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Merchant Account
Rates
These are the typical fees you will see associated with a
merchant account. Rates will vary from one provider to the
other. We showcase a wide array of merchant account
providers included in the following links.
Application/Setup: $0 - $100+ (one time fee)
Most providers have an application fee. Some charge it right out
at the beginning, while others add it into the solution
purchase/lease costs. Some providers do not have an
application fee at all.
Hardware/Software: $99 and up or Lease: $20/month
and up.
One important note worth mentioning here, though leases are
sometimes beneficial to you because they keep you from paying up
front for a terminal, it's usually much better to purchase from the
beginning than pay a lease for the next 12, 24, 36 or 48 months.
Why? With a lease you'll end up paying sometimes 3 times or more
then if you would of just 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/software 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 the 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 you can just let them 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: Standard is 1.49% - 4% per transaction or
learn about "Interchange
Plus Pricing"
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 lesser percentages for these
types of businesses. A typical discount rate for US business is
right around 2.30% for online and 1.79% for retail, perhaps a little higher or a little lower.
Non-US businesses will pay a higher discount rates closer to the
3% to 4% range. Depending on your provider and current
qualification levels you may want to check into
Interchange Plus Pricing.
Don't let a few tenths of a percentage point be the deciding
factor between two providers. For example, if Provider "A"
charges 2.29% and Provider "B" charges 2.49% you'll only save
$0.20 for every $100 processed through your merchant
account.
Transaction: $0.20 - $0.50 per transaction
In addition to the discount rate a transaction fee is also
deducted from the purchase cost. Also, 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.
The typical transaction fee for US businesses is right around
$0.30 while the higher end of this fee is sometimes the case for
Non-US businesses.
Monthly Minimum: $0 - $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
charged $25 as a monthly minimum, the transaction and discount
rate fees collected by the bank must equal or go over
$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 monthly minimum fee, however most do.
Gateway Access: $0 - $25+ per month
Since in most cases, the Secure Payment Gateway provider (e.g.
Authorize.Net, VeriSign, etc.) is a separate company from the
Merchant Processor, they charge extra fees. For every month that
you are on their system, you usually pay an access fee.
The usual fee to pay for gateway access is around $10.
Statement: $0 - $15 per month
The statement fee is charged because at the end of each month
you will receive a statement from your processing bank that will
list all the transactions that went through for that particular
month. It's very much like your credit card or telephone bills.
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. Many providers do charge this daily closeout 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 0.17% to 1.25% on those sales. Most
merchant accounts do have an AVS charge, even if it's bundled
with your transaction fee. 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 - $35 per instance
A chargeback occurs when the cardholder disputes a charge that
they found on their monthly credit card statement. A large
number of chargebacks can cause your merchant account to be
dropped totally and leave you in a bind when trying to get another merchant account for your business. If this is the
case you may not be able to get another merchant account for
several years. As a merchant it is important that you take the
necessary steps to reduce and potentially eliminate the instances of chargebacks.
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. Usually 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. Otherwise, there usually isn't a charge.
In most cases, the reserve fee is used to cover for any
chargebacks on the merchants account. A reserve should be
avoided if all possible.
Annual Fee: $0 to $100 per year
Some credit card processors will charge this fee
just as additional way to pay for maintenance and system
upgrades. This fee usually isn't disclosed upfront.
Ask your merchant account sales representative for information.
Continue to last page:
Tips for Merchant Account
Holders
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