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Understanding Credit Card Transaction Fees
Copyright (c) 2006-2012 Scott Burke
Q: I'm starting a new business and want to accept credit cards.
It seems that all the credit card processors charge a lot of fees
for each transaction. What are these fees?
A: Each credit card processing company operates somewhat
differently, but there are a number of fees that are common to
all of them. Here are some examples of various fees associated
with a typical merchant account.
The Application or Setup Fee is a one-time charge for processing
a merchant application and activating your new merchant account.
Some processors waive this fee to promote their businesses and
attract new merchant accounts.
The Address Verification Service Fee (AVS) is a fraud prevention
measure that provides merchants with an additional fraud-
detection tool to determine the validity of a sale, which is
especially useful when the card is not present. AVS matches a
sale's shipping information with the cardholder's billing
address. When addresses do not match, merchants should discuss
the discrepancies with their customers before shipping orders.
AVS only works with cards that are issued in the United States.
When AVS is used, there is a per-transaction fee for the service.
The Discount Rate is the percentage charged on the dollar amount
of a sale or a returned transaction. Discount rates vary
depending on the type of business, such as a traditional brick-
and-mortar business, a mail-order/telephone-order business, a
restaurant or an e-business. Discount rates also vary depending
on whether a card number is keyed into the point-of-sale terminal
or swiped into the terminal. Swiped rates are generally lower
because of the data encoded on the card's magnetic stripe, which
eliminates key-entry errors.
The Secure Payment Gateway Fee is a charge assessed to e-commerce
merchants to enable them to process transactions securely over
the Internet. This is usually a monthly fee.
The Customer Support Fee is a monthly charge assessed by some
processors, which enables them to provide high-quality customer
service 24 hours a day, 365 days a year, often in multiple
languages and dialects.
The Monthly Minimum Fee is charged to the merchant if the total
monthly discount rate amount for MasterCard and Visa transactions
does not reach a minimum threshold. If the merchant reaches the
minimum threshold, no monthly minimum is charged. Virtually all
credit card processors initiate this fee, and generally it ranges
from $10 to $30 per month.
The Reprogramming Fee is a one-time charge a processor may assess
for converting a merchant from one credit card processor to a new
credit card processor.
The Transaction Fee is assessed for each transaction
authorization submitted by a merchant, such as a sale or a
return. This fee is also charged on transactions where the card
is declined. In addition, transaction fees are incurred for
American Express and Discover card transactions.
Equipment and Software Fees vary depending on the type of
business-traditional brick-and-mortar, mail order/telephone
order, restaurant or e-business. Merchants will need certain
kinds of equipment and software in order to process credit cards,
debit cards and checks. Equipment can include point-of-sale
terminals-both countertop and wireless-printers and PIN pads as
well as secure payment gateways, virtual products, software and
payment options for Internet businesses. Most equipment and
software can be either purchased or leased, and prices vary
depending on the processor.
Chargeback and Retrieval Fees: Chargeback fees for a disputed
transaction are based on the number of chargebacks posted to an
individual account ($10 to $25 per final posting). Incoming
retrievals are requests for the original transaction receipt that
the cardholder's bank requests and are charged whether or not
there is a final posting. The industry standard is $15 per
incoming retrieval.
Keep in mind, there are numerous considerations to maintaining an
effective merchant account, and fees are just one component. When
you open a merchant account, ask your credit card processor,
agent or sales representative to explain all your prospective
rates. Be sure to ask if the transaction processing company has
revealed all charges that could apply to your account; you want
to avoid any hidden charges. Look for a credit card processor
with a reputation for being honest and upfront, whose merchants
are fully informed of what is reflected on their monthly
statements.
Sometimes merchants shop for discount rates, but rates are only
part of the processing picture. Look for a credit card processor
that consistently provides top-quality customer service, 24-hour
availability and a one-stop shopping experience (i.e., point-of-
sale equipment, processing software, training, 24/7 customer
service in more than one language and state-of-the-art fraud
prevention procedures).
Credit card processing does not have to be intimidating or
challenging. Find a processor dedicated to personal interaction
with its merchants. Work with agents and sales representatives
who communicate directly and honestly with their merchants,
explaining each charge and what it covers. Ask questions.
Remember, you are the customer. Accepting credit cards can help
grow your business.
For additional information click over to:
http://www.cmscreditcards.com
|
Scott Burke, President of MAXX Business Solutions is committed to making the merchant experience a pleasure and one that will build long-lasting business relationships. MAXX works as a trusted partner in merchant account credit card processing and strives to provide merchants with the best support, the best rates, and the best service in the industry. http://www.cmscreditcards.com/about.html
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