Demystifying the Fees Associated with Merchant Services

There are many advantages of accepting credits cards: increased convenience for the customer, potential increase in revenue generated through 'add-ons' when customers don't have enough cash on hand for a larger purchase, and also not having to worry about collecting the funds. However, many owners may not fully understand all the fees that are associated with credit card processing. Below, we've listed common fees and charges that business owners should be aware of:

• Standard Fees including:

  • A monthly statement fee
  • The transaction/discount rate: this fee, expressed as a rate, is the percentage of each approved transaction based on the card type (Visa^®/MasterCard^®/Discover^®/American Express^®) and the way in which the card was processed at point of sale ( i.e., swiped, manually keyed, internet, etc.)
  • Authorization fee: a 'per transaction' charge, usually about 25 cents (typically charged by Visa^® and MasterCard^®)
  • Per occurrence fees, which can include things such as address changes and chargeback fees

• Additional fees, which vary by processor:

  • Non Qualified Surcharge: This is a fee charged to the merchant for rewards cards, corporate cards, or transactions that are not swiped. The transaction rate plus the surcharge often add up to a significantly higher rate than the agreed upon discount rate. Many processors do not even identify the surcharge rates on the statements.
  • Assessment Fees: Visa^®/ MasterCard^®/ Discover^® charges a percentage per transaction that is mandatory when accepting these cards, but not included in the promised/advertised rate by the processor. By separately listing this fee, the processor makes your rate appear to be lower than it really is.
  • Monthly Minimum Charge: This charge is common but can usually be negotiated. This is a minimum charge imposed when the merchant doesn't process enough credit card transactions in a month to generate the set monthly minimum of processing fees (usually $25-$35 per month). If the minimum charge is not met, the merchant's monthly statement will be charged the minimum.
  • Equipment Cost: Many processors will offer credit card processing terminal leases at $40 to $50 per month for a 48-month lease as a 'low cost option'. Processors advertise this as low cost because there is no upfront charge. Keep in mind, that typically you do not own the terminal at the end of the lease. The better option may be to purchase a new terminal at approximately $299¹.

For a free analysis of your current merchant services statement or to discuss whether a merchant account may make sense for your business, please contact Patrick McDermott at 908.860.3835 or Dawn Desmelyk at 908.860.3838 at Affinity Business Solutions.

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1 This cost for both leased and purchased terminals is representative of most standard dial-up terminals.
Article content provided compliments of Andy Corvalan, BancCard (www.banccard.com). Through Affinity's partnership with BancCard USA, merchant services are available to Affinity business members at competitive rates. Merchant services are provided by BancCard, and are not supervised nor monitored by Affinity Federal Credit Union.