If you are not careful, the fees you pay to your service providers could quickly reduce your profit margins. It’s especially true for merchant accounts. Merchant account fees can quickly add up if every sale requires payment processing. This is especially true if you work in an industry with high risk.
How can you ensure that the fees you pay are not too high as an owner of an eCommerce business?
Compare fees online or by calling providers. You can then answer your question about “How much is a merchant account?” You’ll also need information to guide you. We’ll tell you everything you need about merchant account charges in this article to help you make the best decision for your company.
What Are Merchant Account Charges?
Merchant account fees include all fees that merchants pay (e.g. eCommerce businesses and retailers are charged fees for their merchant accounts and payment processing. Merchant account fees are often based on transaction fees.
Although the high-level description is straightforward, many different types of fees can be complex. The pricing of transaction fees is based on several different models, including:
- Flat rate pricing: This is a simple way to calculate fees. You are charged a standard fee which is typically a percentage (2-3%), or a percent plus a dollar amount (e.g. 2% plus $0.25).
- Pricing on a tiered scale: Rates charged vary depending on what type of card is processed. American Express, for example, may charge a different fee than Visa. A gift card can have a rate that is different from a credit card. In general, lower-cost cards will be debit cards or cards with no rewards while higher-cost cards will be reward cards.
- Interchange Pricing or Interchange Plus Pricing: In the pricing model described above, you will be charged according to a rate determined by credit card networks (“interchange”) plus a markup from your payment processor. The interchange rate can range from 1.4 to 3.7%, but it may change over time.
- Membership Pricing: With this approach, transaction fees are calculated by adding a membership fee (e.g. An annual fee plus the interchange rate per transaction.
Many other fees can be charged to a merchant account. In a moment, we’ll look more closely at the different fees. Keep in mind, for now, that any transaction fees, processing fees, membership fees, or administrative charges charged by your card issuer or credit card networks, are merchant account costs.
Do High-Risk Merchants Pay Different Fees?
Yes. Merchant services are either denied to high-risk businesses or charge higher fees. Your business’s industry, credit score, and sales model are all factors that can lead to your business being labeled as high-risk. (recurring billing, for example, is often considered high risk). If your business is considered high-risk by traditional merchant service providers, they will charge you significantly higher transaction fees. They may even refuse to provide services.
High-risk merchant accounts such as TailoredPay – can help high-risk businesses keep transaction costs low and avoid unnecessarily expensive merchant account fees. What’s a good rate to charge a high-risk company? As with most things in the business world, it depends. However, as a point of reference, our rates begin at 2.6% plus $0.15 per transaction.
List of Fees for Merchant Accounts
After we have a basic understanding of merchant fees, let’s look at the list of fees that you may find on your bill.
Transaction Fees:
Just like the interchange fee, your transaction fees usually include the transaction fees. These are charged by your payment processor.
Authorization Fees:
These are the incidental charges you incur whenever you manually verify an order.
Cardmember Assessment Fees:
These charges are usually less than 0.2% and cover services like fraud prevention.
Monthly Fees:
You will be charged by some service providers a monthly fee for processing your card. It differs from one provider to the other but beware of any that charge outrageous fees. Beware of providers who charge unreasonable monthly fees.
Annual Fees:
Same as the above-mentioned monthly fees, except they are annual.
Minimum Fees:
Some merchant accounts require a business owner to process a specific amount of transactions in one month. A business owner might be charged for not meeting the minimum requirements.
Cardmember Assessment Fees:
These charges are typically less than 0.2% and cover services like fraud prevention.
Statement fees:
Some providers charge for paper billing statements. You can avoid a statement charge if your provider charges one.
Payment Gateway Fees:
Under certain conditions, merchant accounts charge payment gateway fees in relation to payment.
Chargeback Fees:
Chargebacks can be costly for payment processors and merchants alike, and many merchant service providers assess retailers a fee each time an uncontested transaction incurs one of the numerous chargeback fees assessed to it by customers’ payment providers. To minimize fraud costs associated with chargebacks and fraud charges, we suggest choosing a provider who supports chargeback prevention measures to mitigate their risk.
PCI Noncompliance Fee:
If your eCommerce website does not meet PCI (Payment Card Industry) compliance standards and is therefore incurring non-compliance fees from processors or banks, an administrative noncompliance fee will likely apply – though sometimes grace periods can be granted until compliance can be achieved.
Early Termination Fee:
It can be expensive to get out of a Merchant Services account as many charge high termination fees. We can save you money by using our tips for getting out of a merchant account. But prevention is better than cure. Research and choose a reliable provider right from the beginning!
Application Fee:
Many merchant service providers charge an application fee, and the cost varies greatly from vendor to Vendor. Do your research to determine if your vendor’s application fee is justified.
Setup Fees:
Like Application fees, these fees can vary from one vendor to another. Pay attention to the setup fees.
PIN transaction fee:
These charges apply to debit card transactions using a PIN.
Batch Transaction Fees:
In some cases, your provider will charge you for a large amount of transactions processed at once.
Question About Merchant Account Fees
Merchant account fees can be unavoidable in some situations, such as with transaction fees. In many cases, fees can be reduced or even waived. In some cases, fees are so high that they’re not justified. This is a clear sign to find another provider.
How do you know which one is which? It’s an art, not a science. But by comparing prices, doing some research, and using this information, you can protect yourself from paying unnecessary fees. If a provider charges interchange plus rates that are double the published online rate, this is a warning sign. In the same way, setup and application fees are usually unnecessary or negotiable.
Always read your merchant account terms carefully. You’ll often find that salespeople don’t mention hidden fees. To protect your business, you will need to be vigilant.
Want to avoid surprises? You should choose a trusted payment processor!
Experience The Exzact Advantage Today!
Don’t let the complexities of payment processing hold your business back. Partner with Exzact Business Solutions and unlock the power of secure and seamless payment solutions. Contact us today to learn more about our services and discover why businesses trust us to handle their payment processing needs. Together, let’s build a future where payments are fast, secure, and hassle-free.
Remember, behind every successful transaction lies the expertise and dedication of Exzact Business Solutions—your trusted partner in navigating the world of payment processing. Join us on this journey and experience the difference firsthand!
