The fees that Merchant Account Providers charge for credit card processing can be confusing. It is important to ask your merchant provider about all credit card processing fees before signing up. What looks like a low cost account upfront can end up being expensive. Always look for hidden fees buried in the contract.
Below are the main fees that Merchant Service Providers charge for processing. Merchant Account fees are generally divided between Set up Fees and Ongoing Fees.
Setup Fees
- Application Fee
- Set Up Fee
- Hardware
- Software
- Rolling Reserve/Security Deposit
Application Fee
Average cost for an Application Fee is $50 to $150
Most Merchant Account Providers charge an application fee to cover processing costs, including credit check. It is usually not refundable if your application is denied. Some Merchant Account Providers that do not charge an application fee often charge other higher fees to compensate.
Set Up Fee
Average for Set Up Fee is No charge to $300
A setup fee usually includes hardware or software installation. Merchant Account Providers that do not charge set up fees may charge ongoing fees for software and hardware they lease to you.
Hardware Fee
Average cost for Hardware is $500 to $1,500 for purchase; $15 to $50 per month for lease
Point-of-Sale terminals are used for real-time transactions. High-end models can cost up to $1,500. Some vendors lease the terminal for a monthly fee, which can be more expensive. Internet merchant do not usually need hardware.
Software Fee
Average cost for Software is $400 to $800
Software sends credit card transactions to a Merchant Account Provider across a dedicated or protected line. Online Merchant Account Providers provide you with a link from your site to their secure server for real time transactions. Shopping Cart Software allows customers to enter their credit card information. Most Merchant Account vendors sell both softwares.
Rolling Reserve/Security Deposit Fee
Average cost for Rolling Reserve/Security Deposit is first month's receipts or 30 percent of your monthly business volume
Security deposits and rolling reserves are sometimes charged to start-up businesses, bad-credit merchants, or high-risk industries. After a merchant has built a strong record with profit, both are returned to the merchant.
Ongoing Fees
- Discount Rate
- Per Transaction Fee
- Daily Batch Fee
- Authorization/ Verification Charge
- Monthly Statement Fee
- Monthly Minimum Fee
- Voice/Touch Tone Authorization Fee
- Monthly Gateway Fee
- Chargeback Fee
- Fraud Protection Program Fee
- Annual Renewal
Discount Rate Fee
Average cost: 2.5 percent to 3 percent. The industry standard is 2.65 percent
The discount rate is a percentage of the amount of the sale charged on each transaction. The discount rate is the principal profit for the Merchant Service Provider. The higher your monthly sales volume, the lower your fee. Visa and MasterCard charge Merchant Account Providers approximately 1.8 percent each online transaction.
Per Transaction Fee
Average cost of Per Transaction Fee is 20 to 60 cents per transaction
The Merchant Account Provider charges a fee to process each transaction. A low Per Transaction Fee will usually mean a higher Discount Rate. A lower Discount Rate will usually mean a higher Per Transaction Fee.
Authorization/Verification Fee
Average cost for Authorization/Verification is 5 to 10 cents per transaction
For all remote transactions--such as mail, internet, or phone--there may be an address verification charge added to the Per Transaction Fee. The service can reduce the number of chargebacks.
Daily Batch Fee
Average batch fee is arount 10 to 40 cents a day
Each day the Merchant Service Provider sends all of your transactions to the bank in one batch. Batch fees are charged for closing out your account each day. You may be charged a late batch fee if you do not close out within a certain time frame, usually 24 hours.
Voice Authorization Fee
Average cost for Voice Authorization is $1 per order
If the credit card processing terminal goes down, you must dial a voice authorization number to process orders. Some, but not all, companies charge a fee for this service.
Monthly Statement/Customer Service Fee
Average cost for a Monthly Statement and Customer Service Fee is $10 per month
The Merchant Service Provider issues a monthly credit card transaction statement.
Monthly Minimum Fee
Average cost for Monthly Minimum Fee is $20 to $35 per month
If the discount rate fees do not add up to the monthly minimum set by the Merchant Account Provider, there is a Monthly Minimum Fee charged.
Monthly Gateway Fee
Average cost for the Monthly Gateway Fee is $15 per month
If your Merchant Account Provider uses a third-party service, it will probably charge you a Monthly Gateway Fee to offset that cost.
Chargeback Fee
Average cost for Chargeback is $25
Chargebacks are any customer credits for returned items, misorders, or fraud.
Fraud Protection Fee
Average cost for Fraud Protection is 10 cents per transaction--(There can also be a setup charge between $100 to $150)
Fraud screening software that automatically stops questionable transactions is available through some Merchant Service Providers.
Every Merchant Service Provider charges a different varying rate. Spend the time upfront to compare prices, including any hidden charges. Fees can add up quickly, especially if the Merchant Service Provider does not have the reputation and customer service to back it.