Business owner researching merchant account fees

Understanding Merchant Account Fees

A merchant account is a must-have for any business, on or offline, these days. When you’re looking for the best merchant account, it’s important to have a full understanding of everything that comes with it—including the associated fees.  There are plenty of unavoidable fees that come with a merchant account. We’ve taken seven of the most common merchant account fees and explained them, along with the different ways these fees may appear to you.

What You Need to Know About Merchant Account Fees

There are two main types of fees you’ll have to worry about: base fees and markups. Base fees reflect the honest cost of transactions, which is determined by banks and credit card companies. You’re going to pay the same base fee for all Mastercard transactions, for example, no matter which merchant service provider you go with. On the other hand, markup fees vary among credit card processors. Companies profit off these fees.

Depending on the type of pricing model, you may not see a cut-and-dry list of all the markup and base fees. The interchange plus pricing model is the fairest, yet isn’t as widespread; this option lists all of the fees in a clear, easy to understand format. In a tiered pricing model, your transactions are lumped into three categories: qualified, mid-qualified, and non-qualified. Qualified rates tend to be the lowest, and as you go down the tiers, the rates increase. Your credit card processor will have certain criteria for what makes a “qualified” transaction. If you don’t stick to the processor’s guidelines, your transaction may fall to a lower tier. Not all processors will explain which transactions fall into particular pricing tiers, which can lead to confusion when you’re trying to identify your charges.

Understanding the Fees

Here are seven of the most common merchant account fees. While some credit card processors may or may not charge everything in our list, you’re most likely to run into these fees.

  1. Annual fees
    Annual fees are pretty self-explanatory. Once a year, you’re charged for the cost of using a merchant service provider. Depending on your provider, you may not have to pay an annual fee.
  2. Setup fees
    You may or may not have a setup fee (also known as an application fee). This is a nonrecurring fee you pay for getting your account set up.
  3. Terminal fees
    Ecommerce business owners don’t need to worry about terminal fees, but if you own a brick-and-mortar business, you may be subject to them. A small terminal fee is charged whenever a customer’s card is swiped. Deciding to lease a terminal would increase your terminal-related fees, so it’s smarter to buy a terminal instead.
  4. Batch fees
    Whenever you settle the batch of card transactions at the end of the day, you are charged a batch fee. You don’t pay a batch fees on days that don’t have any credit card transactions.
  5. Monthly fees
    Monthly fees support other aspects of merchant services, such as customer service call centers.
  6. Monthly minimum fees
    Not to be confused with normal monthly fees. Monthly minimum fees are charged when you don’t meet your minimum transaction total for the month.
  7. Statement fees
    This fee is easy to get rid of. Statement fees are often charged to cover the cost of paper statements and correspondence. Switch to online billing and electronic correspondence instead.