Being able to accept credit cards is an essential component of doing business. When shopping for a credit card processing company it is very important to understand the charges so you can get the best value for your money and so you do not get taken in by merchant account providers with bogus fees. Here is a comprehensive list of credit card fees and their costs.

Discount Rates

The discount rate is a component of transactional fees however, since it is one of the largest fees I decided to mention it first.  The discount rate is charged to the merchant and is based on a percentage of the product or service cost i.e. if someone buys something from you for $100 and the discount rate is 2.5% then $2.50 will be subtracted from the total.

The following fees can be tacked on to the discount rate. Mid or Partially Qualified Fee, Non Qualified Fee, Surcharge Fees. These fees are incurred if the credit card is keyed in and not swiped, or in the case of someone using a corporate card or a card with a reward plan. These charges can add significantly to your discount rate so it is important to find out how much they are.

The discount rate should be around 2%, it is higher if the business is conducted online due to the additional fees mentioned in the previous paragraph.

Monthly Costs

There are 2 types of monthly fees, monthly statement fees and monthly minimum fees. A monthly statement fee is a fixed fee that is charged for customer service and support. It is typically around $10 a month. A monthly minimum fee is charged based on the amount of business done per month. If the monthly minimum is not met, the monthly minimum is charged. It ranges between $15-30 a month.

Annual Fees

In addition to monthly fees you might have to incur an annual fee. Although some merchant account providers do not charge this fee you might have to pay it if you received free credit card terminal equipment.

Startup and Termination Costs

These are fees associated with starting or terminating a merchant account. A setup fee is charged to setup the account (it is also known as an application fee). Some merchant accounts wave this fee. When setting up a account you are normally required to sign up for a one or two year contract, it is therefore important to find out what the cancelation fee is if you decided to terminated your contract early.

Transaction Based Fees

These are fees charged per transaction. They consist of address verification fee, transaction fee, and chargeback/retrieval fees.

An address verification fee is charged when a card is not swiped. It prevents fraud by validating the credit card holders billing address info. This charge is normally between 5-10 cents. Transaction fees are charged by the merchant account provider and are typically 20-30 cents per transaction. It is sometimes known as interchange fee, authorization fee or per inquiry fee.

A charge back fee is charged if the customer disputes the charge because they doesn’t recognize the charge , or feel the product was not as described correctly or due to fraudulent use. This fee is normally around $25 per charge back.

Other Fees

Daily Batch Fees or ACH Fee is charged to pay for the expense of settling your transactions into your bank account if you do not have any transactions on a given day you are not charged. This fee ranges between 5 -50 cents.

Gateway Fees are charged for internet merchant accounts. This fee is assessed by the gateway service provider which might be different from your merchant account provider. This fee can be as high as $35.

Voice Authorization Fees are charged when calling in your transaction. The average cost is between 75 cents to $1.50.

Reprogramming Fee is charged if existing software or hardware requires reprogramming.

Bogus Fees

Some unscrupulous merchant account providers might try to charge you junk fees. Watch out for teaser discount rates that sky rocket after a couple of months or low discount rates that only apply to certain cards. Also watch out for fees called file fee, audit fee, conversion fee, over the limit fee, excessive transaction fees.

This information should equip you to make good decisions and get the best deal when shopping for credit card processing for your small business.