Shopping for the right merchant service provider requires that business owners have a full understanding of how fees are assessed on accounts. Generally, fees are assessed on a monthly basis, on a per-transaction basis, and as a percentage of sales. Most of the best merchant accounts require their customers to pay a monthly service fee to cover the fixed costs associated with the account. Merchant accounts also assess a fee on each transaction, which covers the costs associated with verification and other activities. Finally, a percentage fee is assessed to cover the risk associated with the transaction. Below is a full overview of how different merchant account fees are calculated.
1. Monthly Fee
The monthly fee is in place to cover the costs associated with maintaining a particular business as a client. This covers expenses like sales, marketing, technical support, and much more. These rates are often quite low, starting at about $25 per month and going up from there. In some cases, businesses can get lower credit card processing fee rates by paying a higher amount per month. For businesses in a high-volume position, this can be quite cost-effective for saving money.
2. Per-Transaction Fee
Almost all merchant services companies charge a fixed amount per transaction. These rates are usually in the range of $.15-$.40 per transaction. Depending on the plan that a business chooses, these rates can often be interchangeable with the monthly fee. For businesses selling small items valued at one dollar or less, this could be quite advantageous. In other cases, merchants may prefer to accept a higher per-transaction fee in exchange for lower percentage rate.
3. Percentage Rate
Every credit card processing company charges a percentage rate based on each transaction. Even giant enterprises have to pay this fee because it represents the itemized risk-cost of each transaction. Since buyers will often dispute transactions, the merchant services company may be left to pay the damages. In a portfolio, this percentage rate basically offers the merchant account provider a way to insure transactions against loss.
4. Other Fees
Most merchant account providers will also have various fees associated with particular actions. For example, a chargeback often results in a $15-25 fee in addition to a revenue deduction. Other miscellaneous fees are assessed for information requests, online platforms, analytics software, and POS machines. Businesses selling products online will also need to invest capital in developing a website to showcase products and accept payment.