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 One
of the more confusing parts about setting up a merchant account
is deciphering all the fees and charges. Below all the fees
are defined. Be sure to ask your provider about all of these
fees and what they will cost you. Often a merchant account
that seems to be low cost can wind up being very expensive.
You may separate the fees into two categories: set up fees
and ongoing fees. Also be warned about hidden fees that were
not disclosed beforehand.
Set Up Fees
Ongoing Fees
Hidden Fees
There are a variety of other charges, often not spelled
out. Make sure that you read every word of the contract
and that you have some evidence of the Merchant Account
Provider's integrity and good standing before you sign
up.
An application fee is charged by most Merchant Account
Providers to cover processing costs including credit check.
In most cases, it is not be refundable if your application
is denied. If you're considering signing up with a Merchant
Account Provider that doesn't charge an application fee,
make sure that you won't have to pay higher fees elsewhere
to compensate.
Average cost: $50 to $150.
A setup fee is usually charged for hardware and/or software
installation. Merchant Account Providers that don't charge
setup fees sometimes lease software and hardware instead
of selling it, in which case there will be monthly lease
payments later.
Average cost: No charge to $300.
Point-of-Sale terminals, which allow a customer to slide
their credit card through a terminal to verify a transaction
in real-time, can cost up to $1,500 for high-end models.
Some vendors will allow you to lease the equipment for
a monthly fee. Leasing often can be significantly more
expensive.
If you are an internet merchant, most Merchant Account
Providers don't require you to buy or lease hardware.
Average cost: $500 to $1,500 to purchase, and $15 to $50
per month to lease.
Software allows you to send credit card transactions
to a merchant account provider across a dedicated or protected
line.
If you have signed up with a Online Merchant Account Provider,
it will provide you with the code to place a link on your
site to its secure server. This link will allow the credit
card transaction to take place, usually in real time.
You'll also need shopping cart software, which provides
the interface that allows customers to enter their credit
card information. Most vendors sell both as a package.
Average cost: $400 to $800.
Security deposits and rolling reserves may be required
for start-up businesses, high-risk industries, or merchants
with bad credit. A deposit is a lump sum, usually the
first month's receipts; a rolling reserve is a percentage
of all receipts taken in during several months. After
a period during which a merchant builds a strong reputation
and shows a profit, both are returned to the merchant.
Average cost: First month's receipts or 30 percent of
your monthly business volume.
The discount rate is the percentage of the amount of
the sale charged on each transaction. Rates are lower
the higher the monthly sales volume. This is the principal
charge you will incur and the principal way the Merchant
Account Provider generates revenue. Visa and MasterCard
influence this rate. They currently charge Merchant Account
Providers 1.8 percent and 1.85 percent, respectively,
for each online transaction.
Average cost: 2.5 percent to 3 percent. The industry standard
is 2.65 percent.
The per transaction fee is the fee charged by the Merchant
Account Provider to process each transaction. Low discount
rates are often coupled with high transaction fees, and
vice versa. If you sell high-cost products, it's in your
best interest to look for relatively low discount rates.
If you sell low-cost products, look for low transaction
fees.
Average cost: 20 to 60 cents per transaction.
Batch fees are charged for closing out your account each
day. Merchants usually send one batch of transactions
daily. You may be charged a late batch fee if you do not
close out within a certain time frame, usually 24 hours.
Average batch fee: 10 to 40 cents a day.
For all card non-present transactions (i.e. mail, Internet
and phone), an address verification charge may be added
to the Per Transaction Fee. This can reduce the number
of chargebacks. You'll pay this fee with each transaction.
Average cost: 5 to 10 cents per transaction.
If your physical or virtual terminal goes down, you'll
need to dial a voice authorization number to process your
orders. Some companies charge a fee for this service.
Average cost: $1 per order.
The monthly statement/customer service fee is charged
for issuing monthly credit card transaction statements
and servicing the account.
Average cost: $10 per month.
A monthly minimum fee is charged if the amount paid in
discount rate fees does not meet a monthly minimum set
by the Merchant Account Provider. You will have to process
a certain number of orders per month and charge a certain
amount per order to avoid paying this charge.
Average cost: $20 to $35 per month.
The monthly gateway fee is the cost for using a third-party
credit card processing service. If your Merchant Account
Provider uses a third-party service, it will probably
charge you a monthly fee to help offset the cost of using
a third-party service.
Average cost: $15 per month.
Chargebacks refer to the process of issuing a customer
credit for returned items, misorders, fraud, etc.
Average cost: $25
Some Merchant Account Providers offer merchants fraud
screening software that automatically stops questionable
transactions before they go through.
Average cost: 10 cents per transaction. There might also
be a $100 to $150 setup charge.
Some Merchant Account Providers charge a fee for annually
renewing a merchant's account. It's worth shopping around,
though, as many do not.
Average cost: $50 to $100 per year.
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