If your business is accepting credit cards for its transactions, you need to try and find the discount merchant account that will offer you the best services for the most competitive price. You need to take into account all of the various fees, not just the qualified discount percentage. While the discount rate is important, make sure you don’t overlook all of the other “incidental fees” while searching for the best deal to match your needs and budget.
Below are some of the other fees you should be looking at when you’re searching for a good discount merchant account. If you’re not careful you could be nickel and dimed to death.
Authorization/Transaction Fees
The authorization fee is charged when you log onto the merchant account network through a phone line or the Internet to verify that a credit card is valid and has enough credit available on it. There shouldn’t be any charge by your phone company for these calls as most terminals use local or toll free numbers. However, make sure you verify this before signing up or you could end up with an astronomical phone bill at the end of the month.
A transaction rate for retail accounts is usually anywhere from 20 to 40 cents. Remember, the transaction fee will be added on to the discount rate. However, some merchant service companies will combine the discount and transaction rates as one fee. This is generally known as a bundled rate.
Batch Fee
This is typically a small fee which is charged every day to batch or close out all of your transactions for that 24-hour period. These fees usually cost the same as your transaction fee. It is also known as a batch header fee. Remember, if no transactions take place on a given day, you will not be accessed a batch fee for that day.
Monthly Fee (Statement Fee)
This fee is will usually run you anywhere from $5 to $20. The charge is used to supply you with a monthly statement that summarizes, breaks down and shows each one of your credit card transactions over that time period. The statements will be automatically sent to you at the end of each month. Make sure you look it over very carefully just in case it doesn’t match up with your records. If you’re lucky, your discount merchant account provider will offer you online transaction reporting. This allows you to view up to the minute information regarding your merchant account.
Be aware that some companies may charge other monthly fees, such as the gateway fee, applicable if you conduct Internet/e-commerce sales. It’s best to find out what the total monthly fee as you compare vendors.
Monthly Minimum Fee
This fee comes into effect only when your monthly sales are very low or you didn’t sell anything at all. The merchant account provider will calculate the charge by multiplying your total sales for the time period by your discount rate and then adding on your transaction fees. It may sound a little more complicated than it actually is. But for example, if your minimum monthly fee is $25 and your discount and transaction fees only add up to $20, then you will have to pay the $5 difference to reach the agreed upon $25 minimum. Therefore if you didn’t sell anything at all for the month, you would have to pay the whole $25 to keep the provider happy. Needless to say, a discount merchant account should have a low monthly minimum fee or even choose to waive it.
Return Fee
A return occurs when a customer who has already paid for their purchase by credit card wants to return the goods. This means the transaction will be reversed on their monthly credit card statement and the money will appear as a credit. Most merchant account providers will charge you a return fee and a transaction fee when this happens.
You need to pay close attention to how your provider handles returns. Unless you don’t pay a separate return fee on your merchant account, you have to add the transaction fee to the return fee to see how much you’re being charged to credit card returns.
Address Verification Service (AVS) Fees
Most credit card processors will offer the address verification service (AVS). This will match up the cardholder’s billing address (zip code and/or street address) with the information encoded on the cardholder’s credit card.
There are various AVS codes that are used to show partial or complete matches. If the credit card address doesn’t match up with the customer’s billing address, you should verify everything with the customer before shipping the goods out to make sure they are headed to the right place. In fact, you should always verify this anyway. The AVS can be very helpful to you in these circumstances, especially if you’re selling goods or services over the phone or Internet. It’s also a useful tool to help detect fraud. At the moment AVS primarily works with American-issued cards, but can also be a functional tool for the United Kingdom and parts of Canada.
Termination Fee
This is also known as a cancellation fee. And yes, in today’s world you even have to pay a fee to cancel your working contract with a merchant account provider when you want to switch to a different provider or opt to go out of business. Be aware of this and make sure you inquire about any potential termination fee before you sign on as you may be surprised how high it can go. In general, the longer you have been with the provider, the lower the fee. Many vendors waive cancellation fees, providing reassurance to merchants who don’t want to get locked into a contract.
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In these difficult economic times, business owners need to find bargains – and that includes discovering lower fees for credit card processing. It is very possible to gain big savings by knowing the little fees that exist in the merchant account field in your quest to find a true discount merchant account.