These are the typical fees you will see associated with a merchant
account. Rates will vary from one provider to the other. We showcase a
wide array of merchant account providers included in the following
links.
Finding a low cost merchant account is easier today, then it was 5
years ago. While processing rates and fees remain the same, setup and
solution purchase costs for Internet businesses has gone down
considerably. Where it used to cost $600 to setup, many now only charge
$0 to $150 to setup your business with a low cost merchant account.
Non-High Risk Internet businesses should never pay anymore than that for
a merchant account. Retail businesses can expect to pay anywhere from
$75 and up for a retail swipe terminal solution. You can review the
other rates and fees associated with a low cost merchant account below.
Application/Setup: $0 – $100+ (one time fee)
Most
providers have an application fee. Some charge it right out at the
beginning, while others add it into the solution purchase/lease costs.
Some providers do not have an application fee at all.
Hardware/Software: $99 and up or Lease: $20/month and up.
One
important note worth mentioning here, though leases are sometimes
beneficial to you because they keep you from paying up front for a
terminal, it’s usually much better to purchase from the beginning than
pay a lease for the next 12, 24, 36 or 48 months. Why? With a lease
you’ll end up paying sometimes 3 times or more then if you would of just
purchased the solution outright from the beginning. While a $29.95
monthly lease for 48 months sounds good in reality it isn’t. Leases are
very hard to get out of once started. If your business goes under before
the 48 months are up, you still have to pay on the hardware/software
costs until the last penny has been received by the leasing company.
Also, the lease fee you see does not include your state sales tax or the
amount charged for the damage/loss waiver. If you do go for the lease,
always determine the lease’s buyout clause, end of lease terms, and
especially beware of clauses that allow the lease company to continue
charging you even after the 48 months have passed (they say that you
should contact them in writing one month prior to the end of the lease,
or you can just let them keep charging you).
Programming: $0 – $100+ (one time fee)
This
usually only applies to retail merchants who have changed from one
provider to another. The programming process isn’t difficult but watch
out for the cost, some providers may nickel and dime you on programming
fees. Why do they charge this fee if you use your own equipment? It’s
used to somewhat make up for the loss of not selling or leasing you
their equipment.
Discount Rate: Standard is 1.49% – 4% per transaction or learn about “Interchange Plus Pricing”
This
is the fixed percentage amount that is deducted from the purchase cost.
The lower discount rates are for retail establishments while the higher
are for Mail Order/Telephone Order (MOTO) and Internet-based
businesses. Why the lower cost for retail? The instances of credit card
fraud are much lower so banks are able to charge lesser percentages for
these types of businesses. A typical discount rate for US business is
right around 2.30% for online and 1.79% for retail, perhaps a little
higher or a little lower. Non-US businesses will pay a higher discount
rates closer to the 3% to 4% range. Depending on your provider and
current qualification levels you may want to check into Interchange Plus
Pricing.
Don’t let a few tenths of a percentage point be the
deciding factor between two providers. For example, if Provider “A”
charges 2.29% and Provider “B” charges 2.49% you’ll only save $0.20 for
every $100 processed through your merchant
account.
Transaction: $0.20 – $0.50 per transaction
In
addition to the discount rate a transaction fee is also deducted from
the purchase cost. Also, just as with discount rates, transaction fees
are lower for retail businesses while slightly higher amounts are
charged for MOTO and Internet
establishments. Address Verification
(AVS) may either cost an additional fee, or may be included in the base
transaction fee. The typical transaction fee for US businesses is right
around $0.30 while the higher end of this fee is sometimes the case for
Non-US businesses.
Monthly Minimum: $0 – $25 per month
The
fee is based on your transaction and discount rate fees from your
credit card sales each month. For instance, say your bank charged $25 as
a monthly minimum, the transaction and discount rate fees collected by
the bank must equal or go over $25 each month. If this is the case no
monthly minimum will be charged. However, if the fees collected for that
month do not meet the $25 minimum, you will then be charged the
difference. Not all processors have a monthly minimum fee, however most
do.
Gateway Access: $0 – $25+ per month
Since in
most cases, the Secure Payment Gateway provider (e.g. Authorize.Net,
VeriSign, etc.) is a separate company from the Merchant Processor, they
charge extra fees. For every month that you are on their system, you
usually pay an access fee.
The usual fee to pay for gateway access is around $10.
Statement: $0 – $15 per month
The
statement fee is charged because at the end of each month you will
receive a statement from your processing bank that will list all the
transactions that went through for that particular month. It’s very much
like your credit card or telephone bills.
Daily Close-Out: $0 – $0.15 each day
Associated
with software and terminal processing solutions where at the end of
every business day you close-out all your transactions. Many providers
do charge this daily closeout fee.
Address Verification System (AVS): $0 – $0.05 per transaction
The
AVS service checks to see that the billing address given by the
customer matches the credit card. If you opt not to use AVS, VISA and
MasterCard will not support your transactions and will charge you an
additional 0.17% to 1.25% on those sales. Most merchant accounts do have
an AVS charge, even if it’s bundled with your transaction fee. The AVS
service works only with US credit card holders. Currently, there is no
AVS service in place for non-US credit card holders.
Chargeback: $5 – $35 per instance
A
chargeback occurs when the cardholder disputes a charge that they found
on their monthly credit card statement. A large number of chargebacks
can cause your merchant account to be dropped totally and leave you in a
bind when trying to get another merchant account for your business. If
this is the case you may not be able to get another merchant account for
several years. As a merchant it is important that you take the
necessary steps to reduce and potentially eliminate the instances of
chargebacks.
Reserve: Varies, ask the provider for details
Some
providers will require you to have a reserve account where the amount
is determined by your businesses estimated sales receipts. Usually a
reserve is almost always charged to a Non-US based merchant who is
trying to obtain a merchant account. Also, businesses that do a high
volume of sales each month may be charged a reserve fee. Otherwise,
there usually isn’t a charge. In most cases, the reserve fee is used to
cover for any chargebacks on the merchants account. A reserve should be
avoided if all possible.
Annual Fee: $0 to $100 per year
Some
credit card processors will charge this fee just as additional way to
pay for maintenance and system upgrades. This fee usually isn’t
disclosed upfront. Ask your merchant account sales representative for
information.
