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Buyers' Guide to
Online Payment Acceptance
Chapter 3: Rates &
Fees Involved
When
it comes to choosing which Merchant Account
Provider you wish to deal with (there are many of
them out there) the one factor that influences
most people is the cost. Accepting credit cards
can be expensive, so make sure to compare
different providers to get the best deal. Read
all the fine print, too because you may find some
"hidden" charges not mentioned
elsewhere.
For the most part the rates and fees listed below
represent the range of what most providers will
charge. You may find one or two companies that
will charge less for one particular fee, but
beware that they may make up the loss elsewhere
in another fee.
Here's a basic outline of the approximate rates
and fees associated with maintaining a merchant
account:
Application/Setup: $0 - $100+
(one time fee)
All providers have an application fee. Some
charge it right up front, while others add it
into the solution purchase/lease costs.
Hardware/Software: Purchase:
$99 and up Lease: $20/month and up
One important note worth mentioning here, stay
away from leases if at all possible. It's always
better to purchase from the beginning than pay a
lease for the next 12, 24, 36 or 48 months. Why?
With a lease you could end up paying three times
more than what you would if you 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 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 a 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 they can
just 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: 1.49% - 4% per
transaction
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 lower percentages for these types
of businesses.
Transaction: $0.10 - $0.50 per
transaction
In addition to the discount rate a transaction
fee is also deducted from the purchase cost. 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.
Monthly Minimum: $20 - $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 charges $25 as a
monthly minimum, the transaction and discount
rate fees collected by the bank must be equal or
greater than $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 Minimum
Fee.
Gateway Access: $0 - $25+ per
month
Since in most cases, the Secure Payment Gateway
provider is a separate company from the Merchant
Processor, they charge extra fees. For every
month that you are on their system, you pay an
access fee. The big three gateways (mentioned
above) all charge from $15 to $25 per month for
gateway access. Find a smaller gateway provider
or a Merchant Processor with their own free
gateway to get the best deal.
Statement: $10 - $15 per month
The statement fee is charged because each month
you will receive a statement from your processing
bank detailing all the transactions for that
particular month. It's very much like your credit
card or telephone bill. In many cases there is no
statement mailed, because the statement is
available as an Online Report, so the fee may be
called an Account Maintenance or Technical
Support fee.
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. Most
providers no longer charge this 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 .17% to 1.25% on
those sales. Most merchant accounts come with AVS
at no extra charge. If there is a charge, it is
combined with the per transaction fee in most
cases. 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 - $25 per
instance
A chargeback occurs when the cardholder disputes
a charge. A large number of chargebacks can cause
your merchant account to be cancelled. This can
make it difficult to get another merchant account
for your business. In some cases you may not be
able to get another merchant account for several
years.
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. 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.
In most cases, the reserve fee is used to cover
any chargebacks on the merchant's account.
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