No matter what you use, knowing the terms of your merchant account, like fees, rates, and charges, ahead of time can save you a lot of money, time, and stress. Here’s what you need to know before you start processing plastic.

Understanding The Basics

The way a merchant services provider charges you for fees depends on the type of account you sign up for. There are two basic types of account services:

• A Direct Merchant Account and;
• Third-Party Payment Providers

Direct accounts refer to merchant accounts that you obtain directly from a merchant account provider. These are usually banks or other lending institutions which contract with credit card companies to provide merchant services.

Third-party payment providers are companies functioning as middlemen, payment aggregators. These companies have what amounts to a “master merchant account” which they then divide up and “license” to individual businesses, like yours.

You pay a fee for the service, but don’t have to deal with the hassles of signing up for a traditional merchant account.

The industry standard for direct pricing merchant accounts is the Interchange rate plus a per-transaction fee. On top of these fees, a monthly service fee may be charged.

If you decide to run your merchant account through a third-party provider, you may pay higher rates on every transaction completed, plus a per-transaction fee. However, these arrangements often don’t require you to pay a monthly fee or sign a contract.

They’re ideal for businesses with low transaction volume.

Swipe Or Terminal Dip Fee

Even the best merchant account will charge a terminal swipe fee. These fees are charged every time a customer “swipes” their EMV card into the terminal. Fees are usually a percentage of the sale plus a flat per-transaction fee.

Batch Fee

When it’s time to close up shop for the day, you want your takings. Account transactions are “closed out” through a process called “running a batch.” Some merchant account service providers charge a fee for this, so ask about it. If your service provider does, try to minimize the number of times you run a batch – once a week if you can help it.

Programming Fee

If you change merchant service providers, you’re going to need new equipment and that equipment will need to be reprogrammed. There’s a fee for that in most cases.

Chargeback Fee

It happens to the best of us. You’re selling the greatest thing since sliced bread. A customer disagrees with you, and wants to return your merchandise. What happens? You get charged a chargeback fee for the return.

Gateway Fee

A gateway fee is charged on some accounts when you process transactions in real time. You can avoid this by agreeing to have cards processed at a later time. The risk, however, is that you might not know whether a customer’s payment went through or not until later, after the customer is long-gone.

Annual Fee

An annual fee is charged on some accounts. Ask about this. There’s no real reason you should have to pay one, so negotiate it away or find another provider.

Cancellation Fee

This is a fee for cancelling your merchant account. It’s mostly applicable to direct merchant account services where you sign a contract. The fee is usually fairly expensive to deter you from cancelling. Ask about this fee before you sign a contract.

Thomas Lewis works in retail business IT and understands the need for streamlined merchant services. He likes to share his insights with an online audience and writes about a variety of topics for a number of B2B websites on a regular basis.

Categories: General