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A Guide To Understanding Merchant Account Rates & Fees
by Bobi Michaelson
By understanding the true costs associated with merchant account pricing, you
can make an educated decision as to which merchant account is really best for
your needs.
You have opened your business and realize that accepting credit cards will
increase your sales dramatically. It is now time to choose the merchant account
that will be best for you.
You've received emails, postcards and have surfed the Internet and have seen
some great promotions. Which of these merchant account providers will give you a
good deal? Before signing any merchant account agreement it is important to
understand all of the rates and fees that will be associated with your account.
Qualified Discount Rate - This is the percentage that will be charge on
all of your credit card sales.
Swiped credit cards will have a lower discount rate due to the fact that the
cardholder is present and the risk is lower.
Keyed credit cards will have a higher discount rate due to the fact that there
is more risk involved in accepting the credit card due to the fact that the
cardholder is not present.
Mid & Non-Qualified Surcharge - These surcharges are very important to
understand, as some Visa/Mastercard transactions will have an additional
surcharge applied to the qualified discount rate.
Mid-Qualified Surcharge applies to swiped merchants only. When a credit card is
swiped and the magnetic strip cannot be read in the terminal, you will key in
the transaction. When you have a telephone order, mail order or Internet order,
you will key in the transaction. A surcharge will be applied to the transaction.
In other words, if your qualified rate is 1.66% and your Mid-Qualified surcharge
is .85%, you will pay 1.66% + .85% = 2.51% for that transaction.
Non-Qualified Surcharge applies to both swiped and keyed merchants. Whenever a
corporate or foreign card is used, or you do not utilize the Address
Verification System when keying in a credit card, the Non-Qualified Surcharge
will apply. In other words, if your qualified rate is 2.39% and your Non
Qualified surcharge is 1.95%, you will pay 2.39% + 1.95% = 4.34% for that
transaction.
Transaction Fee - Merchant providers will also charge a per transaction
fee on each of your sales. Some providers will also include a per item fee, or a
watts fee in addition to the transaction fee. Make sure you understand the true
cost of the transaction fee structure.
Address Verification System (AVS) - Address Verification applies to keyed
transactions. The AVS determines whether the street address and zip code is
actually a match for the cardholder. AVS does not work for foreign transactions.
The AVS fee is a separate fee charged for each transaction.
Travel & Entertainment Cards - American Express, Discover, Diners and JCB
are considered non-bank cards. The transaction fee for these cards is normally
called a T&E fee, or a non-bankcard transaction fee. You will incur this
transaction fee each time one of these cards is processed, in addition to the
discount rate set by these individual companies.
Batch Header Fee - At the end of each day, you will either close out for
deposit, or your merchant account will automatically be set up to close out for
deposit. Once this is done, the funds will travel through the ACH system
electronically to deposit the funds in your checking account. The batch header
fee is applied for each batch closed out for deposit.
Wireless Access Fee - This fee is assessed for merchants utilizing a
wireless terminal. Wireless access will allow you to process transactions
through the wireless network, rather than processing transactions through a
telephone landline. There is also a set-up fee for the wireless network with
will range in cost from $35.00 - $50.00. Once a transaction is completed through
the wireless terminal, it travels through the wireless network for processing. A
monthly fee is associated with this.
This fee will range in cost from $12.00 - $25.00 depending on your merchant
provider.
Gateway Access Fee - This fee is assessed for merchants utilizing
Internet processing or a virtual terminal. Once a transaction is completed by
the customer on your website, or through your virtual terminal, it travels
through the Internet gateway for processing. A monthly fee is associated with
this. This fee will range in cost from $20.00 - $50.00 depending on your
merchant provider.
Statement Fee - This is the monthly fee for statements, reports, customer
support and service costs associated with your merchant account.
Monthly Minimum - Most merchant providers access a monthly minimum associated
with your Visa/Mastercard merchant account of $25.00. In other words, if you
processed $1,000.00 in sales and your discount rate is 2.39%, your total amount
of discount fees would be $23.90. However, the monthly minimum is $25.00. You
would pay an additional $1.10. Should your sales exceed the monthly minimum, the
monthly minimum would not apply.
Annual Fee - Some merchant providers will charge an annual fee for your
merchant account. These annual fees can range in cost from $50 - $195.00.
Termination/Cancellation Fee - Most merchant providers have a policy
regarding termination/cancellation fees. These fees range in cost from $75.00
all the way up to $1,500.00. In addition there is a specified time period to
remain with the merchant provider - from 12 months all the way up to 36 months.
It is important to understand this and have this fee clearly in writing before
signing your merchant agreement. A huge cancellation penalty can be very costly.
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About the author:
The author has been with Cardservice International for over 10 years, striving
to provide the very best service in the credit card processing industry. Visit
us at
www.best-merchant-accounts.biz
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