You might be surprised to learn that there are many different kinds of Merchant Account Fees. Before signing up with a merchant account provider, you should know what the most common charges are. This will help you make an informed decision about your choice of merchant account provider.
Application fee
Your first step in the process is to apply for a merchant account. Depending on which company you choose, this can be done either online or by fax. The next step is to pay the application fee, which is usually around $100 or more. This fee is charged once and is non-refundable; however, if your company’s application needs to be reviewed again before being approved for an account (such as if you have changed your business name), then there may be an additional charge for that review as well.
Authorization fee
The Authorization Fee is the fee charged by a merchant account provider to authorize a transaction. It is usually a small percentage of the total amount of money involved, and it’s paid by the merchant to their bank or credit card company (if they are using one).
There are two types of authorization fees: 1) “per-transaction” and 2) “per-charge”. Per-transaction authorization can be used when an entire transaction has been authorized (i.e., debit card purchases), whereas per-charge authorization applies only if there have been multiple charges applied to your account within a certain period of time (usually 24 hours).
Batch fee
Batch fees are a fee that is charged to merchants for each batch of transactions that they process. This can vary depending on the provider, but it’s generally lower than other fees and charges, such as interchange fees and monthly maintenance fees.
The higher your volume, the lower your batch fee will be. For example, if you have 150k transactions per month at $0.10 per transaction but only 100k transactions at $0.15 per transaction (you’re charging less), then your farmer’s market vendor account may offer an even better deal than one with 5x more capacity!
Chargeback fee
Chargeback fee is a fee that a merchant account provider charges for each transaction that is charged back by the credit card issuer. The chargeback fee can be anywhere from $15 to $100 per transaction, depending on the provider.
So what’s this all about? In short, when you make a purchase using your credit card and it’s declined due to fraud or other reasons, then you’ll incur an additional chargeback fee from your bank (or financial institution). This means that instead of getting paid for your sale immediately after completing it—as would happen if no one disputed it—you now have to wait until there’s enough money in your account before being reimbursed by them.
Gateway fee
A gateway fee is a charge that you pay to your processor for the use of its network. Some processors may charge you a flat rate per transaction, while others may offer discounts based on volume.
If you’re wondering what this means for your merchant account, it means that if your processor offers discounts, they’ll reduce the amount they charge you when they add them into their discount rate calculation.
Monthly minimum fee
The monthly minimum fee is the minimum amount that you must pay each month to your merchant account provider. It’s usually a percentage of the average monthly transaction volume, and it may vary based on how many transactions are being processed.
For example, if you have an account with $1 million in annual sales (which would be a lot), then you’d likely pay less than 0.5% of that amount—or $50 per month—to cover operating expenses like processing fees, fraud prevention measures and other costs associated with processing transactions through your bank’s system.
Monthly statement fee
The monthly statement fee is the fee charged by your merchant account provider for sending you a monthly statement. This is typically around $2 per month, but this can vary depending on your merchant account’s terms of service (ToS).
The amount you pay for this fee will depend on how much activity takes place in your business and whether or not there are any additional fees associated with it. For example, if there are other fees that apply to each transaction—such as deposit rates or check cashing fees—then those would also be included in calculating the total amount charged by your bank each month.
Monthly statement review fee
The monthly statement review fee is a small one-time charge that you pay every year after your account has been open for a while. This fee covers the cost of reviewing your statements, which are usually sent out monthly. If you have many transactions going through your merchant account, this can be a significant cost if you fall behind on paying these fees.
If you’re looking to open an account, consider whether or not this one-time fee is worth it for the convenience that comes along with having access to these statements in advance of receiving them from other providers (like PayPal).
Non-qualification discount rate
The non-qualification discount rate is the fee charged for each transaction that does not qualify for a discount rate. The discount rate is usually higher than the standard transaction fee and it’s usually a percentage of the transaction amount.
For example, if you are processing $15k worth of transactions per month using your Merchant Account and have no promotional offers or discounts applied to those transactions, you would pay $75 as your standard transaction fee ($15 x 25%). However, if one out of 10 orders did not meet its minimum order amount (MOA), then you would be charged an extra “discounted” amount based on their MOA—in this case it could be either 50% or 75%.
Non-qualification transaction fee
A non-qualification transaction fee is a charge that you may incur if your merchant account is rejected. The fee can be substantial, especially if the rejection was due to the bank’s inability to verify your business credentials or provide other information that was requested.
Non-qualification occurs when someone uses a service offered through an online marketplace (eBay, Amazon etc.) and discovers too much fraud in their account history. This could result from buying stolen goods, using counterfeit IDs/documents or engaging in credit card scams like phishing emails or drive-by downloads of computer viruses onto PCs that connect into Wi-Fi networks at malls, restaurants etc., which then allow hackers access from across oceans thanks to cellular technology!
PCI compliance non-compliance chargeback fee
A chargeback is a reversal of funds from a merchant account that has been processed by the bank. It can take place either in-house or via an outside agency, but the most common form of chargebacks are those initiated by customers who feel that their payment should have been accepted.
- What is a Chargeback?
Chargebacks are typically initiated because of fraud or other reasons beyond your control such as:
- You made an error on your receipt or transaction confirmation (e.g., forgot to print out all required information) and did not catch it before processing payments;
- You did not send out all required disclosures after receiving them; or
PCI compliance non-compliance transaction fee
PCI compliance non-compliance transaction fee is charged by the merchant account provider if a merchant does not comply with PCI standards. This fee can be up to $100 per month, but it generally takes place in addition to a monthly minimum charge.
Setup/cancellation fees. Setup fees are one-time fees that may be charged by a merchant account provider when you open an account with them. Cancel fees are one-time fees that may be charged by a merchant account provider if you close your account before the end of your contract.
Transaction fee. This is the percentage of each credit card transaction that a merchant account provider charges for processing the transaction. This is usually anywhere from 1% to 5%. Part of this percentage will go to Visa, MasterCard, Discover and American Express for each transaction. Additionally, this percentage could include additional fees as well, as will be the case with most discount rates. Some providers may also charge specific per transaction fees too. These can vary in price but most often range between $0.10 and $0.30 per transaction processed by your company’s website or app within their network (which includes online sales).
There are many different kinds of Merchant Account Fees
There are many different kinds of Merchant Account Fees:
- Application Fee
- Authorization Fee
- Batch Fee
- Chargeback Fee (if your transaction is denied)
Gateway fee (if you use an independent gateway provider)
Monthly Minimum Fee Monthly Statement Review Fee
Conclusion
As you can see, there are a lot of different Merchant Account Fees. Some of these include application fees, authorization fees, batch fees, chargeback fees, gateway fees and monthly minimums.
