SET UP FEE

This is the initial fee that the company will charge you to activate an account.  This generally starts at about $200, but can quickly inflate depending on the type of plan you are choosing.  Important questions to consider in the set up fee are first of all, is it a one time fee, or a recurring annual fee?  This will make a big impact twelve months from now when it is time to renew.

Associated fees with the set up may be an application fee (to process the application), an annual membership, and possibly a gateway access fee.  Find out if your provider can save you this fee if you combine services with them.

TRANSACTION FEE

When processing a card, the merchant account providers use a computer system to complete the sale.  Whether your customer is using a debit or credit card, expect to be charged a transaction fee.  This may be a percentage of the sale, or a flat fee.  The flat fees are generally between twenty to fifty cents each transaction.  Determine your average sale to find out the least expensive transaction sale charges.  If your sales are going to be well over $100 each, it may be less expensive to pay a flat fee.

DISCOUNT RATES

This rate is the portion of the sale charged for processing.  This is generally around 2+ % for online transactions, for a total of about 3% of the sale going towards fees from sales.  While this may seem frustrating to factor all these fees into your sales, think about how much higher sales will be!  Selling online makes accepting credit card payments essential.

SETTLEMENT FEE

This fee is between ten to fifteen dollars a month.  The merchant account provider will provide a statement of all transactions, listing the money earned from credit card transactions.  This will include sales and charge-backs.  Charge-backs are directly related to merchant account risk.  Consider the electronic/paperless version to potentially waive this fee.

MINIMUM MONTHLY FEE

The credit card company wants to know that you are going to be sure they are earning money every month, so there may be a stipulation that you must have a minimum number of charge transactions every month.  If you don’t meet the minimum number, there will be a fee assessed as well.  Check ahead of time and find out how much you will be paying if you have decreased sales one month.

Merchant account fees are not something that should overwhelm you as the seller.  Having a clear understanding of your merchant account provider’s policies will help you anticipate expenses each month.

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Using a merchant processing company does involve some merchant account risk.  As with all things financial, someone will lose money if something goes wrong.  Finding a reputable provider with good accounting practices can decrease the chances of losing money, or else you might find yourself in the cold.

*** For more information on credit card processing, CLICK HERE ***!

It is important to keep accurate records yourself in case there is ever a discrepancy in records, and this includes making sure you have all of your credit card receipts.  Being a responsible business owner is the biggest key in risks.

When considering risks, you must look at it as the merchant and the merchant provider’s risk. There are several different types of risks:  strategic, credit and transaction risk.  The merchant account providers are well experienced in the risks, and have fee schedules set up to accommodate the risks for providing services.

Strategic risk is the risk the bank takes offering the merchant account services.  By not having a strong business plan,  the bank may take some financial hits while figuring out how to effectively manage an online service.

Credit risk comes about from charge-backs.  These affect the acquiring/processing bank down to the business owners.  Charge-backs are payments taken back from the credit card company due to consumer complaints.  Good for the consumer, but not so good for the merchants.

Charge backs are more common in certain areas, which will equal larger fees for the merchant.  Things such as high-end jewelry, dating/escort services, pornographic sites, and telemarketing to name a few, are all considered high risk.

In order to protect their finances, the merchant account provider will often require a “reserve”.  Once the merchant has gone out of business or files bankruptcy, the merchant provider can no longer collect charge backs.  With a reserve, any charge backs received after the business closes are still available to the merchant provider.

The last type of risk is transaction risks.  This may be due to employee errors (in entering information), system breakdowns, or other natural calamities.  This is why it is important to be especially careful in keeping accurate records to make sure that as the merchant you have all the funds deposited that you have earned.

Merchant account services greatly streamline the online shopping experience.  Just make sure to do your research and find a company with experience to avoid risk when interacting with your merchant account provider.

*** Learn how to avoid merchant account risk, CLICK HERE ***!

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