![]() ![]() These additional fees can increase your cost-per-transaction to well over 3%, so make sure to factor them into the overall cost of a vendor when shopping for merchant accounts. Your merchant account might also charge a monthly fee (sometimes referred to as a statement fee) for the preparation of your monthly statement, a gateway fee for remote or online transactions, a monthly minimum fee for accounts that fall below a monthly minimum, an annual fee for maintaining the account and a customer service fee for merchant support. It is a one-time fee typically required to set up the new merchant account. Make sure to read the contract carefully to assess what fees your business will likely accrue.Ī setup fee will be the first fee you are likely to encounter. The fees associated with a merchant account vary by provider. While it will make your monthly statements easy to comprehend, the transaction fee will likely be higher than you were expecting as the provider will advertise the lowest possible rate and most transactions will not actually qualify. Unfortunately, this model is the most common pricing model available. Not surprisingly, qualified transactions receive the best rates while non-qualified transactions receive the least advantageous rates. This model breaks down transactions into three categories: qualified, mid-qualified and non-qualified transactions. This model is considered the fairest pricing structure because of its transparency, but it will make your statements difficult to read. For example, a typical interchange-plus pricing structure looks like 2.2% plus $0.22 per transaction. ![]() The second rate is the markup set by the credit card processor itself as the profit. ![]() This model consists of two components: an “interchange” and a “plus.” The interchange is a processing rate set by the credit card company. If your business has low sales volume or small-ticket items, this might be the most beneficial pricing structure for you. For every credit card or debit card transaction, you are charged a fixed percentage of that transaction. This is the simplest and most commonly used pricing model by mobile credit card processors. Typically vendors will use one of three models: flat-rate pricing, interchange pricing or tiered pricing. Pricing structure is the biggest factor you want to look out for when shopping for a vendor. If a business is deemed high risk, the vendor might initially set higher transaction fees to offset that risk. Merchant vendors might also analyze if your business is susceptible to credit card fraud. During the approval process, merchant banks consider a variety of criteria such as length of time the business has been established, history of bankruptcy, past credit issues and any previous merchant accounts. In order to open a merchant account, businesses must apply and be approved for an account with a merchant acquiring bank. Once funds are confirmed, your merchant account provider will front your business the funds for that transaction. Your merchant account provider will then confirm sufficient funds with the customer’s card issuer. When a customer swipes their credit card or debit card to pay for a transaction, the card processor sends those transaction details to your merchant account. It allows businesses to receive the money for transactions immediately instead of waiting for the customer to pay their credit card bills. The merchant account acts as the middleman between the swiping of the card and the deposit of the money into a business account. What Is a Merchant Account?Ī merchant account is a type of business bank account that allows businesses to process electronic payments such as debit and credit cards. ![]() They must first create a merchant account that acts as an intermediary between a customer’s bank account and your business’s bank account. While accepting card payments is essential for business, unfortunately, businesses cannot start accepting these payments on their own. ![]()
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