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An Overview Of Additional Fees For Processing Credit Cards

May 29, 2008
Besides the interchange fees and discount rates that are attached to every credit card transaction you process, there are a myriad of other fees that can creep in. Individually, they're not substantial. But, they are numerous. When combined, they can add up to significant charges that can take a business owner by surprise. Below, we're going to provide you with a quick list of additional fees you'll likely pay for processing credit cards.

Transaction Fee

Every time a charge request is sent from a merchant to the credit card's issuing bank, the bank levies a transaction fee (sometimes combined with an authorization fee). It's usually small (less than $.35), but can be charged on any request, including those that are declined.

Statement Fee

Each month, a business will receive a merchant account statement. The statement provides details regarding the processing that was completed during the month as well as any fees incurred. At $10 or less, most merchants accept the statement fee as a small cost of doing business.

Monthly Minimum Fee

A merchant account provider needs to cover the costs it incurs from keeping an account open. The provider also needs to make a small profit from the merchant. Whenever a merchant account is opened, part of the contract stipulates a minimum monthly fee the merchant will be responsible for paying the provider. If the fees incurred during a month don't reach the minimum, an additional fee is charged to make up the difference.

Batch Processing Fee

At the end of a business day, merchants send all of their credit card transactions to batch settle their account. This results in a small fee. It's also worth noting that if a merchant fails to batch settle the day's transactions, those transactions can be assigned a higher discount rate.

Annual Fee

Many merchant account providers charge merchants an annual fee to keep their account open. This fee is commonly explained as a way for an acquiring bank to pay for the ongoing costs of maintaining a merchant account. Some providers will charge $20 while others will charge several hundred. The amount of the annual fee can vary due to the conditions surrounding the account.

Early Termination Fee

The contract between a merchant and a merchant account provider usually specifies a predetermined length of time over which the merchant agrees to maintain their account. If the merchant decides to break the contract by closing the account early, the provider can charge an early termination fee. These fees can be different based upon the circumstances, including the length of time left on the contract and presumed profits lost by the provider because of the account closure. The early termination fee is designed to make the decision of closing the merchant account especially unappealing.

Chargeback Fee

Banks hate chargebacks. They carry the greatest amount of risk for a merchant account provider because the provider is responsible for all of the transactions performed by the merchant. Whenever a customer "charges back" a transaction, the acquiring bank is accountable. If a merchant conducts fraudulent transactions that result in chargebacks, the provider may be unable to recoup its losses. Thus, the acquiring bank will assess a hefty chargeback fee to the merchant along with the amount of the charged back transaction. Both Visa and Mastercard have both strict rules and severe fees for excessive chargeback activity.

Planning For The Future

Though many new business owners neglect to devote much attention to credit card processing fees, these fees can grow quickly and become an obstacle to running the business. Some fees are small and easily dismissed. Others are large and can have an impact on the cash flow of a business. If you're searching for a credit card processing solution, make certain that you're planning your operational budget with the above fees in mind. The last thing you or your business needs is to be surprised by unanticipated charges.
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This article is brought to you by PaySimple, a leading provider of merchant account services.
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