Fees, Fees, Fees (Part 5 of 6)
There are a number of perfectly acceptable and predictable fees in this industry including setup fees, statement fees (also known as: account fees, customer service fees, admin fees), transaction fees, early termination fees, etc.
These fees reflect the overhead absorbed by each of the processors. The problem for most merchants is to understand which of these fees are acceptable and if so, if the rate is competitive.
Below you’ll find some example fees you might encounter. Please note that many of these fees are dependent on very specific account requirements, so don’t expect to see each of these apply to your account.
Please note that this information is more of a reflection of what you’ll see while shopping for a Merchant Account and doesn’t necessarily represent 1st Nationals fee structure.
These are the basic monthly fees you can expect just to administer your account and in concept is very similar to what a bank may charge you for your checking account. In this case it’s often referred to as a “statement fee” which ranges in price between around $8 to about $15.
And similar to bank fees, these statement fees can be lowered or waived depending on the volume of processing. Very similar to how a bank might provide free checking depending on your average balance.
Anyone with a traditional merchant account can expect transaction fees. These are fees that are applied to each charge in addition to those applied by the rate tier. For example, you may process a payment for $100 at which point there is a percentage fee, let’s say 2.1% in addition to a 5 cent transaction fee.
What if a merchant account provider has given you a low percentage rate but a higher transaction fee? This might work well for many merchants, but what if you were selling candy at .25 cents each? In this case, you could be paying over 20% in processing fees.
Granted what we mentioned above is an exaggerated example, but the point is that a good agent will know how to balance the realities of your business with a balanced solution that will provide you with the best possible value. Higher transaction fees aren’t necessarily bad, so long as the complete rate structure provides the best overall value.
PCI Fees can often be avoided. PCI is a hardware and software security standard that helps reduce fraudulent activity by encrypting (jumbling) the transaction. All credit card machines use this standard. But often, the financial institution that underwrites your account will want to make sure that your equipment is PCI compliant. If not, their risk is higher.
Normally what happens is that the Merchant will simply need to answer questions some questions once a year or so about their business and how they charge. In return the Merchant receives a compliance certificate that waives the PCI charges.
Online Processing Fees
These fees are attributed to those merchants who use a payment gateway for an online shopping cart or virtual terminal for web based processing. Some payment gateways can cost about $15 per month in addition to a transaction fee. 1st National can provide these services without extra cost, but know that these fees aren’t unusual.
Don’t confuse these fees with smartphone solutions. Wireless fees apply to units that are dedicated wireless credit card machines. These devices connect to networks very similar to cellular networks and have a similar fee structure. An additional transaction (per charge) fee may also apply.
Monthly Minimum (often hidden)
Monthly Minimum fees reflect the minimum processing fees expected for any given month. For example, if the monthly minimum is $25 then that will mean that your processor expects your business will be paying at least that amount each month. But if your total processing fees were only $17, then your processor would be billing you the addition $8 to cover the monthly minimum.
This might be buried in your Merchant Account contract, so be sure to ask in addition to a thorough review of your contract.
Early Termination Fees
This is often a category of abuse, so please be careful. There’s nothing uncommon about a Merchant Account Provider charging a fee if the Merchant terminates the contract early. That’s not actually the problem so long as you know what the termination fee is in advance.
The problem is this: Some processors will advertise that there will be no early termination fees, but they still find a way around it. For example, some will not levy a termination fee, but what they will do is to charge you both the statement fee and/or the monthly minimum fee for the duration of the contract period.