Understanding Merchant Account Fees: A Comprehensive Guide

Understanding Merchant Account Fees: A Comprehensive Guide

Introduction

Let's face it: merchant accounts can be confusing. There are a lot of different types of fees, and you're not always sure what they'll cost. To make things even more difficult, different providers use different terminology to describe their rates. But as a merchant account provider ourselves, we know how to help our clients navigate these waters. We want to share some of our knowledge with you so that you can learn about merchant account fees—and how to avoid getting caught up in traps that could cost your business big-time money!

What are merchant account fees?

Merchant account fees are the costs associated with accepting credit cards. They can include interchange, assessment and monthly fees.

• Interchange: This is the price you pay to your processor for every transaction that goes through their network. It's regulated by Visa, MasterCard and American Express. The fee varies depending on which card brands you accept (Visa or MasterCard) and whether it's a debit or credit card transaction.* Assessment: A percentage of each sale that goes towards funding PCI compliance programs such as tokenization and encryption.* Monthly Fees: Usually flat rates charged by processors based on how much you process per month

Types of merchant account fees

There are four main types of fees that merchants pay to their payment processors. These include:

• Transaction cost: This is the fee that your processor charges every time you accept a credit card payment and it's typically between 1% and 2%. The exact amount will depend on a number of factors, including how much you sell each month, whether or not you provide customer support over the phone (or via live chat), what kind of processing equipment you use (e.g., an EMV-enabled terminal), etc.

• Monthly fee: This charge covers things like processing statements and providing support for your business' online payments platform if applicable--but it doesn't include any interchange fees! It's usually around $20 per month for most small businesses that don't require extensive customer service assistance from their merchant account provider.

• Statement fee: Like monthly fees, statement charges cover administrative costs associated with handling transaction data; however, unlike monthly charges which go away once they've been paid off entirely (!), statement charges continue accumulating until there aren't any outstanding balances left on the account anymore (!!). You'll usually see one or two statements per year depending upon how often money comes into them; if those amounts are small enough though then maybe just one statement would suffice instead? If so then think about saving yourself some cash by opting out altogether!

How do you know how much you'll pay in merchant account fees?

• Transaction cost vs. monthly fee. The merchant account fee is broken down into two parts: a transaction cost and a monthly fee. The transaction cost is the rate you pay per transaction, so it will be expressed as a percentage of your sales (e.g., 2%). The monthly fee is a flat rate that you typically pay every month regardless of how many transactions occur during that time period (e.g., $15).

• How can I tell which one will be better for me? In general, if your business has high volumes of sales or credit card payments each month then it's better to have lower rates on both fronts--meaning lower percentages for each sale plus lower monthly fees overall--but if these numbers are low then it might make more sense for you to choose higher percentages instead since those will translate into higher profits over time anyway!

Transaction cost vs. monthly fee

Transaction costs and monthly fees are two of the most common types of costs that you'll see when you're looking at merchant account providers. The difference between these two types of fees is simple: transaction cost refers to the percentage of each transaction that your business pays, while monthly fee is an amount that you pay every month regardless of how many transactions take place on your site.

Most merchants will pay both a transaction cost and an additional monthly fee in addition to their gateway charges (which we'll discuss later).

Why can't you just use Stripe or Square for free?

Stripe and Square are designed for personal use. They have a lot of limitations, and they aren't PCI compliant. Many businesses require more features than these platforms provide, like the ability to accept international payments or process ACH transactions (automatic bank transfers). If you need these types of capabilities, then using Stripe or Square would be a mistake because they won't work well for your business! Moreover, if there's ever an issue with their platform--like if it goes down unexpectedly--your business could suffer as a result.

If you're looking for better merchant services than what Stripe/Square offer but don't want to spend thousands per month on them either...we've got just the solution:

What about interchange and assessment fees?

If you're wondering what interchange and assessment fees are, they're the same thing. Interchange fees are paid to the card network, while assessments go to issuing banks. Intercharge is a popular name for both interchange and assessment fees because it's short, catchy and easy to remember (it's also the name of an old Visa subsidiary).

Interchange fees are usually a percentage of the transaction amount--for example: 2% plus $0.10 per transaction or 1% plus $0.15 per transaction--but not always; some networks have flat rates instead of percentages!

Don't get caught up in looking at just one rate.

You should also be aware of all the fees that are attached to your merchant account. While it's tempting to just focus on one rate, it's important not to overlook other costs. For example, if you have a flat rate and no monthly fee but pay higher interchange rates and assessments (the fee paid by credit card companies when they process transactions), then your overall cost may still be higher than if you had picked an account with a higher monthly fee but lower transaction fees.

Don't get caught up in looking at just one rate--look at the total cost of your monthly fees, transaction fees, interchange rates and assessment charges before making any decisions about which type of account is best for your business!

Conclusion

We hope that this article has helped clarify some of the most common merchant account fees. Now that you know more about them, you'll be able to make an informed decision about which type of account is best for your business needs and budget. If you have any questions or comments, please don't hesitate to reach out!