What You Need to Know About Merchant Account Fees

Feb 09, 2017

Many payment services providers have done an excellent job in ensuring their application processes are as easy and as straightforward as possible, but there is still a lot to be done regarding merchant account rates. Consequently, these companies have earned a reputation of having extensive, complicated and overwhelming fees.

Unfortunately, a good number of merchants end up signing up for an account having not fully understood the charges, and they end up paying blindly. This ultimately becomes a problem when they realize some costs are unfair to them, and it is too late to dispute.

It is, therefore, good merchant practice to be knowledgeable about your card processing fees, before you open an account. Below are some of the essentials:

Types of fees

A merchant incurs the following charges in any given card transaction.

  1. Transaction fees

These constitute the biggest cost of running a merchant account. They are charged to process every transaction, whether it is approved or declined by the customer’s card-issuing bank.

  1. Fixed fees

On top of transaction fees, credit card processors charge some flat fees for additional services, such as monthly statements, support or service charges. Some companies may even charge annual flat fees.

  1. Variable fees

Such fees are charged only when the merchant does something to justify them. For instance, chargeback fees are only charged when chargebacks occur.

  1. Hidden/Junk fees

Going by names such as file fee, security fee, or conversion fees, these charges usually come as a surprise and escalate within months after you’ve signed the contract. Thankfully, we now have companies that are openly known to charge zero hidden fees. eMerchantBroker is a good example.

Models of pricing merchant accounts

Providers usually employ one of four models of pricing their accounts: Interchange-Plus, Tiered, membership and blended. These models outline the terms of fees to be charged to a merchant.

  1. Interchange-Plus

Considered the most transparent model, Interchange-Plus clearly lists all the fees and markups upfront; and when you sign up for the account, details of every charge will be included your monthly statement.

  1. Tiered

This is the plan most employed by payment processors, and although not necessarily wrong, it is a more complicated price model that account providers often take advantage. A merchant, therefore, has to understand the fees being charged fully.

  1. Membership

Membership model is just as transparent as Interchange-Plus, but with lower overall fees to favor merchants with larger transactions.

  1. Blended

This model is employed by processors who don’t charge monthly fees. Instead, all costs are blended to create one uniform rate per transaction.

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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