Merchant Account Fees and Rates Explained
Traditional methods of payments in today's business prove to be quite ineffective, especially when it concerns online business. The greatest thing about buying online is the possibility to go shopping without even leaving your home. This also concerns payment. Customers are reluctant to send checks or cash. Besides, this slows down business tempo since sending cash or checks takes some time. That is why it is important to be able to accept credit cards as payment methods (more than 80% of online customers prefer paying with their credit cards).
Sure, to be able to accept credit card payments you will need to get your own merchant account. You are probably familiar with the concept of merchant accounts since all of you go to the traditional offline stores and pay with credit cards at terminals. Online merchant account is the same payment gateway although it is located in the cyber space which makes it a perfect option for online retail stores and e-commerce web sites.
Application for a merchant account can be quite a difficult task, and you need to be aware the main costs and fees. Sure thing, every merchant account provider has own fees depending on types of business, chosen merchant account plan etc. Listed below are most common types of charges:
There are not many companies that will ask you to pay a certain amount of money upfront. These are called application fees. Avoid these companies since you will pay money even before you get some cervices.
Transaction fees and all relevant charges related to transactions:
As a rule, merchant account providers will charge from 2.20% to 2.50% for each transaction you make through your web site. At least so are the fees provided by US merchant account providers. Offshore merchant account providers have higher fees but also less strict requirements to applicants. Fees can increase if you want to accept corporate or government credits cards, as well as other credit card types (additional 1.00%). There can be also a fixed transaction fee, for example 0.30$ or 0.20$ for each performed transaction.
You will also need to cover expenses related to maintenance of a payment gateway. This is a monthly fee which can range from $15 to 35$ a month.
Sometimes, customers require a refund, i.e. want their money back because they do not like the product/service they purchased (or there may be some other reasons). Thus, anytime a customer wants a chargeback, a merchant will have to pay a chargeback fee. It does not matter usually whether or not a chargeback is successful of not, the online business owner will pay this fee anyway. Fees differ among various merchant account providers. As a rule this is % from chargeback amount.
Minimum Fees Paid Monthly:
As a rule, there is a minimum monthly fee. Sometimes it happens that there are couple of transactions a month (for instance your business is going through hard times). If transactions amount does not reach a minimum threshold, you will be required to pay minimum monthly fees. Always ask, if a merchant account provider sets a minimum limit of transactions volume.
Monthly Statement Fee:
Normally, every business requires a monthly statement of all performed transactions to calculate revenues or losses. A bank statement will contain all info on transactions as well as all incurred merchant account fees. Usually, this statement costs around 10-15$.
When canceling or terminating your merchant account, you may be also required to pay some money. Normally, termination fees are applied if the account is closed within a specified period of time (for example, within a year after opening). This period differs with different merchant account providers, so make all necessary inquiries before paying money. There are offshore merchant accounts providers with no termination fees!
You see that opening and maintaining an Internet merchant account is associated with numerous charges and fees. You need to remember that these are not standard fees that all merchant account providers charge. Look for the kind of credit card processor that perfectly suits your business needs and budget.