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Credit Card Processing Fees – Get Informed Before Looking For A Vendor

Credit card processing companies have earned notoriety for charging fees under many pretexts and trying to dupe the customers. This is also true for merchant account processing. But it is important to recognize that charges and fees are a source of revenue for them. And being knowledgeable about various fees can help you appreciate and understand better the fee structure and find the best credit card processing service for your business.

Listed below are the various types of fees that are normally charged by card processors:

Application Fee: This fee is charged upfront at the time of applying for the merchant account service but is usually not charged by reputable companies. Try avoiding this fee as far as possible.

Startup Fee: You pay this fees to get set up for credit card processing. It is normally around $25.

Statement Fee: This is charged for providing detailed account statements at the end of each billing cycle. These list out useful info like transaction details – dollar amounts, time and date, etc. This is a monthly fees in the range of seven to ten dollars.

Minimum Monthly Fee: This fee is a safeguard against accounts that may process very low number of transactions and may not be viable to service since they would not generate enough revenue for the card processor. This is also known as ‘monthly minimum not met’ charge.

Discount Rate: This is the primary fees charged for accepting credit cards and is a percentage of each transaction processed. It normally lies in the range of 1.5-2 percent of each transaction. It could be higher for high risk businesses.

Chargeback Fee: You are liable to pay this fees only if you see a large number of chargebacks. Typically, a certain number of chargebacks are permitted in a billing cycle before this fee is levied.

Gateway Fee: This is charged to facilitate internet transactions. To enable transactions over the internet, a credit card processing firm would need basic web infrastructure in place including a shopping cart function and/or a portal that enables customers to submit and monitor payments. This fee is usually around $10 per month.

Termination Fee: This fee is imposed if you terminate the contract before expiration. Normal contract periods are between one to three years. The fee varies from one hundred to three hundred dollars. But not all providers impose this fee.

As a general rule of thumb, credit card processing should cost around 2% of total receipts. This number is reasonable enough for the businesses to accept credit and debit cards as well as substantial enough for the payment processing vendors to profitably run their business. Any vendor with fees lower than this may sound enticing, but should be considered with caution as it is usually not worthwhile for the service providers to charge any lower than that. Be on the lookout for hidden fees and charges if the offer looks too good to be true. Go over the contract carefully including the footnotes and fine print.

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