Hidden Fees You Must Know About Before Getting a Merchant Account
There are a handful of fees that usually aren’t explained to you when you first sign up for a merchant account. This isn’t always the fault of the salesperson or account specialist you work with because you don’t know what questions to ask and they don’t always volunteer these fees assuming you’ll ask when you see the pricelist on the contract. With each application that you’ll sign as a merchant, all of the fees should be listed and sometimes it’s up to you to make sure you question what they are. Here are a few of those fees that you may not know about that should be explained.
The monthly minimum is a fee based on the discount rate. To summarize this fee the way most merchant providers assess this is that you’ll either pay the monthly minimum or the discount rate, whichever is higher. So, if you have discount rate fees in excess of $25 per month (which most merchants will if they are processing), then this fee will basically be non-existent. But, if you are a seasonal merchant who only processes during the a certain time of the year, you will want to know that this fee will be assessed even on months when you aren’t processing.
Many merchant service providers are willing to waive this fee. So, especially if you are an internet merchant or seasonal merchant, you should work to get this fee waived. Also, some merchant providers will base your early termination fee on the monthly fees multiplied by the duration of the contract which means that the $25 minimum will add significantly to your overall early termination fee.
Transactions are batched together daily usually automatically, but sometimes, if your terminal is programmed not to batch, this must be done manually. These batches of transactions are assessed a batch header fee, usually around $.25 per batch. That I know of, batches can be hundreds of transactions or even thousands of transactions and still only be assessed the one batch. Consider this a daily processing fee not to exceed about $7.50 per month assuming you are processing every day of the month. This is a lesser known fee and not a huge deal, but something you should be aware of anyway.
There is a fee known as AVS which stands for address verification system. This is the method of verifying transactions against the billing address on file, usually with a postal code match. What this does, especially if this is an internet account, is keep the rates low or keeps the transaction “qualified”. If this is a retail account, this AVS can be used if the card mag stripe is unreadable and you must key in the number or if a customer is calling with a credit card number. This will also help to verify that the address matches and reduce the risk associated with processing that credit card.
Several merchant service providers will charge an annual fee. This is usually right around $100 and will be assessed at your 1 year anniversary and every year after this. In my opinion, this fee is justified when all of your other rates are low enough that your savings for being with this provider are significantly more than the $100 annual fee. This is a decision you can make on whether it is worth the $100 annual fee to have the lower rates. Just make sure to ask about this fee if you see it on your contract, and even if you don’t see it there!
When you’re ready to be done with your merchant account whether you’re going out of business, or whether you are going to switch to another provider, you’ll most likely have an early termination fee. This is not unlike any other service company. However, you need to know the duration of your contract, the cost of terminating the contract and what happens in the event you are going out of business. Going out of business is bad enough, but to be hit with an additional fee for terminating your account can add additional financial stress. You should expect something around $200 to $300 for an early termination fee. If it is significantly more than this, be cautious before entering into the agreement with your merchant account provider.
There are many different fees associated with merchant accounts and most of them are relatively straightforward. A little education can go a long way in making sure that you are getting a good deal when processing credit cards. The key is to work with a good merchant account service provider who has integrity and who you can trust to be honest about the fees associated with the account.
