There are lots of factors to consider when deciding on a credit card merchant account for your business. One issue that may surprise you – depending on how much experience you have with the business world – is the potential amount and variety of fees involved.
Merchant account fees come in three main types – initial fees, recurring fees, and transaction fees. Here is a non-exhaustive list of some fees you may encounter.
- Discount Rate The discount rate may be, in the long run, the highest cost associated with a merchant account. With every transaction processed, a percentage of the total cost makes up the discount rate. If taking orders online, this percentage will likely be a little higher due to the associated risk of Internet sales.
- Cancellation Penalties Because there is cost involved with setting up and maintaining a merchant account, if a business cancels their account there is almost always a fee involved. Be sure to select a merchant provider with a fixed cancelation fee – as opposed to a variable one – as this will provide you more security if you do end up cancelling. Also, if you’re canceling because of a problem or concern, discuss it with the merchant provider and they may waive all or part of the fee.
- Application and Setup Fees When first getting started, there will likely be a fee to process your application and activate your account, although this is becoming less common.
- Monthly Fee The merchant provider will charge a flat fee each month which may include sending you a monthly paper statement, customer support you may need, or other general service. This is usually between $10 and $15 per month.
- Chargeback or Retrieval Fees If a customer takes issue with a charge – questions the amount or doesn’t recognize the charge – they may dispute it. The merchant provider handles any disputes and will charge you about $25 if the charge ends up getting reversed.
- Annual Fee Not all providers charge an annual fee, but it is just a fee charged each year to maintain your account.
These are by no means all of the fees you may encounter when setting up a credit card merchant account; however, it should give you a good idea of the kind of budgeting you’ll need to consider when using a merchant provider. As always, shop around to several different providers to see which one will work best for you.
