charges - when you sign the contract, make sure that those charges are spelled out on the contract. This is what matters. Also read the print to see how long the contract is good for. They are either usually 6 months, 12 months, 24 months, or 36 months.

Do your due diligence. Let’s say you sign up with a 2.39% discount rate, 25¢ transaction fee / batch fee, 5¢ AVS, $15.00 monthly electronic gateway fee, and $10.00 customer service fee. With the above contract, let’s say you have 40 transactions at $100.00.

• The transaction fees will be $10.00
• The AVS fees will be $2.00
• The discount rate charge is going to be about $95.60
• Now let’s say that you have nightly batches each night - so for one month, that is about $8.00
• If your provider charges an ACH fee, that will be about $8.00 a month
• Your electronic payment gateway fee is probably $15.00
• Your customer service / statement fee is probably $10.00
• Now, your total is $148.60 for the $4,000 in sales, which is about 3.7%

Third party processing has some advantages over a merchant account.  If your merchant account provider though does not charge as much, then your monthly fees will be less and that means more money in your pocket.