Does a Merchant Account Cost Money?

Yes. 

Don’t worry, we’ll have a lot more insight for you here but yes, merchant accounts (and every other type of account or service you need for your business) cost money. That’s just the way of the world. But what you’re paying for is the important part. Without appropriate and up-to-date merchant services, you won’t be able to collect payments. Moreover, your customers won’t trust your business with their money and information. In short, what you’re paying is crucial.

So we know it costs money - what kind of money are we talking about? In this article, we’ll take a look at the kind of costs you can expect with your merchant services accounts and a few of the “red flags” you should look for when selecting a provider.

Looking to save on your right merchant account?Book a free consultation with Swipesum today, and let us help find the most cost-effective solution for your business!

Common fees

Merchant services fees are a cost of doing business. Providers have a whole number of different fee structures from flat fees to per transaction, to add-ons. Let’s take a look at some of the more common fees you’ll find. 

Setup Fee

Some merchant account providers may charge an initial setup fee to establish the account. This fee covers the administrative tasks and account activation processes; it basically covers all the back end staff that have to work on creating the payment network and other systems for your account. You can often work your way out of this fee if you agree to different terms.

Transaction Fees

Merchants are usually charged a fee for each transaction processed through the merchant account. This fee is typically a percentage of the transaction amount, known as the discount rate, along with a flat per-transaction fee. The specific rates can vary depending on factors such as the type of card (credit or debit), the payment method used (online, in-person, mobile), and the merchant's industry.

Monthly Statement Fee
A monthly statement fee covers the cost of generating and delivering statements that outline the transaction details and fees incurred during a specific period. This fee is typically charged on a monthly basis.

Monthly Minimum Fee
Some merchant account providers set a minimum monthly processing volume. If a merchant's transaction fees do not meet the specified minimum, the provider may charge a monthly minimum fee to make up the difference.

Chargeback Fees

In cases where a customer disputes a transaction and initiates a chargeback, the merchant account provider may charge a fee for handling the chargeback process. This fee covers the administrative and dispute resolution efforts involved.

Termination Fee

Some merchant account agreements may include a termination fee if the merchant cancels the account before a specified period. This fee is intended to cover the costs associated with account closure and early termination.

International Transaction Fee

If you’re doing business across borders, your merchant account provider may charge you a fee for converting currencies and managing the process. These fees can include currency conversion charges, international transaction fees, or cross-border fees.

Payment Gateway Fees

If you plan to accept online payments, you will likely need a payment gateway to securely process transactions. Some merchant account providers will bundle this as part of the transaction fee, while others may charge an additional fee for gateway access or usage.

It’s crucial that you understand the fees you’re being charged by your merchant account provider. Failing to understand what you’re paying and exactly what it goes toward will end you up in very hot water because there are lots of red flag fees out there.

The Red Flags

Yes, just like any other business, there are reputable merchant account providers and those that are less than honest. You can usually tell these unsavory companies by the fees that they charge. There are a few fees that you should look out for.

Oddly High Discount Rates

Everything costs something and there is generally an industry standard price. If your provider ends up offering you a rate that is far below the competitors, you should be asking yourself why. Make sure you understand what the true rate is once that discount rate goes away.

High Chargeback Fees

Chargebacks happen and while you will have to pay a fee regardless, there is a standard amount you’ll find most merchant service providers charge. If yours is charging a good deal more, it’s a huge red flag.

Mandatory Leasing

Some providers will require that you lease their equipment from them; this can be a reputable practice. However, be cautious about how much they’re charging you for that equipment. It should be reasonable and come along with guarantees and the opportunity to upgrade.

Long Contract Lengths

All merchant service providers offer their services under contract. However, you shouldn’t lock yourself into an especially long contract and should be cautious of any provider that requires you to do so. This keeps you from shopping around and can be especially troublesome if the merchant services provider charges a large fee for early termination.

Review & Research

Some fees you should expect to pay without a doubt. After all, everything costs something and merchant services are no different. The providers themselves have to pay the various card networks, banks and other financial institutions for the process anyway. You should, however, have a rock solid understanding of the fees that you should expect to pay and those that seem a little fishy. Carefully reviewing the fine print as well as reading reviews of the various companies and their offerings can help you narrow down your search or better understand your current provider.

You should also be aware of any fee increases that come down the pike. Your provider should be communicating with you consistently about fluctuations in the cost of doing business. Maintaining transparency is crucial; it will allow you to better plan your business and what you should expect to be paying.

We can help

‍Swipesum can help you with all of these fees and more. From selecting a merchant service provider to working with your current provider, Swipesum can help you lower your fees, keeping more of your profit in your pocket.