The Complete Guide to Credit Card Merchant Fees

credit card merchant fees

In 2016, there were nearly 180 million credit card holders in the U.S. alone.

With so many credit cards in use, any company that doesn’t accept them as a form of payment is missing out on potential clients.

If you’re thinking about signing up to a credit card merchant service, you may be worried about the fees you’ll have to pay. The truth is that these charges vary from one provider to the next.

So read on as we break down the main credit card merchant fees that apply.

Flat Credit Card Merchant Fees

Flat fees are fees that are paid year on year, regardless of how many transactions you make. They fall into a number of categories.

Annual Fees

Annual fees are charged by some merchants for the use of their services for the year. These are separate from the monthly fees that most merchants charge.

Established merchants won’t usually charge an annual fee. We certainly don’t.

Payment Gateway Fees

If you are an e-commerce business, you will pay a fee for the right to access the payment gateway of your provider. This is basically a fee for using the online card payment service.

Terminal Fees

For businesses with physical locations, terminal fees are the equivalent of payment gateway fees but cover the use of physical terminals for scanning credit cards. You have the option of leasing a terminal or buying one outright.

PCI Fees

Payment Card Industry fees are charged for support with complying with the PCI regulations. Some providers will offer this support in exchange for a flat fee.

There are also additional fees levied if you fail to comply with the PCI regulations. If you don’t meet their standards, you can expect to pay for it.

Monthly Fees

This is the most common flat fee, which is charged for the service provided. It’s typically around $10.

Some providers may offer a lower monthly fee but charge more for transactional fees, so you need to do your sums to find out who is offering the best deal. And remember that the cheapest option isn’t necessarily the best one.

Monthly Minimum Fees

Some providers will charge a fee for not reaching a minimum number of transactions within a set period. This ensures that enough transactions are made to cover the provider’s costs.

Often the fee will be the difference between actual sales and the set monthly minimum.

Statement Fees

Some providers charge a fee for generating written statements rather than electronic versions. Its role is to cover the administration costs involved in providing a written statement.

IRS Report Fees

These are fees charged for providing transaction information directly to the IRS. The payment processor is obliged to provide a 1099-K form to the IRS as well as to any merchants who process more than $20,000 in a year.

Transactional Credit Card Merchant Fees

Transactional fees accrue with each transaction made rather than being a flat fee.

Interchange Fees

These are the fees that the banks and credit card companies charge for each individual transaction.

There is typically a set charge for each transaction plus an additional fee that is a percentage of the value of the transaction. Information on these fees is freely available and can be found online.

Processor Fees

Your processor wants to make money also, so it will charge its own fee on top. This will be by charging a little more for interchange fees, as a flat fee per transaction, or both.

Our prices vary depending on the risk of the business we’re serving but are still competitive.

Brand Fees

The credit card brand, such as Mastercard or Visa, will request a fee per transaction that will often be included as part of your provider’s total fees.

Information on these fees is again freely available but can be quite confusing due to different brands giving the same fees different names. We include these fees in our overall pricing, so you don’t need to worry about them.

One-Off Credit Card Merchant Fees

In addition to the fees listed above, there are some charges that are only incurred under specific circumstances rather than on every transaction.

Chargeback Fees

A chargeback is a request for a retailer to refund a transaction for a purchase if it has been disputed or made fraudulently. If a chargeback is processed, not only will you have to refund the money received, but also pay a fee for the privilege.

AVS Fees

Address Verification Service fees are charged if a transaction is completed online for the processing and verification of the cardholder’s address.

Transactions made on physical terminals won’t incur this fee.

VAF Fees

Voice Authorization Fees are fees for the rare occurrence of having to call a hotline to verify some details before a transaction can be approved. This is not very common, so it’s unlikely to affect your bottom line in any way.

Batch Fees

When a batch of transactions is processed, there is an additional batch fee accrued, but this is usually negligible. A batch is settled at least once a day, otherwise the brand fees can increase.

NSF Fees

A Non-Sufficient Funds fee is charged if you don’t have enough money to cover your merchant account expenses.

Retrieval Request Fees

A retrieval request is the first stage in the chargeback process if a refund is being sought. Once again, a fee is charged for this occurrence.

Choose a Trusted Merchant

As you see, some credit card merchant fees are unavoidable. But when it comes to choosing a merchant, the fees can vary a lot.

We have a range of different plans and pricing options so that you should be able to find one that best suits your needs. If you were worried that the nature of your business could stop you having access to credit card processing services, we’re here to help.

If you’d like to know more or you’re interested in any of our plans, don’t hesitate to get in touch!

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