Merchant Account Fees

When it comes to setting up a merchant account, the fees that are charged can quickly become confusing and overwhelming. Different fees are used to pay for different things. Additionally, there are fees that are charged at different times in the transaction process.

Before you decide on a merchant account provider, it is important to ask them specifically about what merchant account fees they charge – and how much each fee costs. It is important to shop around for a merchant account provider because the costs can vary a great deal. Sometimes, if you can combine services with a merchant account provider, you can get a break on some of the fees.

Application/Set up Fee

Most merchant account providers charge a set-up fee or an application fee. (Watch out for those that charge an application and a set-up fee.) For the most part, this is a fee that you only have to pay once. Most merchant account providers charge right around $200 for set-up, although some charge as much as $800 – $1,000, and others charge less, depending on what kind of account you have, and the benefits that come with it.

In some cases, if you go with a merchant account provider that offers a variety of integrated solutions, you might have this fee waived, if you get another service with the provider. It can be a good idea to look at what you are being charged for other services and see if switching can save you money.

Transaction Fee

Whenever you “run” a customer’s credit card, there is a fee associated with it. Merchant account providers must use a system of computers and digital network access in order to process your sales. This costs money. Every time a customer uses a card – whether it is a debit card or a credit card – you are charged a transaction fee.

The transaction fee is usually expressed as a percentage of the sale, or a flat fee of between 20 and 50 cents per transaction. It really depends on the merchant account provider. But it is something to be aware of.

Discount Rate

Like the transaction fee, the discount rate is a portion of the sale that is charged for processing. Along with the transaction fee, this is taken off of the total money you get for the sale. Most often, the discount rate is around 2.35 percent of the transaction for real time sales approval (like those done online), and around 1.89 percent for transactions where the card is actually present (such as in a store). Usually, by the time the discount rate is added to the transaction fee, it averages about 3 percent of your sale each time you accept a credit card. However, the larger number of customers you receive for accepting credit cards normally offsets the fees you have to pay.

Statement Fee

When you have a merchant account, the money you earn from credit card and other transactions is put into an account. Sales and chargebacks are recorded, and the daily transactions balanced against each other. Every month, you will receive a statement that details all of the transactions that took place in your account. It is more difficult to produce these statements for merchants and retailers than it is for individuals.

Many account providers will charge a statement fee of $10 to $15 a month in order to compile you list of transactions. However, as the world becomes increasingly paperless, some merchant account providers are willing to reduce your statement fee – or waive it altogether – if you get an electronic statement emailed to you rather than a paper statement.

Minimum Monthly Fee

In many cases, merchant account providers want to make sure that they get a certain amount of money each month from transaction fees. This means that if you do not do enough transactions to reach the minimum, there will be a fee charged. Depending on the provider, this can be anywhere between $30 and $50.

There may be other fees as well. If you have a question about a fee, ask your merchant account provider for more information. Carefully review the fees, and compare them with other providers. Also, it might help to have a trusted attorney review the contract in order to make sure that you do not have nasty surprise fees down the road.