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A Guide To Understanding Merchant Account Rates & Fees A Guide To Understanding Merchant Account Rates & Fees By understanding the true costs associated with merchant account pricing, you can make an educated decision as to which merchant account is really best for your needs. You have opened your business and realize that accepting credit cards will increase your sales dramatically. It is now time to choose the merchant account that will be best for you. You’ve received emails, postcards and have surfed the Internet and have seen some great promotions. Which of these merchant account providers will give you a good deal? Before signing any merchant account agreement it is important to understand all of the rates and fees that will be associated with your account. Qualified Discount Rate – This is the percentage that will be charge on all of your credit card sales. Swiped credit cards will have a lower discount rate due to the fact that the cardholder is present and the risk is lower. Keyed credit cards will have a higher discount rate due to the fact that there is more risk involved in accepting the credit card due to the fact that the cardholder is not present. Mid & Non-Qualified Surcharge – These surcharges are very important to understand, as some Visa/Mastercard transactions will have an additional surcharge applied to the qualified discount rate. Mid-Qualified Surcharge applies to swiped merchants only. When a credit card is swiped and the magnetic strip cannot be read in the terminal, you will key in the transaction. When you have a telephone order, mail order or Internet order, you will key in the transaction. A surcharge will be applied to the transaction. In other words, if your qualified rate is 1.66% and your Mid-Qualified surcharge is .85%, you will pay 1.66% + .85% = 2.51% for that transaction. Non-Qualified Surcharge applies to both swiped and keyed merchants. Whenever a corporate or foreign card is used, or you do not utilize the Address Verification System when keying in a credit card, the Non-Qualified Surcharge will apply. In other words, if your qualified rate is 2.39% and your Non Qualified surcharge is 1.95%, you will pay 2.39% + 1.95% = 4.34% for that transaction. Transaction Fee – Merchant providers will also charge a per transaction fee on each of your sales. Some providers will also include a per item fee, or a watts fee in addition to the transaction fee. Make sure you understand the true cost of the transaction fee structure. Address Verification System (AVS) – Address Verification applies to keyed transactions. The AVS determines whether the street address and zip code is actually a match for the cardholder. AVS does not work for foreign transactions. The AVS fee is a separate fee charged for each transaction. Travel & Entertainment Cards – American Express, Discover, Diners and JCB are considered non-bank cards. The transaction fee for these cards is normally called a T&E fee, or a non-bankcard transaction fee. You will incur this transaction fee each time one of these cards is processed, in addition to the discount rate set by these individual companies. Batch Header Fee – At the end of each day, you will either close out for deposit, or your merchant account will automatically be set up to close out for deposit. Once this is done, the funds will travel through the ACH system electronically to deposit the funds in your checking account. The batch header fee is applied for each batch closed out for deposit. Wireless Access Fee – This fee is assessed for merchants utilizing a wireless terminal. Wireless access will allow you to process transactions through the wireless network, rather than processing transactions through a telephone landline. There is also a set-up fee for the wireless network with will range in cost from $35.00 - $50.00. Once a transaction is completed through the wireless terminal, it travels through the wireless network for processing. A monthly fee is associated with this. This fee will range in cost from $12.00 - $25.00 depending on your merchant provider. Gateway Access Fee – This fee is assessed for merchants utilizing Internet processing or a virtual terminal. Once a transaction is completed by the customer on your website, or through your virtual terminal, it travels through the Internet gateway for processing. A monthly fee is associated with this. This fee will range in cost from $20.00 - $50.00 depending on your merchant provider. Statement Fee – This is the monthly fee for statements, reports, customer support and service costs associated with your merchant account. Monthly Minimum – Most merchant providers access a monthly minimum associated with your Visa/Mastercard merchant account of $25.00. In other words, if you processed $1,000.00 in sales and your discount rate is 2.39%, your total amount of discount fees would be $23.90. However, the monthly minimum is $25.00. You would pay an additional $1.10. Should your sales exceed the monthly minimum, the monthly minimum would not apply. Annual Fee – Some merchant providers will charge an annual fee for your merchant account. These annual fees can range in cost from $50 - $195.00. Termination/Cancellation Fee – Most merchant providers have a policy regarding termination/cancellation fees. These fees range in cost from $75.00 all the way up to $1,500.00. In addition there is a specified time period to remain with the merchant provider – from 12 months all the way up to 36 months. It is important to understand this and have this fee clearly in writing before signing your merchant agreement. A huge cancellation penalty can be very costly. About the Author The author has been with Cardservice International for over 10 years, striving to provide the very best service in the credit card processing industry. Visit us at www.best-merchant-accounts.biz
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