Low Cost Merchant Account Procesisng Fees

Please select from one of the following
low cost merchant accounts solutions:

But before we help you locate some low cost merchant accounts, it would be best to ensure that you understand the various fees and costs you may come across.

Sidenote: Merchant accounts and credit card processing costs were discussed in The Nine Minute Tutorial. Before reviewing the low cost merchant accounts, you should take The Nine Minute Tutorial. It will provide you with a basic understanding of what is involved in credit card processing, the equipment or software you may need to acquire and how to select the best low cost merchant accounts provider for your particular business.

To quickly review, here are some of the most common charges you might incur, no matter what type of low cost merchant accounts solution you are seeking:

Discount Rate Fee. The discount rate is a percentage charged on the dollar amount of each sale you process. The actual rate varies according to what type of low cost merchant accounts processing system you select. Presently, real-time and manual online processing generally have rates in the 2.15% to 2.45% range, while retail processing rates are in the 1.60% to 1.80% range. The higher rates levied for online processing are a result of the fact that with these processes, the merchant does not have a physical credit card in front of him to swipe, so the chances of fraud are higher.

Transaction Fee. These are credit card processing fees charged for each individual transaction you perform, including each sale processed, each chargeback, each batching of sales submitted, etc. Typically, transaction fees run between 20 cents to 35 cents per transaction processed.

Monthly Statement Fee. This is a fee charged monthly by the merchant account bank, usually in the $10 to $15 range, but sometimes running as high as $30.

Monthly Minimum Fee. Monthly minimum fees are imposed on low cost merchant accounts only if the total Discount Rate Fees you pay in a particular month don't reach your monthly minimum. These fees are usually $15 to $30 per month. Suppose, for example, the monthly minimum is $25.00, the Discount Rate is 2.30%, and that you process $800.00 of sales in a month. You would have paid only $18.40 ($800 times 2.30%), so you would be assessed another $6.60, to bring you up to your $25 monthly minimum. In other words, the monthly minimum is the least amount you will pay in a month, no matter what your sales are. Of course, once you have a decent amount of sales each month (in our example, $1,087), the monthly minimum will have been met and you won't be charged a monthly minimum fee.

Application Fee. Some low cost merchant accounts providers will charge a one-time fee ($100 to $500, or more) for merely allowing you to apply for a merchant account. Due to high competition in today's market, the majority of companies now either do not charge an application fee, or waive it. If you do want to apply to a company that charges an application fee, you should ask them to confirm in writing that they will refund your fee if you are not approved for a merchant account.

Chargeback Fees: Another credit card processing fee you will come across sooner or later with all low cost merchant accounts is the chargeback fee. These are fees (usually $10 to $35) you, the merchant, pay when one of your customers successfully disputes a charge on their credit card and has the transaction reversed. These charges can quickly add up if you sell a defective product or service, or if the shipping process you utilize to deliver products is faulty. And, high numbers of chargebacks can place low cost merchant accounts in jeopardy.

Reserve or Holdback Fees. Some low cost merchant accounts providers insist upon holding back from you a percentage of your sales each month, as security against future chargebacks, especially if you are in a high risk business. If you operate for several months without a problem, this requirement may sometimes be dropped and the money that was held back released to you.

assessing low cost merchant account providers
Also, keep four things in mind.

First, banks and ISO's are in business to make money. If they charge you a lower than normal amount for one type of fee, they may be making up for the lost revenue by charging you higher credit card processing fees elsewhere. So it is always best to look at the whole package of credit card processing fees being charged, to assess which low cost merchant accounts provider makes the most economic sense for your business.

Second, one can expect to pay higher rates if the risk associated with one's business is assessed as greater than normal; for example, with certain industries such as gaming, travel, etc; if your business is international or offshore; or if your credit history is tainted. To locate a provider for high risk merchant acounts, click here.

Third, as stressed in The Nine Minute Tutorial, always carefully read the merchant account agreement before you sign, paying special attention to any hidden fees that may not have been raised on the provider's website or during your conversations with its representatives.

Fourth, when you compare low cost merchant accounts, if you see unusually low discount rates or other fees being offered, be on your guard. Remember that what looks like a super deal to begin with may end up costing you in the long run, through unexpected fees, poor service, etc.

When you compare merchant accounts, of course you should examine each provider's costs carefully, using reasonable assumptions for your particular business, and see what the bottom line is. But unless the costs differ significantly overall, you'll likely be best off selecting a provider based upon some of the other factors we discussed in The Nine Minute Tutorial.