Merchant processing can be very confusing and at times misleading. At
Merchant 1 Payments we are dedicated to providing merchants with the best
possible solutions for their processing at the lowest possible rates and fees.
Below are the most common fees associated with merchant accounts.
Discount Rate: This is the percentage you pay on each
transaction you process with your merchant account. The higher rates charged
for internet and online processing are due to the merchant not having a
physical credit card present at point of sale, so the risk of fraud is
greater. Also, if your business type is seen as high risk, or it is operated
from outside the U.S., you can expect to pay significantly more. There are
three types of discount rates: Qualified, Mid Qualified and Non Qualified.
Qualified Discount Rate:
This is the lowest rate. It
applies for retail transactions where the merchant has the credit card
present, 'swipes' it and 'batches out' daily. Various conditions apply in
order to qualify for this low rate and if not met, the Mid Qualified or Non
Qualified Rate will be added on to the Qualified Rate.
Mid-Qualified Discount Rate: An additional charge on top
of the standard Qualified Rate where (i) a retailer manually inputs (keys-in)
a transaction (i.e. the card is present but not swiped); or (ii) for internet
and phone/mail order transactions, there is no AVS match. This can also apply,
in some instances, to rewards cards.
Non-Qualified Discount Rate: An additional charge added to
the standard Qualified Rate where (i) a retailer fails to batch out daily; or
(ii) for internet and phone/mail order transactions, transactions are keyed in
but are not batched out daily (Note: where the customer keys in the
information on a website, most gateways perform the batching automatically).
In addition, all transactions using international, corporate, or business
credit cards will be subject to this surcharge.
Transaction Fee: This is a fixed charge for each
transaction processed through your merchant account.
Batch Processing: Submitting a group or batch of
transactions each day to the processor.
Address Verification Service (AVS) Fee: AVS service checks
that the customer's stated billing address matches the address provided to his
credit card company.
Monthly Minimum: This represents the least amount that
will be levied against you for discount rate fees in any month, even when you
have no sales processed. You will be charged this fee only when the sum of all
the discount fees you have paid for the particular month do not reach your
minimum monthly specification, so once that monthly minimum has been reached,
you will not be charged a minimum fee.
Statement Fee: A charge levied each month for maintenance
of your merchant account, preparing your statement, etc.
Charge back: Charge backs result when one of your
customers disputes your charge on his monthly credit card statement. The
customer's card issuer then starts a charge back procedure - and your merchant
account then has deducted from it the amount in dispute. Then, you will have a
short period to dispute the issue, by giving the customer's bank with proof
that the customer did in fact make the purchase and that he received what he
bargained for. Large numbers of charge backs may cause the loss of a merchant
Gateway Fee: With internet merchant accounts, the
'gateway' integrates the purchase form or shopping cart on your website to
your processing service.
Re-Programming Fee: When a retailer switches merchant
account providers and some alterations to his processing system are needed, a
re-programming fee may be charged.
Reserve: If a merchant's business is perceived as high
risk, a holdback or reserve may be set up to secure the bank regarding the
higher risk. The reserve may be either a lump sum payment made upfront, or a
percentage of monthly sales processed, or both. The reserve may be reduced or
eliminated if you operate without many chargebacks for a period of time.
Some merchant accounts call for payment
of a termination fee if your account is cancelled.
A fee charged for completing an
application for a merchant account.
Annual fee: A fee charged annually for the maintenance of
you merchant account.
Retail merchants, terminal and printing equipment needs to be bought or