Credit Card Processing Fees for Your Business

Frequently Asked Merchant Account Questions and Answers

2. Are there any other fees you aren't mentioning on the site?

Unfortunately, the true answer is yes there are other costs not listed on the sites of most credit card processor sites. The processor does explain and detail all of the fees before signing the contract with the merchant.

Here is a list of other fees. Some may or may not apply to your specific business type.

Void Transaction - When the customer decides to return the merchandise and it is before the merchant has closed the batch containing the transaction then this is known as a void transaction. When voiding a transaction occurs before the merchant has closed their batch then the merchant will save on fees and the only cost that is incurred is the transaction amount. The discount fee is waived in this type of transaction and is not applied to the transaction.

Annual fee - Annual fees are starting to become more common then in previous years. This fee covers annual upgrades and maintenance and should be no more then $99 per year. Make sure to find out if your provider charges this fee and ask for the exact cost.

Over limit fee - When you set up a merchant account you are assigned a set limit for monthly volume, if you go over this limit you will be assessed over limit fees. The best way to avoid over limit fees is to contact your merchant account provider ahead of time and let them know that you will more then likely be over your limit and need to be bumped up to the next level. Usually if you go over limit two or more months in a row it is definitely time to have your limit upgraded.

Reserve account - A reserve account is used to protect credit card processors from high risk merchants. High risk merchants are those who are at the greatest risk of chargeback’s. The higher risk of having chargeback’s the bigger the reserve. This also prevents the processor from taking a large loss.

Debit Card fees - The cost of processing debit card transactions is a lot less expensive and there is only a flat fee that is charged which ranges from .35 to .75 cents. Discount fees and transaction charges do not apply to debit card transactions. Debit card fees will only apply to merchants who have this service available.

There is an encrypted pin password that is four digits and it is required that you have a keypad available for the customer to key this number in so that the system can access their bank and debit the transaction amount. It is crucial to businesses to allow for many types of payment options in order to maximize revenues for the company.

Debit card fees are minimal compared to the costs of processing credit cards, but it is necessary to be able to offer both options in order for your business to stay competitive.

When starting a reserve account there are four ways that this is done.

1. The first way is for the credit card processor to hold a certain percentage of the gross sales every month until the amount of the reserve are equal to one month of processing volume. This percentage usually ranges from 5% to 25% of monthly gross credit card sales.

2. The second way is to set up a rolling reserve which is usually about 6 months in length. The processor holds 5% of gross sales for each month for a period of six months. Then on month seven the reserve that was captured on the first month is then released. Then on the eighth month the sales captured on the second month are released, and so on.

3. The third way is for the merchant to place a dollar amount in a reserve which is equal to one month of processing volume. This is held for the life of the account and is released once the merchant has closed off the account and 210 days have passed.

4. The fourth way is very similar to the third way except instead of holding processing volume for a month it is the actual sales of a month. This amount would be held for the life of the account was closed and 210 days have passed.

Programming or encryption fee - This can be a separate charge for ensuring their system is compatible with your digital terminal. This fee is sometimes included in the setup fee, and varies from company to company.

Chargeback fee - When a chargeback occurs some merchant account providers will charge a fee which ranges anywhere from $0 - $40. This is because of the cost involved when someone sets up a dispute for the charge. Chargeback’s can be reduced by having effective customer service as well as good fraud prevention. Another way to avoid chargeback’s is to have a contact number available on your invoice or billing statement. This way when someone has an inquiry about the charge they can have fast access to you, rather then resorting to a chargeback.

Termination or cancellation fee – Clients, seldom informed, may only discover this expense when they switch processors. It can be as high as $400 if you end processing with a particular merchant service provider, especially if you only employed their service for a short length of time. The fee is NOT applicable as long as you do not switch providers! Ask, or better yet, read your provider’s termination/cancellation policy in the contract.

Retrieval Request - In the instance a card member can't remember when a credit card transaction took place or for some reason the bank needs order information then the card issuer will initiate a retrieval request which gives the merchant 10 days to respond with the order information otherwise the order information will become a chargeback. The cost of a retrieval request can vary anywhere from $2.00 to $15.00 and is dependant on the processor. You will see all of these fees listed in the merchant agreement that you sign. So please ready all of the information as well as any fine print.

Return - When a customer returns a product after the merchant has closed their batch containing the transaction this costs the credit card processor double the discount fees and this is why some companies have very strict return policy guidelines. For example if the discount rate was 2.10% and the sale was $100. It would cost the processor $2.10 for the sale and $2.10 for the return for a total of $4.20 plus the cost of two transaction fees.

Some credit card processors offer the AVS service which verifies the address of the customer with that of their billing address to ensure extra protection. If the addresses don't match it will be up to the merchant to process the transaction or to contact the card member to ensure that the shipping address is correct. This does help decrease fraud and does reduce the overall fees slightly.

Mid-qualified and non-qualified fees – Mid-qualified and non-qualified rates are extra charges that are transactions that don't meet the guidelines set out by Visa and MasterCard. An example of this is manually keying in a transaction with an AVS match. The rate would be even slightly higher if you didn't have an AVS match. Also, if you fail to batch out the transactions within 24 hours your rate will increase. If you decide to accept corporate, international or government cards you should expect your rates to go up even more. The surcharges are based on a variety of factors.

General Information

1. What exactly is a Merchant Account and do I really need to have one?

2. What other options are available ?

3. Is it necessary to accept credit cards ?

4. When I make a credit card sale how do I get the money ?

5. Can I apply for a merchant account at a bank ?

6. When looking for a merchant account provider how do I find the right one?

7. What information do I need to provide to set up a merchant account?

8. What is a high risk processor what makes them risky?

9. I plan to open an online store what must I know about processing credit cards online?

10. If someone wants to make a check payment on my site can I process it?

11. How do I implement the payment process on my website?