Learning about Merchant Account Fees

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If you are starting a business and wish to accept debit or credit cards, you need to have a merchant account. It is therefore imperative that you select the best service provider for your business bank account and fully understand the fees associated with it. Merchant accounts are associated with base and markup fees. Base fees refer to the non-negotiable fees that are determined by the service provider while markup fees cover the cost of doing business. Seeing as this is how credit processors make their profit, you need to pay attention to the markup fees whenever you carry out any business transactions.

Both fees are determined by the interchange plus or the tiered pricing models. The interchange plus model is the simplest as it lists all the fees incurred in your monthly statement in a way that is easy to understand.

The tiered pricing model on the other hand categorizes all transactions into qualified, mid-qualified and non-qualified transactions where qualified transactions cost the least while non-qualified transactions cost the most.

Now that you understand the basics of a merchant account, here are seven of the most common fees associated with it:

Application fees

Also known as the setup fee, it refers to what the service provider will charge you for setting up your account. This is a one-off fee that you will not have to worry about in future.

Annual fees

As the name suggests, you will have to pay this fee for every year that you use the account. However, there are some providers that do not require an annual fee.

Monthly fees

Merchant accounts provide a wide variety of services to the businesses associated with it, including customer service call centers. The monthly fees are paid so as to cater for those services.

Monthly minimum fees

Every account holder has a minimum transaction total per month. The monthly minimum fees is charged if your business does not meet this minimum total for the month for one reason or the other.

Terminal fees

If you own a brick-and-mortar business, you may be subject to terminal fees. Terminal fees are charged whenever a customer swipes their card. For this reason, buying a terminal is cheaper than leasing one.

Batch fees

Batch fees are charged after sending your completed transactions for the day to the service provider for payment. It is worth noting that this fee will not be incurred if no transactions were made in that day.

Statement fees

Last but not least, statement fees are charged to cater for the paper statements and correspondence. You can easily avoid this fee by switching to an online billing system as well as an electronic correspondence.

Merchant accounts are essential for both online and physical businesses because of their ability to accept debit or credit cards. The first step to choosing the best service provider is understanding all the fees that may be incurred. Please note that choosing a provider with the lowest processing rates may not necessarily be the best option for your business. All in all, you have to understand what your business needs before opening any business bank account.

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