Getting information on what you’ll be charged to process credit cards will help you manage the expenses associated with this important part of your business. Most merchants don’t give too much thought to this after they’ve setup their accounts. Business owners that are overpaying can very easily reduce their fees and those just getting setup for the first time can use the information in this article to make sure they’re not overpaying.

The discount rate is probably the one component of the merchant account pricing that represents the largest percentage of the fees you’ll pay as a merchant. A competitive discount rate for qualified retail transactions is about 1.29% for check or debit cards and about 1.69% for regular credit cards. Internet discount rates are typically considered competitive at 2.15% to 2.25%.

Your discount rate will depend on which type of merchant you are. If you’re a supermarket, for instance, you’ll pay significantly less than a website dedicated to travel reservations. You’ll also have a lower discount rate if you process mostly check cards vs. corporate cards, for instance.

Another fee charged is the per transaction fee which is typically about $.20 per transaction. These can get as low as $.15 to $.16 per transaction but it wouldn’t be worth negotiating that low unless you have an incredibly low average ticket item. If you have a $10 average transaction, a $.25 per transaction would be a 2.5% effective rate. If you add a 1.5% discount rate, you’d end up with an effective rate of 4%.

If your per transaction fee is closer to $.18 per transaction, your effective rate is reduced by 1.7% which is significant. So, you should know what your average ticket item is going to be or at least a good estimate in order to most effectively determine whether your power of negotiation would best be used to get your discount rate as low as possible or your per transaction fee. Try to get your overall rate or “effective rate” as low as you possibly can.

You will typically have a monthly fee associated with any merchant account. This is sometimes referred to as a customer service fee, statement fee, or monthly account maintenance fee. You shouldn’t be paying too much for this fee. It shouldn’t be more than about $10 per month.

There is also a monthly minimum that is usually charged on merchant accounts as well. This is a $25 minimum fee based on the discount rate. Any given month, the $25 worth of discount fees is charged. So, if you process $1000 per month at 1.7%, you’ll be assessed $17 worth of discount fees. If your minimum is $25, you’d pay the extra $8 worth of fees to equal the $25.

These are the main fees associated with any merchant account. Of course, there are more fees that will apply to certain types of accounts, such as an internet-based account or a wireless account which may have additional fees. There are also some per instance fees such as insufficient funds fee, chargeback, retrieval fees, AVS fees, batch header fees, and other misc. fees. Your sales representative should know and be able to explain any and all of these fees.

Be sure to work with a merchant service provider and a sales representative that you can trust. The industry is a lucrative one and attracts both the honest and dishonest sales reps. Having said that, make sure you review the “fine print” and pricing pages for the application before you commit to work with a merchant services provider.

Brian’s expertise is in internet merchant accounts and he offers free merchant accounts price quotes to both existing and new merchants looking to save money on their merchant accounts.

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