Merchant Account Fees FAQ

We are asked about merchant account fees more than anything else.  So you will find the answers to are most FAQ's below.

Merchant Account Fees Explained

Discount Rate

The discount rate is % rate assessed on each transaction.  This will be a merchant's largest fee so  make sure to understand the terms of your merchant account agreement.  You may benefit from a sliding scale based on the number of monthly transactions but here is your most basic example.

If you have a discount rate of 2.0% and you make a $1,000 sale, then the transaction fee to the merchant services provider would be $20.00.

Transaction Fees

Refers to the actual dollar amount levied against for each transaction.  The $20.00 in the example above is your transaction fee.  Read your terms and find out it you are charged a transaction fee on declines and/or returns.  Find out This fee is charged to process each transaction. There are usually minimum transaction fees  charged on low cost items.  Read the fine print in your agreement.

PIN Debit Transaction Fees

Only applies to debit card transactions.  Fees are now regulated as a result of The Durbin Amendment, but include a low flat fee per transaction in addition to a % transaction fee.

For example, your merchant account statement might show $.21 + 5%

Address Verification Service Transaction Fee (AVS)

Charge to verify name and address for all MastCard & Visa transactions and transactions where card numbers are keyed in without a physical card being present.  The fee is for fraud protection and ranges from 5- 10 cents per transaction.  The AVS is helpful for merchants who may find their transactions questioned by their merchant services provider.

Daily Batch Fee - ACH

This is the fee providers charge to settle your account each day.  This how get the funds you collect from sales into your bank account.  Read your terms and batch your account as noted.  It may cost anywhere from $.05 to $.50 each time you run a batch so do not do it after every sale, or if you have no sales on a particular day.  Know Your Terms.

Monthly Statement Fee

Be prepared for your provider to charge a fee to generate your monthly statement. This information is invaluable for accounting purposes and is usually a fixed flat fee no matter how many or how few transactions made during the month.  Expect an average fee of $12 a month across the industry, with $10 being the low and $15 the high.

Internet Gateway Fee

Refers to virtual merchant accounts which do require software on your computer or a physical credit card terminal.  This will also be a flat monthly fee to your gateway provider.  Most merchant account providers now offer this service but check to make sure you are not dealing with a third party unless absolutely necessary.  It makes sense to bundle merchant services if possible.  Remember you will still have transactions fees to pay.

Voice Authorization Fee

No longer part of basic services and unless your terminal is down.  The fee is for calling customer service to verify credit card information over the phone.  This was standard protocol 20 years ago but those days are gone.  This fee should be charged only per transaction and not as a monthly flat fee.  Make sure you have access to Voice Authorization if you need it and expect an industry average of $1 per transaction.

Monthly Minimum Fee

This represents the minimum charged by your merchant account provider regardless of sales volume.  If you do not conduct business during a month, or have a low sales volume, you must pay the minimum for the service.  Industry fees range from $20 to $25 a month.  Be savvy because there are new ways for low volume sellers to avoid monthly minimums using cell phone credit card processing.  You can use this to your advantage when negotiating your package with your merchant account provider.

Surcharge Fees

These are the fees tied to international cards mostly.  However, this is where they charge and list fees associated with corporate discount plans and  rewards cards.  These fees are rare but can be up to 2.5% so know your plan.

Application / Setup Fee

In the past it was customary to pay a flat fee to set up your account but providers are cutting this fee due to competition.  Ask your potential provider about the fee and do not assume it is set in stone.  Let them earn your business.

Reprogramming Fee

This is a service fee charged by providers for reprogram equipment.  Whether it is a credit card machine, software program or virtual merchant account, there is labor involved in maintaining and upgrading merchant services.  Expect this fee when you change technologies or equipment.

Chargeback - Retrieval Fee

Perhaps the most misunderstood merchant account fee.  They relate a customer disputing a charge. There are several reasons for chargebacks but the most frequent being buyers forgetting what they bought and from whom.

A merchant will respond to a dispute in writing and the merchant account provider handles the entire process for a fee.  The industry average is $25 and it is worth every penny.  Having your provider as your advocate keeps you focused on your business.  Defending you in a dispute is theirs.

Cancellation Fees

This few comes as a surprise to merchants but all providers have them.  There are always discount offers out there enticing you to switch merchant accounts and this game of "musical chairs" is costly for merchant services providers who invest in your set up and the operating of your business.

Cancellation fees are determined at contract but can vary.  Most are flat fees, prorated fees or buyouts of your contract.  They are negotiable and your leverage comes before your sign your agreement.  Make sure you understand the full terms of your cancellation fees.

Hidden / Junk Fees

Beware of the fine print.  There are "hidden" fees throughout the industry and most come in the form of low teaser rates on transactions.  These state you will have an introductory rate for a set amount of time and then your rate will jump to a specified discount rate.  Others target sales volume when a monthly minimum fee is not part of your agreement.  Watch for fees for usage fees if you have a set number of transactions at a low teaser rate.  All fees are listed in your agreement but the terms can be confusing.

Make sure your merchant account provider answers all of your questions before you enter into any type of contract.