merchant account fees defined

One aspect of obtaining a merchant account that can be confusing is the array of fees that are involved. In the hopes of clarifying them for you, Constant Processing® offers the following list of rates and fees you may run into when setting up your merchant account. Additional information is available by clicking on each term:

Discount Rate

Typically comprising the largest portion of your costs, the discount rate is basically a percentage charged on each transaction you process. It varies depending on the type of card and the type of transaction. It also includes interchange, which are fees that are set by the credit card networks, charged to credit card processors and paid to the card-issuing banks.

Transaction Fees

A transaction fee is charged to process each and every transaction, whether it’s approved or declined by the card-issuing bank. The fee is set according to the type of transaction; for example, swiped or keyed.

PIN Debit Transaction Fees

A fixed transaction fee that only applies when you process debit cards that require the cardholder to enter their PIN (personal identification number).

Address Verification Service Transaction Fee (AVS)

AVS is required on all Visa® and MasterCard® transactions and whenever the card is not physically present, requiring that the account information be keyed into the system. AVS checks that the address and zip code provided by the cardholder matches the information on file with the card issuer. This security feature is a first line of defense against credit card fraud.

ACH/Daily Batch Fee

A fee that is charged when you settle your daily transactions (also known as the batch) with your credit card processor. If you have no credit card transactions to settle on a particular day, you are not charged this fee.

Monthly Statement/Support/Service Fee

Credit card processors charge this fixed fee that goes by different names on a monthly basis. It remains the same regardless of the number of transactions you process and helps cover the cost of your statement and any customer support or service you may require.

Internet Gateway Fee

This fee, which applies only to merchants who use an internet payment gateway, is billed directly by the gateway provider. The provider may also charge an additional per-transaction fee in addition to any transaction fees charged by your merchant account provider.

Voice Authorization Fee

The voice authorization fee applies to merchants who use a telephone dial-up service for transaction authorization. A fee is charged for each call that is made. Voice authorization is a payment processing option that can be useful as a backup in case your terminal, software or Internet connection malfunctions.

Monthly Minimum Fee

Your merchant account agreement stipulates a minimum amount of transaction fees that your provider requires you to generate each month. If your monthly fees fall below this minimum, you still pay the same monthly minimum fee.

Transaction Fee

Merchants are charged this fee every time their processing system makes connection with the network. This also includes voice authorizations, attempted sales that are declined, voids, operator error and invalid card numbers.

Network Access Fee

Merchants are charged this fee every time their processing system makes a connection with the network. This also includes voice authorizations, attempted sales that are declined, voids, operator error and invalid card numbers.

PCI non-validation fee

A fee charged to merchants who do not return a PCI Compliance Validation Certificate, which can be obtained by completing and passing on an annual basis a Self-Assessment Questionnaire (SAQ) and/or Quarterly Network Scan (for merchants that electronically store cardholder information or whose application systems are connected to the Internet) according to the applicable business level as defined by PCI Security Standards Council.

Surcharge Fee/Partially-qualified Fees/Non-qualified Fees

Three different names for fees related to an additional discount fee that applies to certain types of cards. These typically include business, corporate, rewards and international cards.

Application/Setup Fee

Once more prevalent than it is now, this fee is a one-time, upfront charge for setting up your account.

Reprogramming Fee

This fee for reprogramming your existing equipment or software covers the time and effort involved on the part of your processor and terminal/software vendors.

Chargeback/Retrieval Fee

These fees kick in when a cardholder or issuing bank disputes a transaction. The merchant is given the opportunity to refute the dispute with a written response and documentation. The merchant account provider handles the dispute with the issuing bank and charges these fees to do so.

Annual Fee

The amount charged by the processor for your merchant account on an annual basis.

Cancellation or Termination Fee

If you cancel or terminate your merchant account before the date stipulated in your merchant account agreement, your provider will most likely charge a fee to help recover some of their loss. There is usually room for negotiation, however, especially in the event that you have unresolved problems or issues that the provider cannot or will not resolve. In any event, the fee should be a fixed dollar amount, not a variable fee. Check your merchant account agreement regarding how the cancellation/termination fee is calculated.

Hidden/Junk Fees

This category covers a variety of surprise and bogus fees that some merchant account providers charge. Included in this group of the extremely low “teaser” rates that escalate within months after the contract is signed. Beware of other conditions, including increases in your discount rate without prior notification, which may be buried in the fine print of your agreement. These so-called junk fees go by many names, including file fee, security fee, audit fee, conversion fee, over-limit fee, excessive transactions fees and bill back fees.