Understanding Credit Card Processing Fees for Small Business
Being able to accept credit cards is an essential component of doing business. When shopping for a credit card processing company it is very important to understand the charges so you can get the best value for your money and so you do not get taken in by merchant account providers with bogus fees. Here is a comprehensive list of credit card fees and their costs. Discount Rates While discount rate is a type of transactional fee I decided to mention it first because it is one of the largest fees. If someone purchases a product or service from a merchant for $100 and the discount rate is 2.5% 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 should be in the 2% range and is higher or lower based on factors mentioned in the previous paragraph. Monthly Costs The two kinds of monthly fees are monthly minimum fees and monthly statement fees. A monthly minimum fee is charged if the merchant does not do the minimum amount of transactions per month. For example, if the monthly minimum is $20 and the business only does $10 worth of transactions that month, they are charged an additional $10. Monthly minimum fees are in the $15-30 a month range. The other type of fee is the monthly statement fee which is around $10 a month. Annual Fees In addition to monthly fees you might have to incur an annual fee. Although some merchant account providers do not charge this fee you might have to pay it if you received free credit card terminal equipment. Startup and Termination Costs Some merchant account providers wave the setup fee. When setting up a merchant account the merchant is required to sign up for a 1-2 year contract. A cancelation fee is charged if the merchant decides to terminate early. Transaction Based Fees Transactional Fees consist of address verification fees, transaction fees and charge back fees. If a credit card is not swiped by a card machine an address verification fee is charged. This is done in order to protect the merchant from fraudulent transactions. The charge should be 5-10 cents. Transaction Fees are charged to the merchant by the merchant account provider on every purchase. They are generally between 20-30 cents each transaction. If the customer disputes a charge the merchant is charged a charge back fee. This fee is typically $25 per charge back. 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. Gateway Fees are charged for internet merchant accounts. This fee is assessed by the gateway service provider which might be different from your merchant account provider. This fee can be as high as $35. If you need to call in the credit card transaction you could be charged a voice authorization fee, which is typically 75 cents to $1.50. Reprogramming Fee is charged if existing software or hardware requires reprogramming. Bogus Fees Some unscrupulous merchant account providers might try to charge you junk fees. Watch out for teaser discount rates that sky rocket after a couple of months or low discount rates that only apply to certain cards. Also watch out for fees called file fee, audit fee, conversion fee, over the limit fee, excessive transaction fees. This information should equip you to make good decisions and get the best deal when shopping for credit card processing for your small business. Quick and Easy Credit Card Processing Setup Click Here to find out more http://www.creditcardprocessingsmallbusiness.com |