How Much Should Your Merchant Account Cost?
By: Jeff Jackson
Business is an area which undergoes constant changes and developments rather
quickly. Within the wink of your eye, you may notice that a new trend has sprung
up and a certain competitor has come up with a unique formula for success.
Hence, it is advisable that you are alert and keep your knowledge and business
strategies up to date.
You must be cautious to avoid any avoidable and unnecessary expenses, which
may crop up in any form. For example, a decision like choosing a merchant
account might look simple, but it is not so. Like any other decision, choosing a
merchant account is of great significance because there are tricky providers
waiting to trap you by offering attractive rates and fees. Also, there are
clearinghouse agents who survive on commissions given for every customer they
add. Don稚 rely on them as they might not give importance to your needs and on
the other hand concentrate on their motive of making money.
Nevertheless, a merchant account is indispensable for any business person
because it eases the burden of carrying huge amounts of cash and checks to
banks. There are other added benefits to merchant accounts. The point of focus
for us is the ways of choosing a good merchant account. Proceeding further, let
us examine the hassles that you might face while choosing a merchant account.
The most prominent among them will be the hesitation on the part of banks and
providers to help you especially if your business is Internet-based or
home-based business. These would argue that these businesses are more prone to
credit card scams or non-payment by customers as there is no face-to-face
meeting between the seller and the buyer. There are few providers who are ready
to help you if you have a business that deals with mail order transactions.
Instead of getting discouraged by the non-responsive attitude of providers
and/or banks, it is better to think ahead and search thoroughly for good
providers who would help you. Even after finding one such provider or bank, you
need to check the rates and fees prescribed by the company. Some typical fees
and costs that you look for while choosing a merchant account are as follows:
- Setup costs葉his is the fees charged to setup the terminal or PC software
and the related equipments. It speaks well about the provider if he does not
charge a whopping amount like $99 for setting up a merchant account and offers
free setup facilities.
- Up front application costs裕his is the fee charged by the credit card
company for merely processing your application for opening a merchant account.
This seems to be rather an unnecessary cost and it is better to avoid such
companies.
- On going fixed costs葉he provider charges you this fee for preparing and
mailing an updated monthly statement with details of all your transactions. This
cost should not be charged by the provider and try to find one who does not
charge this cost. If you are unable to find one, at least remember that a cost
more than $10 is just too much.
- Discount rate costs様ike the other costs aimed by providers to earn money,
this cost refers to a certain percentage of the total earnings that you get from
each transaction. Usually, this is 2 to 4% of every transaction.
- Fixed transaction costs葉his cost is rather a fixed one and charged by the
provider on a flat basis, irrespective of your income and size of each sale.
This is usually fixed between $0.20 and 0.30% of each transaction.
Monthly fees葉his is charged by the provider irrespective of whether you have
carried business or not in a particular month. This is most disadvantageous
especially if your business is seasonal and there is a certain off-season period
when the sales will be nil or negligible.
Apart from the above mentioned fees or costs, do check out for any hidden
costs like termination cost that is charged if you terminate your merchant
account within the agreed period; miscellaneous costs are charged unto your
account if a customer chooses to get refund and thereby cancel the transaction.
To get the best deal while choosing a merchant account, compare and do
research about the rates and the various companies in the credit card industry.
Evaluate all components of costs of the merchant account and finalize a merchant
account characterized by affordability and reasonableness.

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