Merchant Account Fees

Merchant account providers charge different fees for the different types of merchant accounts.  Visa and MasterCard are actually somewhat responsible for the merchant rates that are charged.  They set the "interchange" rate, and merchant account providers mark up their rates from there.  While merchant account fee descriptions may read like a foreign language to you, the good news is that most providers all speak the same foreign language so once you understand it you can understand all providers!

Most merchant account fees are made up of three components:

1. One-time charges
2. Monthly charges
3. Per-transaction charges

It gets a little confusing when we discuss payment gateways and their fees as well.  The payment gateway is the software or code that actually transmits the order from the customer to the merchant's bank for processing.  (The merchant account handles the processing of the credit card, but the payment gateway is like the messenger that carries the credit card information to and the merchant account for processing, and then carries the funds back to the business who sold the product or service.)

Payment gateway fees also are made up of three components:

1. One-time charges
2. Monthly Charges
3. Per-transaction Charges

 Many merchant account providers will include a payment gateway in the package, so you are only dealing with one billing structure and most of the time you receive better rates this way.  The only drawback of using a merchant provider that includes a payment gateway in their fees and service offerings is that the one-time charges and set-up fees are sometimes not explained very well.  Businesses have found out that "no set up fees" sometimes only pertains to the merchant account set up; and the hidden fees charged for the setting up of their payment gateway came as a big surprise!  So it's very important that you determine whether or not the fees a merchant account provider lists includes fees for payment gateways or not to have an accurate understanding of how much you will actually be required to pay to set up and maintain your merchant account.

One way to accurately compare the different merchant account providers is to ask specific questions, and speak with a customer service representative from each company you are interested in for a breakdown of the fees that would be charged.  If while you are speaking with a representative from a merchant account provider you find they are not willing to work through a quick example transaction with you to see what sort of fees you can expect- they may be hiding some fees that you might find out about once you start using them.  It may be in your best interest to disregard that company and move on to another that is willing to fully disclose their billing and fee structure.

Questions to Ask Merchant Account Providers to Determine Fees:

• What is the merchant account set up fee?  (this is a one-time fee)
• What is the payment gateway set up fee? (this is a one-time fee)
• What is the monthly payment for the gateway and what does it include?
• What is the merchant account monthly statement fee? (sometimes called "handling fee")
• What percentage of each transaction is paid to the credit card companies?  (the discount rate)
• What amount per-transaction will be charged for the payment gateway? (the transaction fee)

Asking these questions of each merchant account provider you are interested in doing business with will allow you to easily compare their services and fees to find the one that offers the most for the least amount of money.