Merchant Account Cost

When your business is ready to accept credit cards, you will need to contact a payment processor and set up a merchant account of some kind. If you have been doing some research about merchant accounts or spoken to other business owners, you may have heard about the fees you are expected to pay and the true merchant account cost. This can be overwhelming and confusing, but luckily the information below should help you understand the various fees associated with a merchant account.

One of the merchant account cost aspects is called the discount rate. This will be the majority of your costs associated with the merchant account. The discount rate is a percentage of each transaction, on average anywhere from 2 – 3%, but it depends on your payment processors system. What this means is that anytime a customer uses their credit card to make a purchase, you will have to pay your payment processor 2-3% of that sale amount. If your customer makes a purchase for $100, you will be charged $3.00 if your discount rate is 3%.

Another merchant account cost you need to be aware of is called the transaction fee. The transaction fee is also a payment you will make with each transaction. Usually the transaction fee is about $0.25 on average but this can differ. If we look back at the customer example above where they spent $100, you will now owe $3.25 to your payment processor.

Those fees are usually the most common, but there are certainly other merchant account costs you should be aware of. In addition to the mandatory discount rate and transaction fee, there are other various fees that are charged at the discretion of the payment processor. For instance, many of them charge a batch fee. This batch fee is applied to your account when you send your credit card sales to your payment processor in order to get payment. Sending the credit card transaction information your company has done in a set amount of time is called sending the batch. This can be done daily, weekly or monthly depending on your sales volume. Usually it is cheap, about $0.50, but this can add up to and extra $15 a month if you do it daily.

A merchant account cost that you may not expect is a monthly statement fee. This fee is applied to your account when you are sent a monthly statement. Ranging from $10 - $15 per month, sometimes this cost can be negotiated away if you are a savvy businessperson.

The final merchant account cost you may encounter is the equipment cost. Often people do not take this into account when thinking of the monthly fees, especially if you are interested in leasing equipment instead of buying it. Though it can be a large cost up front for equipment, usually about $500 minimum, it may very well be worth it to lay the money out for it. You can have the option to rent or lease the equipment, but if you will be using it long term, eventually you will just be throwing your money away.