Credit Card Processing Fees - Learn Before Looking For Service

By Author: Daljeet Sidhu
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Credit card companies have earned notoriety for charging fees under all guises and attempting to swindle the customers. Same is also true for merchant account processing. But one needs to realize that fees and charges are a source of revenue for them. And being knowledgeable about various fees can help one appreciate and understand better the credit card processing fee structure.

Listed below are the various types of fees that are usually charged by card processors:

Application Fee: You pay this upfront at the time of filling out the application for the merchant account service but is usually not charged by reputed companies. This fee should be avoided as far as possible.

Startup Fee: This is the fees taken for setting up the credit card processing account. It is normally around $25.

Statement Fee: This is charged for providing detailed account activity statements at the end of each billing cycle. These contain valuable info like the number of transactions processed, the time and dates of these transactions etc. You pay about $7 to $10 for this service.

Minimum Monthly Fee: This is charged ...
... to ensure that your account generates revenue for the card processing company even if there are no transactions or if they are below a certain limit. This is also known as 'monthly minimum not met' charge.

Discount Rate: It is the main fees imposed for accepting credit cards and is a percentage of each transaction processed. It normally lies in the range of 1.5-2 percent of each transaction. It could be higher for high risk businesses.

Chargeback Fee: This fee is applicable if a large number of transactions are charged back. Normally, a specific number of chargebacks are allowed in a month before this fee is levied.

Gateway Fee: This is charged to facilitate internet transactions. To facilitate transactions on the internet, a credit card processing firm needs to have basic web infrastructure in place including a shopping cart function and/or a portal that enables buyers to submit and monitor payments. This fee is usually around $10 per month.

Termination Fee: This fee is charged if you terminate the contract before expiration. Standard contract periods are between one to three years. The fee ranges from $100 to $300. But not all service providers impose this fee.

As a general rule of thumb, accepting credit cards from customers should cost around 2% of total receipts. This amount is affordable enough for the companies to accept credit and debit cards as well as large enough for the payment processing vendors to profitably run their business. Any vendor with fees lower than this may be tempting, but should be considered with caution as it is usually not worthwhile for the service providers to charge any lower than that. Be on guard against hidden fees and charges if the offer looks too good to be true. Go over the contract carefully including all the footnotes and fine print.
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