Evaluating Credit Card Processors and Their Fees

If you are starting or currently operating a business you are aware of the importance of accepting credit and debit cards. Nearly 80% of commerce today is done in a noncash form while online businesses are accepting credit and debit cards for over 90% of their business.

Where does someone start when looking to open a merchant account (credit card processing account)? There are hundreds of companies on the internet that currently provide these services in an unregulated industry. Companies such as Internet Merchant Accounts and High Risk Merchant Accounts are BBB members which provide retail and internet solutions.

One of the most confusing sections of merchant accounts are their fees. There are nearly 10 different fees plus the rates. The fees and rates are higher if you are accepting cards over the phone or on the internet. This is because there is a heightened risk of fraud. When applying for a merchant account there are several portions of the application that are related to your business. The first part will be what goods or services your business provides. This will follow by the length of ownership, your estimated monthly volume, your typical sales amount and estimated highest ticket amounts. Processors will also require a percentage broken down into how many transactions you process face to face or over the phone/internet.

The fees involved which merchant accounts consist of; transaction, ACH, Decline, Annual, Chargeback, Early Cancellation, Minimum Monthly Discount and Statement.

A transaction fee is a flat fee for each transaction. Usually $.20-$.30. ACH fees or batch fees are daily fees for everyday that you have processed cards. For example if you are open Monday- Friday and process cards everyday you are open, then you will be charged an ACH fee each day (Monday-Friday) which is usually $.25-$.30. If you are closed one day and process no cards then you will not have to worry about the ACH fee on that day. A decline fee is a fee that is charged (usually $.25) for every card that is declined. An annual fee is a fee that is charged yearly for service. A chargeback fee (usually $25) is a fee that ALL processors have. This states that if a customer is satisfied with a transaction they have the ability to chargeback the amount and the merchant will need to deal with the bank directly to try and receive the funds back. Early cancellation fees are just what they sound like, fees that must be paid if the merchant cancels the merchant agreement before the term of the contract is up (usually 36 months). The minimum monthly discount fee is a fee accessed for merchants that do not process the minimum set in the contract (usually $2,500). We suggest that you avoid any company charging an annual, early cancellation or minimum monthly fee.

The discount rate is the percentage that is charged on every transaction. The discount rate ranges from 1.75% for retail to 2.25% for internet merchants. If you business is considered "high risk" you can expect to pay 7.5-8.5%+. High risk companies would include; travel timeshare, adult, pharmacy and business opportunity companies.

Companies that are processing phone or internet transactions are required to use a secure gateway or virtual terminal. This terminal allows the user to login from any computer with an internet connection and charge, refund or authorize cards. You are also able to accept e-checks, search through all transactions and verify settlements.

The most important fragment of merchant accounts is that you need one! The fees may look extensive but by working with a reputable processor you can maximize your profits and minimize the headaches. Our company uses PowerPayServices.com for processing and they have an impressive client retention rate of over 98%! Whoever you might use please make sure they are part of the Better Business Bureau. Do your research and you will be satisfied down the road.

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