Merchant Account Fees

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This is a brief overview of the merchant account fees you will encounter for your online business.

  • Discount Rate

    • This is some what of a misnomer. This is the main cost of doing business. It is the amount you pay for doing business. It is based on the total transaction. The swiped cards usually cost less and keyed in cards cost more. The rate will be on the fee schedule as a percentage. So if your discount rate is 2.9% and your customer charges $100, the discount fee will be $2.90. This is on the total dollar amount.

  • Monthly Statement / Support / Service Fee

    • This is charged by the processor or merchant service provider. It is a monthly fee and is billed to you regardless of the number of charges you collect.

    This fee provides you with monthly paper statements, telephone support. It runs between $10 to $15.

  • Minimum Fee

    • This is a cost of doing business. If a merchant does not collect a minimum amount from your sales, they will charge the balance. The monthly fee runs around $25 per month. If your sales only total $800 and your at a 3% discount rate, the amount collected will be about $24. You will be billed an extra $1, the difference between the minimum and your sales.

    If your just getting started, this makes the third party providers look more attractive.

    In some cases it is possible to negotiate the minimum fee. My art sales are very seasonal and often go into the tens of thousands of dollars. It has to be worth the trouble for the credit card service provider.

  • Application or Setup Fee

    • This is the charge for setting up your account. Many providers no longer charge it however they will say that they are waving it.

  • Chargeback or Retrieval Fee

    • Retrieval fees and Chargebacks are the fee when a customer or bank disputes a transaction after it has been processed. You will be notified via snail mail, e-mail, fax or even a combination of them.

    This happens when the customer doesn’t recognize the charge such as when a charge card was used fraudulently. The fee will usually be around $25.

    There are a number of steps you can take including double opt in for any offers.

  • Annual Fee

    • This is the fee charged every year on your anniversary of starting to use the service. Not all providers charge it.

    Lesser Known Merchant Account Fees

  • Cancellation / Termination Fee

    • Many merchant account providers have a fee when you stop using their service. You need to find out what this fee is on signing up. It is not usually volunteered. What to watch for...is it a fixed amount? Some have a variable fee which means you could end up owing thousands. This is buyer beware. Knowing in advance could save you a lot of money should you choose to change companies.

  • Hidden Fees or Junk Fees

    • There are plenty of hidden and bogus fees out there to be aware of. Unfortunately hidden fees seem to be common among some unscrupulous agents and merchant account providers that don't mention them upfront.

    A common hidden fee is for a merchant account provider to offer you a teaser rate that is extremely low - but what you don't know is that it's just temporary and usually goes up after a few months of processing.

    It's usually buried in the agreement allowing the provider to raise the discount rate at will, or when you do not meet certain volume targets. Another tactic is to have a teaser rate that only applies to one specific card type in one specific category, and then charge higher rates on other cards and categories.

    As for junk fees, these come under different names: file fee, security fee, audit fee, conversion fee, over the limit fee, excessive transactions fees, discount rate fees charged on refunds, and billback fees. If you see any of those fees you may want to think twice before signing up with that provider.

    There may be other merchant account fees we have not covered. We will keep researching this topic an try to provide the most complete information necessary for the DIY website builder.

    May your merchant account fees be low and your conversions high.

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