Merchant Account Fees Defined

A merchant account is an exclusive account provided to a merchant by a bank or any other similar financial institution to help the merchant in real time credit card processing. This account is for both the internet and retail merchants. When you buy a product or order for a service and make the payment via a credit card, the merchant accepts the credit cards and validate the identification to process further. For doing this, the merchants should have a merchant account, because these accounts have a contract with the card issuing bank. Hence, based on the agreement, the merchant account owner agrees to some specific rules and responsibilities to offer the customers a secure and convenient payment method.

So, in general the merchant account encompasses certain service agreements, an array of useful equipments, required software and also the banking protocols for the retailers and the business operators. However, a merchant account can not be considered as an ultimate solution for every step associated with the overall business. When the business owner chooses to sign up with a merchant account provider, he needs to provide various details and documents in order to get approved for it. Hence, the merchant account includes a number of fees in order to set up a merchant account and offer various services to the business operators.

Usually, it becomes confusing for the business owners while obtaining a merchant account especially when they come across the wide array of fees involved. The merchant account providers charge a number of fees for various purposes. This article will give you an overview about the types of fees involved in a merchant account application and services.

The set up fee is a basic fee charged by most of the merchant account service providers. This fee is either combined with the application fee or is charged after the final application process and the account approval process. This fee is usually charged by the provider to complete the overall set up procedure. The charges will be anywhere within $50 to $500 in total. Usually, the internet merchants pay this fee as a one-time fee while setting up their account processing system; however, some providers also do not charge this fee for certain business owners.

This fee is charged as a one-time fee during the application process for a new merchant account provided by any bank or similar financial institution. Some providers also offer a refund in case your application is not approved. Presently, the providers charge application fees only for the high risk and offshore merchant accounts.

This type of fee is a typical flat-rate monthly fee, usually charged to mail the client's monthly detailed bankcard statement to his given mailing address. This fee covers the operational cost and some other charges associated with such operations. The cost can be anywhere from $10 to $15 per month; business owners also have the choice to make a one-time payment per year by paying around $120 to $180.

This is also a flat charge applied annually for to manage the merchant account and other associated operational costs. It can vary within $50 to $195 per year. This fee also includes a fee for customer support and the charges for the monthly statement. It can be $10 to $20.

This fee is charged per transaction. Usually, such fees are applied when you settle your transactions or close out for the day and the transaction amount is transferred to your business account with a charge of $.05 to $0.50 per day. Hence, the approximate batch fee annually would be somewhere within $17.60 to $176.

This is a fee charged when you get your terminal programmed. Certain service providers can charge a programming fee of up to $295 or higher.

This fee is only applied for the business owners in case they need their equipment to be reprogrammed by the service provider. This fee is also applicable when the owners switch their merchant account provider. This fee can be up to $150 and higher based on the number of times that you are looking for doing reprogramming.

A chargeback is applied when there is a disputed charge by a customer. In such cases, the issuing bank initiates a chargeback for the client's merchant account; hence, the original sales amount associated with the disputed transaction gets immediately transferred from the client's merchant account. Usually, you will have approximately 10 days to dispute the chargeback. You can do it by providing the issuer with a purchase proof by the customer. Then, you will be charged a fee of $20 to $35. Usually, the merchant account providers prefer to terminate the merchant account service if the client has a large history of chargebacks in the past.

These kinds of fees are applied when the transaction information is typed into a computer or terminal manually; this can happen when the merchant doesn't have the customer's card or when his swipe machine is unable to read the card.

This fee is calculated in percentage depending upon the amount of each processed sale in any particular merchant account. Usually, the merchants are charged to pay approximately 2.2% to 2.45% in case of the real time online or manual processing and 1.60% to 1.80% when it is retail processing. Basically, there are three different discount rates such as the Qualified, Mid-Qualified and lastly the Non-Qualified discount rate. Based on the type of business and the merchant account, this fee is charged to the customer. In case, the merchant has an offshore business, which is a high risk one, the discount rate becomes comparatively higher.

This fee is applicable to the client, when he decides to terminate the merchant account service with the provider. This fee is also applicable to them who decide to terminate the merchant account due to the excess set up cost and maintenance cost associated with their merchant account. This fee can also be prorated in case you decide to stay with your current provider for a longer period of time.

This is the fee applied for those merchants who transmit for processing of daily sales in batches. For any such transactions, a Batch Header Fee of approximately 25 cents is charged per day basis.

As the name defines, this fee is applied for the services associated with the address verification of the clients. For these keyed transactions, the merchant account service providers use the AVS service; hence, they charge a fixed amount of 10 cents or higher per every single dealing. The AVS service verifies that the billing address of the customer matches the address provided in the credit card. This check is specially done to avoid any risk of fraud.

This is a fee charged per each transaction of the customer. A fixed fee up to 20 to 30 cent is applied per transaction.

Each merchant account service provider charge a monthly minimum amount ranging from $15 to $30 every month. This fee is also applicable for those clients who don't even do any processing. The customers pay this fee only when his monthly total discount rate fees are lesser than your monthly minimum. This fee is the least amount that you will have to pay in a month regardless of what your sales are. But after reaching the minimum in the discount rate payments, you will not be charged for a monthly minimum fee.

While selecting a service provider, you will have to set the maximum dollar volume per month as the owner of that business and this needs to get approved in order to process through the merchant account. In case you expect to exceed this monthly volume amount, you should contact your provider in order to discuss about the fees.

This is the fee required when the merchant tries to apply for a credit card and the bank sends a message to him with a "please call" notice, instead of the regular authorization number. In such cases, the merchant must give a call to the issuing bank to receive the authorization for his credit card and for the transactions. This fee is also applicable when the merchant's online system is unauthorized and he needs to call for an authorization.

This particular fee is for the internet merchants only. In case of internet business, there is a gateway that connects the shopping cart of the merchant's website with the payment method options and the card processing service. For this operational cost, this fee is charged. The gateway access fee varies from $15 to $30 per month.

For all sort of online transaction and processing, merchants need to purchase a required software program or lease it for a particular period of time. Hence, the retail merchants have to purchase or lease the terminal equipments, printers and all other necessary items. These days, there are a few providers who forfeit this fee for all those merchants with internet accounts and offer a free refurbished swipe machine while opening a new merchant account.

The above mentioned list of merchant fees is the commonly associated fees with all merchant accounts. While signing up with a provider, you can ask for the merchant account quotes by that provider to have an idea about the overall fees and costs. Some providers also lower certain fees and waive some charges based on the business type and the duration of agreement. And also, every provider doesn't charge all listed fees. In order to lower these costs, you can also discuss with your provider.