Understanding Your Merchant Account Provider's Fees

There are several transaction fees associated with creating and maintaining a merchant account. But business owners should keep in mind that banks and merchant account providers all have their own fee schedules, and there is a lot of variation among providers. It is important that the services offered match the needs of the particular business. All the fees and charges should be disclosed in the merchant agreement prior to any commitment between the merchant and the merchant account provider.

Below is a list of the most common merchant account fees:

The Discount Rate:

The discount rate is a percentage of the total transaction amount that the bank will deduct prior to transferring the deposit into the merchant bank account. Discount rates generally range from 2.5% to 5%.

The Transaction Fee:

A transaction fee is typically a standard amount that is incurred for each transaction. (A "transaction" is generally considered to be any interaction involving the merchant and the processing network). Transaction fees will usually range from 30 cents to 50 cents per transaction.

Pass-Through Fees:

In some cases, a surcharge may be added to individual transactions that do not fulfill certain requirements as detailed by the merchant account provider. A common example would be accepting a credit card that does not pass the Address Verification System (AVS) test.

Monthly Fees:

Monthly fees are charged for account-related services, such as customer service and monthly account reporting.

Set-up/Application Fees:

Some merchant account providers require a on-time fee for applying for and setting up a new merchant account.

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