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Hidden Credit Card Processing Fees

Get smart about the fees that credit card processing companies can stick to you.
Latest posts by Andy Lax (see all)

In today’s waning economy, it is more important than ever for a small business to acquire the best deal possible on a merchant account, which enables you to accept credit card payments for goods or services.

With all the pressures in this economy, the hucksters of such services are getting more aggressive than ever. It is your job to see through the smoke screen and marketing techniques employed by various merchant account providers (MAP) to get down to the bottom line. This is critical to attaining the best deal on your merchant account.

Are You Being Told the Whole Story?

It is a common practice among some merchant account providers to not fully disclose all fees that will apply to your account. What you see is not always what you get! To possibly save a boatload of money down the road, it is paramount to become aware of hidden fees that may be buried in your contract before selecting a merchant account provider. As the wise saying goes, “knowledge is power”.

A few hidden fees to be on the lookout for include:

Additional Transaction Fees – In most cases, you will be charged a fee to process each transaction – regardless if it is accepted or not. A common transaction fee is 15-20 cents when a card is swiped or 25-30 cents if the card numbers are keyed in. However, what you need to be aware of are transaction fees that are not brought to your attention such as PIN debit transaction fees that are charged when debit cards are used for example.

Payment Gateway Fees – This fee applies if you will be using an Internet payment gateway instead of software or a terminal. This is usually a fixed fee of approximately $15-30 per month and billed directly from the gateway provider; however, it may be billed through your merchant account. In addition to the transaction fees stated above, some gateway providers charge transaction fees as well.

Software Fees – This is often billed for payment gateways.   

Monthly Minimum Fees – This is not an extra fee, but a fee that is charged if you do not meet the monthly minimum amount stipulated in your contract. For example, if your monthly minimum is $25 and you only accrued $20 in fees for a given month, you are required to make up the difference of $5.

Annual Fees – This is an annual charge for running your account throughout the year.

Setup Fees – This fee helps the merchant account provider defray its cost in underwriting applications and opening an account.  This used to be a common fee, but many merchant account providers no longer charge for this service.  Some providers claim to have no setup fees but then charge for the gateway, using semantics to their advantage.

Chargeback/Retrieval Fees – This fee would apply if there were a dispute regarding a processed transaction, initiated by a customer who contacts their card-issuing bank. A chargeback usually runs around $25 and is only applicable if a dispute occurs. What you need to be weary of are additional chargeback/retrieval fees not brought to your attention before enlisting the services of a MAP.

Cancellation/Termination Fees – This fee applies if you were to terminate your contract. This fee is fairly common, however, you need to be leery of variable instead of fixed termination fees as this could potentially cost you the proverbial arm or leg.  Many providers waive this fee.  

Statement Fees – Most merchant account providers charge to generate a paper monthly statement. This fee generally runs anywhere from $10 to $15 per month.

Mid-qualified and Non-qualified Fees – Although it is counterintuitive to most merchants, their rates will be dependent on the type of credit card their customer uses in a transaction.  Rewards cards, for example, typically downgrade to mid or non-qualified rates that can be much higher that the quoted qualified rate.  (Do you think Visa and MasterCard are the ones who truly pay for these rewards?)  Consequently, if you are quoted only one rate, ask for the other tiers … or perhaps simply avoid such a merchant account provider who does not believe in a policy of outlining ALL fees.

These are just a few of the fees that may apply to your merchant account. None of these fees are necessarily underhanded or without merit. However, the problem lies in not receiving full disclosure before signing a contract. There should be no surprises when you open your first billing statement from your merchant account provider.

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