Merchant Account Fees

Fees associated with merchant accounts include: statement, application, setup, discount rate, transaction, monthly minimum, reserve, annual, and chargeback. Make sure you inquire about all of these fees when deciding on a merchant account, as it can get tricky.

First, is the statement fee. This fee is a monthly charge for issuing you statements on all transactions. This fee also covers around the clock customer service, risk management and loss prevention, underwriting, billing, and fraudulent services.

The application fee is to pay for the application process. When you fill out the paperwork, a fee is sometimes applied for the opportunity to request a merchant account regardless if the application is accepted or not.

To establish your account once your application is approved, there is the setup fee. This fee can run you a couple hundred dollars.

Discount rate is a percentage deducted for each item sold. There are three types of discounts rates in three levels: Qualified Discount Rate, Mid-Qualified Rate, and Non-Qualified Rate. The Qualified Rate is a percentage taken out and it is what is originally advertised. The Mid-Qualified Rate is added to your Qualified Rate and is applied when you key in a transaction. The Non-Qualified Rate is added to your Qualified Rate and is applied to certain types of credit cards such as business or corporate. This rate will also be applied if you do not have Address Verification (AVS) on any keyed transactions or fail to batch out within 24 hours of processing a transaction.

The transaction fee is added to the discount rate and is a flat fee for each transaction. Some companies call this fee "Authorization," "Per Item," or "Interchange" fee.

The fee you are charged whether or not you make any sales in a month is the monthly minimum. It's usually $10-$20 each month.

The reserve is when you are required to hold a certain amount in your account to be kept on "reserve." It is used to cover chargeback fees. Sometimes called a "Rolling Reserve," this fee is for a merchant who has poor credit and will vary according to each merchant's financial status. The reserve is returned to the merchant within a certain time period, but is kept on hold for at least six months. On the seventh month, the first month's reserve is given back to the merchant and the process repeats.

The chargeback fee is the one you have to look out for. This fee is applied when there is a fraudulent transaction and can cost up to $30 for each transaction. This occurs when a customer disputes a transaction.

With all these fees, it's difficult to keep track of the money coming in versus the money going out. So, it's important to be on top of your merchant account just like you would any other financial relationship. Think of it like your personal checkbook, which needs to be checked all the time and kept balanced. Same goes for your merchant account. Watch those fees and be sure to keep your business in the positive.

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