Overview of Typical Merchant Account Fees for Credit Card Processing

As a business owner, you know it’s important to accept credit cards.  For online businesses, it’s absolutely required that you accept credit cards as you will lose customers if you tell them they can only place an order on your website by mailing a check or money order!  Unless you are using a third party payment provider like PayPal to process credit cards, you will need a merchant account to process credit cards from your customers.  Here is an overview of typical merchant account fees you can expect to see on your merchant account agreement:

Set up fee: many new applicants of merchant accounts will be required to pay a set up fee to get their account open and ready to accept credit cards.  Some merchant account providers will allow new account holders to sign up for free.

Equipment: unless you are 100% online, you will need credit card processing equipment to swipe customer credit and debit cards to start the processing. Some credit card processors provide free equipment.

Monthly fixed fees: merchant account providers charge a fixed fee each month to account holders.  It covers the cost of supporting your account and will be the same regardless of how many credit cards you process each month.  This fee may be between $10 and $15 per month.

Minimum fee requirement: most merchant account providers will set a minimum monthly fee for transactions each month, to ensure you pay them a minimum monthly fee.  If you process less credit cards than the minimum, you’ll be required to pay the additional fee.  Monthly minimum fee requirements may be in the $25 range.

Transaction fees: each time a credit card is presented for processing, you’ll be charged the transaction fee.  This will be a few cents per transaction, and it is charged whether the card is approved for payment or declined.

Chargeback fees: if one of your customers initiates a chargeback request, most merchant account providers will charge you a fee for handling the claim.  Average chargeback fees are $25 per transaction.

Fee Structures for Merchant Accounts

All merchant accounts charge fees-per-transaction in addition to any flat rate, monthly account fees they may charge. The amount of the fees vary and depend on the fee structure your particular merchant account uses.  Here are several different merchant account fee structures:

Interchange Plus Pricing – you’ll pay the actual interchange charge plus a fixed rate.

Flat Rate Pricing – your fees remain the same even if your sales volume increases or decreases.  There are no additional markup prices for interchange fees, it’s a single flat rate charged by the merchant account provider.

Tiered Pricing – the most popular method of merchant account pricing.  You’ll be charged one rate for qualified transactions (the base rate), another rate for mid-qualified transactions, and a higher rate for non-qualified transactions.

Mixed Rate Pricing – fees are calculated with a combination of interchange plus pricing models and tiered rate pricing models.  You’ll receive three different rates for debit transactions, qualified credit transations and non-qualified transactions.

Posted on Monday, April 4th, 2011