A Guide To Understanding Merchant Account Rates & Fees
by Bobi Michaelson

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.

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