How Merchant Account Fees Affect Your Costs

When you are looking into merchant accounts and credit card processing for your business, one of the things that will shape your decision is the fee structure of those accounts. Even in those situations in which you are looking at free merchant accounts, you’re going to find that there are additional fees associated with accepting credit cards.

Below, you will be able to develop an understanding of the following types of fees associated with merchant accounts:

• Authorization fees
• Statement fees
• Minimum monthly fees
• Batch (or settlement) fees
• Annual fees
• Customer service fees
• Early termination fees
• Chargeback fees

Authorization Fees

As the name implies, authorization fees that are associated with merchant accounts are those fees that must be paid each time the merchant runs a credit card transaction. Authorization fees will be paid each time you process a credit card transaction, when you submit a credit card number for authorization; these fees will need to be paid regardless of whether or not the credit card is approved. (top)

Statement Fees

When you have a merchant account for your business, each month you will receive a full statement of the charge activity that had taken place. Statement fees are those charges that must be paid each month so that you will be able to receive your statement. (top)

Monthly Minimum Fees

With many merchant accounts, it is necessary to agree to processing a minimum dollar amount each month. If you have a monthly minimum of $500 associated with your merchant account, whether you process one credit card payment for $500 or fifty ten-dollar transactions, you will need to be sure that you are processing credit cards for that amount; if you were only to process $300 one month, you would be responsible for paying the processing fees for the additional $200 to your merchant account provider. Keep in mind, the other monthly fees associated with your merchant account will not count toward this minimum monthly amount. (top)

Batch Fees or Daily Settlement Fees

When you have a merchant account, you will be able to get authorization for a number of payments processed throughout the day; when the day is done, however, you will need to group together all of your transactions and submit them to your merchant account provider so that payment can be received. Batch fees are those costs associated with grouping all of your day’s transactions into a batch. Keep in mind that you will need to settle a batch at least once within a given 24 hour period in order to avoid additional processing fees. (top)

Annual Fees

Just as the credit cards that you obtain for your business may have associated annual fees, there can be yearly fees related to your merchant account. Annual fees are put into place on many merchant accounts to cover the costs of setting up and maintaining a business merchant account. (top)

Customer Service Fees

When you open a merchant account, it’s important to know whether or not there will be fees charged to your account if you need customer service. You may find that a fee is charged to your account monthly to cover the calls that you may or may not make to the customer service department or you may be charged fees for each time you make contact. (top)

Early Termination Fees

When you open a merchant account for your business, in most cases you will be required to sign an annual contract; if you choose to close your merchant account prior to that time, early termination fees will be charged. The amount of early termination fees that you are required to pay will vary based on the individual contract and are established based on the term of the contract as well as an estimation of profit lost by the merchant account provider. (top)

Chargeback Fees

Chargeback fees that are associated with merchant accounts are designed to protect the merchant account provider. Because the merchant account provider is held liable for the actions of the merchant when customers claim that a merchant has processed a credit card without their authorization, many providers include chargeback fees as a part of the contract. If at a later point in time, someone reports not having made a transaction that they are charged for, chargeback fees are added to the amount of the transaction so that the merchant account provider can recoup expenses. (top)

There may be other fees that are associated with your merchant accounts - even when you open a free merchant account. In order to know whether or not you are getting the best merchant account for the cost, you are going to want to be sure that you are aware of all of the fees associated with the account.