It’s always a good idea to know what fees you’ll have to pay when you sign up for any kind of service. That’s why I’m writing this article. I want to explain merchant account fees so that you’ll understand exactly what they are and how they work. Then, if you’re considering signing up for merchant services, this post will help you make an informed decision about whether it’s right for your business—and which provider might be best for your needs.
Credit Card Processor Fees
Credit card processors charge a fee for processing credit cards. They’re the middlemen between you, the merchant, and your bank. Credit card processors charge a flat fee per transaction and/or a percentage of each transaction.
Gateway Fees
Gateway fees are similar to payment processor fees, but they’re not the same.
Unlike processors, gateways (or “acquiring banks”) provide a physical connection between your business and credit card networks. This can include acquiring services and/or payment gateway software for online transactions and POS systems in brick-and-mortar stores. The cost of these services is built into the price you pay for your merchant account–but before that happens, it’s important to understand exactly what these costs are so you can avoid them when choosing which provider is best for your business needs!
Gateway fees do not apply to all types of merchant accounts because some processors don’t offer gateway capabilities as part of their product offerings; however, most do offer them as an add-on service option at an additional cost above base pricing packages such as virtual terminal plans or basic virtual terminal packages.”
Termination or Early Cancellation Fees
If you cancel the merchant account before the end of the contract, you may have to pay a termination fee. The amount of this fee varies and can be up to $500.
PCI Compliance Fee
The PCI DSS (Payment Card Industry Data Security Standard) is a requirement for all merchants processing credit card payments. The payment card industry sets the fee for this service, which is not negotiable. This means that you will pay the same amount for PCI compliance whether you have one location or 100 locations across the country.
The cost of PCI compliance can vary depending on how many people are required to be trained and what kind of technology you use to meet security standards. For example, if your business uses an older POS system that doesn’t offer encryption capabilities or requires employees who process transactions manually instead of electronically, then it will cost more money than if you were able to upgrade your equipment and software so that they meet current standards (and thus require less employee time).
Address Verification Service (AVS) Fee
AVS is a service that checks the billing address on a credit card against the address provided by the merchant. This is required for all transactions, so it’s not something you can opt out of.
AVS fees are paid by the merchant and charged per transaction (typically between $0.25-$0.35 per transaction).
Merchant account fees can be complicated, but you must understand them so you don’t end up overpaying.
Merchant account fees are a small percentage of your overall costs, but they can add up quickly. If you don’t understand them, it’s easy to end up overpaying.
For example, if your merchant service provider charges a $1,000 monthly fee and you have an average transaction size of $50 (which is not unreasonable), then their charge amounts to just 12%. That’s less than half what many banks charge for debit card processing!
Read more: How Do High-risk Accounts Differ from Regular Accounts for Payment Processors?
Conclusion
Hopefully, this article has helped you understand why merchant account fees exist and how they work. While these fees can be complicated, it’s very important that you understand them so you don’t end up overpaying or being surprised by unexpected charges on your bill.
