Merchant Account Explained
A merchant account is a type of bank account that allows businesses to accept payments credit cards or debit cards. In order to process credit cards, a business must open a merchant account. The cost for having a merchant account includes monthly fees, and processing fees per transaction. However, being able to accept credit cards and debit cards will increase sales for your business overall.
In order to use your merchant account, you will need some sort of terminal. Our merchant account service includes a Virtual Terminal that you can access from any computer with Internet access. The Virtual Terminal allows you to process credit cards by entering the card number, amount, name on card, etc. through your web browser At the end of the day, the Virtual Terminal will send (aka Settle) all of your approved transactions to your Merchant Account. Your Merchant Account will then capture the funds from each card that was approved and then automatically deposit those funds into your checking account.
When a card is processed and approved via your Virtual Terminal, Cell Phone, or Website, it is sent to your merchant account. Your merchant account will then automatically deposit all of your approved credit card and debit card transactions directly into to your business checking account. On average, this process takes 2 business days.
At the end of each month, your merchant bank will calculate your processing fees (fees per transaction), and your flat monthly fees. The total processing charge for the month will be automatically deducted from your business checking account at the begining of the following month. A monthly processing statement is always mailed to your mailing address so that you can see exactly what you were charged for.
Since merchant account types and business types vary, we do not quote pricing directly on our website. We prefer to first speak with you direclty so that we can determine the best pricing option for your business. However, these are the ONLY fees that will ever be included when you open account with us. We do not have any 'hidden fees'. The following fees are typical of all merchant accounts.
- Discount Rate: This is the 'percentage per transaction' that is billed for every 'approved' Visa/MasterCard/Discover transaction. For example, 1.79% per approved or authorized transaction.
- Transaction Fee: This is the flat fee that is billed for every Visa/MasterCard/Discover transaction. This fee is billed regardless of whether the card was approved, declined or authorized. This is a flat fee, it does not vary. For example, 25 cents per transaction.
- Account Maintenance/Statement Fee: This is a flat fee that is included on practically all merchant accounts. It is fee that is billed to cover the operating costs for maintaining the account every month, sending the monthly processing statement, providing customer support, etc.
- Batch Capture Fee: A batch fee is a flat fee. For example 20 cents per batch. This fee is billed every time that a batch is settled. A batch consists of one or more transactions, and the batch 'settles' every day. Therefore, if you process one or more transactions in a given day, the system will 'settle' the batch that evening, and the 'batch' fee will be billed. If you do not process any transactions on a given day, then there is no batch to settle, and there will not be a batch fee for that day.
- Address Verification System Fee: This is a flat fee (ex. 5 cents per transaction) that is billed every time AVS is used while processing a transaction. For example, if your website is processing transactions, and you are checking for a 'Matching Zip Code', then an additional 5 cents will be charged for that transaction. AVS is highly recommended for transactions that are keyed in (not swiped).
- Chargeback Fee: This is a flat fee that is billed only when one your customers disputes a purchase through his/her credit card company. Merchants can contest the chargeback by submitting proof of the transaction with signed receipts, or signed invoices. On average, the chargeback fee is $25 per incident.
- American Express Authorization Fee: This is a flat fee that is charged whenever an American Express credit card is processed. This is seperate from the charges that American Express charges per transaction. In other words, the merchant account bills per transaction (ex. 15 cents) and American Express also charges a 'percentage fee' and 'flat fee'.
- Monthly Minimum: Some merchant accounts include a minimum fee that will be charged for monthly processing. For instance, if a merchant account is setup with a $20 minimum, and the total processing fees for a given month added up to $15, then the merchant bank will charge an additional $5 to reach the $20 Monthly Minimum. Otherwise, if the business processed enough transactions to cover the monthly minimum, then no additional charges will be applied. For example, if a merchant is billed 2% per transaction, and the merchant processed $1,000, then the total processing fees will be $20 (not included other fees mentioned above), and therefore, the merchant bank will only charge the $20 in processing fees.
- Checking Account or Name Change Fee: This fee is billed for requests to update the checking account or business name information. This fee varies, but averages around $25 per request.