A merchant account for accepting credit cards lets a company utilize customer and business credit cards. The merchant services provider deposits the charged funds in the merchant’s bank account at regular intervals. The process of charging a credit card has several components, and the service provider either charges merchant account fees for the services it provides or passes on service charges it incurs. In addition to regular fees for each purchase charged to a card, there are monthly merchant account fees and fees for transactions. For high-volume accounts, fees generally average out at a percent of overall volume, but small businesses that have lower sales volumes can lose money due to hidden merchant fees.
How to Get Out of Merchant Account Fees
A company’s first step after a payment processor accepts the company as a merchant is to pay the set-up merchant account fees. This fee typically varies from several hundred to a thousand dollars depending on the merchant services provider. The new payment processor will often waive or reduce this fee, but may simply replace the upfront fee with monthly or annual fees. At this point, a company has to read the contract carefully to find out about any account termination fees. Some suppliers charge hundreds of dollars whenever a company terminates the account agreement, and many charge substantial fees that can be in the thousands of dollars for termination within the first three years. Therefore, it is in your business’ best interest to find the best merchant account with no hidden fees.
Credit Card Processing with Low Merchant Account Fees
The merchant account service provider passes the captured card data on to the card processing networks that the major credit card companies operate. They charge their fees as a discount rate and small additional fixed fees. The discount rate, including small percentages and additions for security assessments, network access and interchange fees, ranges from about 1 to 3 percent. Discount rates for non-credit-card transactions such as debit cards can be on the low end of this range, or even zero.
Overall, when everything is added together, a small business with a low order volume can expect to pay about 5 percent of sales for credit card costs, and another per-month fixed charge of around $50.
Penalties
Credit card transactions that don’t process normally are quite expensive for the suppliers. As a result, merchants have to pay merchant account fees as penalties for charge-backs and for disputed transactions. Some suppliers charge for processing disputed transactions, even when the transaction eventually clears. All suppliers charge for transactions that fail and require refunds. A disputed transaction requiring a refund is called a charge-back and a typical penalty fee is $25 on top of the refund amount.
Most merchant service suppliers require the merchant to maintain a level of security defined in the contract. If the merchant does not comply, he faces additional penalties. Such security charges vary widely, and a company has to verify its exposure and compliance before signing the contract. Therefore, it is important to find a merchant services provider that offers fully secure, PCI compliant payment solutions to eliminate the risk of penalties.
