Merchant Account Fees
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Merchant account -- a
special bank account for handling the revenue (and fees) from
credit card transactions. Your merchant account provider (MAP)
is a bank or other institution that processes online credit card
transactions.
Some MAPs will not allow a large volume of purchases to be made
when a card is not physically present; or example, for charges
made over the Internet, or by phone, fax, or mail. In that case,
you will need to obtain a separate merchant account to process
your online transactions because financial institutions and the
Visa/MasterCard card associations have different criteria for
evaluating the potential risks of credit card transactions when
a card is not present. A variety of fees and other expenses are
associated with online merchant accounts.
Setup Fees
Your MAP will charge some combination of fees to get started.
Most charge an application fee, which is seldom refunded if your
application is denied. When you open an account, you may be
charged software licensing fees, if applicable, and you may be
required to purchase hardware or equipment, such as a point of
sale (POS) terminal.
Software
Software requirements also vary widely, from using Web-based
applications hosted on your provider's server free of charge, to
purchasing and installing software. In some cases, all that's
required is a personal computer with Internet access, but
depending on your business needs, a POS terminal may be
necessary. POS terminals are the devices you see in most retail
locations, used for processing credit card transactions. These
terminals come in a variety of models -- from bare-bones
versions to fully loaded editions with integrated printers and
real-time processing capabilities.
Transaction Fees
A transaction fee is a flat fee charged for each transaction.
Credit card transaction fees may be assessed by the financial
institution that handles your merchant account, the Internet
payment service that enables the merchant to accept online
payments from their customers and securely processes these
payments, or both. You may be able to receive separate invoices
from your financial institution and the Internet payment
service; but in many cases, this fee is presented to merchants
in one invoice from your financial institution. The transaction
fee is based on the financial institution and the risks
associated with the merchant, including type of products, market
segments, method of selling, price of product, expected sale
volume and merchant credit history.
Discount Rates
Discount rates are percentages taken from each order. Expect to
pay discount rates from 1.75% to 3.95%.
Other Fees
Beyond these fees, many MAPs have also established minimum
annual revenue requirements. Some MAPS also require security
deposits or revolving accounts to ensure that you'll pay for any
charges contested by a customer. Like transaction fees, these
amounts are usually based on the type of product you're selling
and the price of your goods and services, your credit history,
and the length of time you've been in business. Each MAP offers
a different mix of fees. Regardless of the MAP, however, these
costs can add up quickly.