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Accepting credit cards is a very important part of doing business. In order to get the best value when shopping for a credit card processing company it is very helpful to understand the different fees and charges so you can get the best deal and not have to pay phony fees. Since there are many fees associated with merchant accounts this can be a complicated task. Here is a list of fees and their costs.

Discount Rates

Discount rate is one of the largest fees associated with a merchant account. The discount rate determines what percentage of a purchase by the customer gets taken away. For example, if the discount rate is 2.5% and the customer purchases a $100 item from a merchant using their credit card then $2.50 is charged to the merchant and subtracted from the total.

There are additional fees that can be tacked on the discount rate such as Partially Qualified Fee, Non Qualified Fee and Surcharge Fees. You can incur these charges if during credit card processing the card info is keyed in rather than swiped or if someone pays using a card with a reward plan. These additional fees can add up quickly so it is imperative to find out how much they are.

Generally, the discount rate is in the 2% range. It fluctuates as a result of factors mentioned in the previous paragraph.

Monthly Costs

There are 2 types of monthly fees, monthly statement fees and monthly minimum fees. A monthly statement fee is a fixed fee that is charged for customer service and support. It is typically around $10 a month. A monthly minimum fee is charged based on the amount of business done per month. If the monthly minimum is not met, the monthly minimum is charged. It ranges between $15-30 a month.

Annual Fees

Some merchant account providers charge an annual fee, particularly if they provide free credit card terminal equipment.

Startup and Termination Costs

These are fees associated with starting or terminating a merchant account. A setup fee is charged to setup the account (it is also known as an application fee). Some merchant accounts wave this fee. When setting up a account you are normally required to sign up for a one or two year contract, it is therefore important to find out what the cancelation fee is if you decided to terminated your contract early.

Transaction Based Fees

Transactional Fees consist of address verification fees, transaction fees and charge back fees.

An address verification fee is charged when a card is not swiped. It prevents fraud by validating the credit card holders billing address info. This charge is normally between 5-10 cents. Transaction fees are charged by the merchant account provider and are typically 20-30 cents per transaction. It is sometimes known as interchange fee, authorization fee or per inquiry fee.

If a charge is disputed the merchant can incur a charge back fee. This fee is usually about $25 each time.

Other Fees

Daily Batch Fees or ACH Fee is charged to pay for the expense of settling your transactions into your bank account if you do not have any transactions on a given day you are not charged. This fee ranges between 5 -50 cents.

If you are doing credit carding processing via the internet there is a gateway fee. This fee goes to the gateway provider and can be as much as $35.

If your transaction needs to be called in you could incur a voice authorization fee, which is in the 75 cent to $1.50 range.

In the event that any credit card processing hardware or software needs reprogramming you could be charged a reprogramming fee.

Bogus Fees

Beware of other fees not mentioned above particularly for terms like over the limit fee, file fee, conversion fee, audit fee, and excessive transaction fees. In addition pay attention for teaser discount rates that could spike after a couple of months.

A good understanding of credit card processing fees and how much they should cost will help you avoid paying unnecessary fees and help you get the best price on your merchant account.

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categories: credit card processing,merchant accounts,small business,finance

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