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A Guide To Understanding Merchant Account Rates & Fees
By: Bobi Michaelson, Thu Feb 9th, 2006
A Guide To Understanding Merchant Account Rates & Fees
By understanding the true costs associated with merchant account
pricing, you can make an educated decision as to which merchant
account is really best for your needs.
You have opened your business and realize that accepting credit
cards will increase your sales dramatically. It is now time to
choose the merchant account that will be best for you.
You’ve received emails, postcards and have surfed the Internet
and have seen some great promotions. Which of these merchant
account providers will give you a good deal? Before signing any
merchant account agreement it is important to understand all of
the rates and fees that will be associated with your account.
Qualified Discount Rate – This is the percentage that will be
charge on all of your credit card sales.
Swiped credit cards will have a lower discount rate due to the
fact that the cardholder is present and the risk is lower.
Keyed credit cards will have a higher discount rate due to the
fact that there is more risk involved in accepting the credit
card due to the fact that the cardholder is not present.
Mid & Non-Qualified Surcharge – These surcharges are very
important to understand, as some Visa/Mastercard transactions
will have an additional surcharge applied to the qualified
discount rate.
Mid-Qualified Surcharge applies to swiped merchants only. When a
credit card is swiped and the magnetic strip cannot be read in
the terminal, you will key in the transaction. When you have a
telephone order, mail order or Internet order, you will key in
the transaction. A surcharge will be applied to the transaction.
In other words, if your qualified rate is 1.66% and your
Mid-Qualified surcharge is .85%, you will pay 1.66% + .85% =
2.51% for that transaction.
Non-Qualified Surcharge applies to both swiped and keyed
merchants. Whenever a corporate or foreign card is used, or you
do not utilize the Address Verification System when keying in a
credit card, the Non-Qualified Surcharge will apply. In other
words, if your qualified rate is 2.39% and your Non Qualified
surcharge is 1.95%, you will pay 2.39% + 1.95% = 4.34% for that
transaction.
Transaction Fee – Merchant providers will also charge a per
transaction fee on each of your sales. Some providers will also
include a per item fee, or a watts fee in addition to the
transaction fee. Make sure you understand the true cost of the
transaction fee structure.
Address Verification System (AVS) – Address Verification applies
to keyed transactions. The AVS determines whether the street
address and zip code is actually a match for the cardholder. AVS
does not work for foreign transactions. The AVS fee is a
separate fee charged for each transaction.
Travel & Entertainment Cards – American Express, Discover,
Diners and JCB are considered non-bank cards. The transaction
fee for these cards is normally called a T&E fee, or a
non-bankcard transaction fee. You will incur this transaction
fee each time one of these cards is processed, in addition to
the discount rate set by these individual companies.
Batch Header Fee – At the end of each day, you will either close
out for deposit, or your merchant account will automatically be
set up to close out for deposit. Once this is done, the funds
will travel through the ACH system electronically to deposit the
funds in your checking account. The batch header fee is applied
for each batch closed out for deposit.
Wireless Access Fee – This fee is assessed for merchants
utilizing a wireless terminal. Wireless access will allow you to
process transactions through the wireless network, rather than
processing transactions through a telephone landline. There is
also a set-up fee for the wireless network with will range in
cost from $35.00 - $50.00. Once a transaction is completed
through the wireless terminal, it travels through the wireless
network for processing. A monthly fee is associated with this.
This fee will range in cost from $12.00 - $25.00 depending on
your merchant provider.
Gateway Access Fee – This fee is assessed for merchants
utilizing Internet processing or a virtual terminal. Once a
transaction is completed by the customer on your website, or
through your virtual terminal, it travels through the Internet
gateway for processing. A monthly fee is associated with this.
This fee will range in cost from $20.00 - $50.00 depending on
your merchant provider.
Statement Fee – This is the monthly fee for statements, reports,
customer support and service costs associated with your merchant
account.
Monthly Minimum – Most merchant providers access a monthly
minimum associated with your Visa/Mastercard merchant account of
$25.00. In other words, if you processed $1,000.00 in sales and
your discount rate is 2.39%, your total amount of discount fees
would be $23.90. However, the monthly minimum is $25.00. You
would pay an additional $1.10. Should your sales exceed the
monthly minimum, the monthly minimum would not apply.
Annual Fee – Some merchant providers will charge an annual fee
for your merchant account. These annual fees can range in cost
from $50 - $195.00.
Termination/Cancellation Fee – Most merchant providers have a
policy regarding termination/cancellation fees. These fees range
in cost from $75.00 all the way up to $1,500.00. In addition
there is a specified time period to remain with the merchant
provider – from 12 months all the way up to 36 months. It is
important to understand this and have this fee clearly in
writing before signing your merchant agreement. A huge
cancellation penalty can be very costly.
About the author:
The author has been with Cardservice International for over 10
years, striving to provide the very best service in the credit
card processing industry. Visit us at
www.best-merchant-accounts.biz
