If your business is accepting credit cards for its transactions, you need to try and find the discount merchant account that will offer you the best services for the most competitive price. You need to take into account all of the various fees, not just the qualified discount percentage. While the discount rate is important, make sure you don’t overlook all of the other “incidental fees” while searching for the best deal to match your needs and budget.

Below are some of the other fees you should be looking at when you’re searching for a good discount merchant account. If you’re not careful you could be nickel and dimed to death.

Authorization/Transaction Fees

The authorization fee is charged when you log onto the merchant account network through a phone line or the Internet to verify that a credit card is valid and has enough credit available on it. There shouldn’t be any charge by your phone company for these calls as most terminals use local or toll free numbers. However, make sure you verify this before signing up or you could end up with an astronomical phone bill at the end of the month.

A transaction rate for retail accounts is usually anywhere from 20 to 40 cents. Remember, the transaction fee will be added on to the discount rate. However, some merchant service companies will combine the discount and transaction rates as one fee. This is generally known as a bundled rate.

Batch Fee

This is typically a small fee which is charged every day to batch or close out all of your transactions for that 24-hour period. These fees usually cost the same as your transaction fee. It is also known as a batch header fee.  Remember, if no transactions take place on a given day, you will not be accessed a batch fee for that day.

Monthly Fee (Statement Fee)

This fee is will usually run you anywhere from $5 to $20. The charge is used to supply you with a monthly statement that summarizes, breaks down and shows each one of your credit card transactions over that time period. The statements will be automatically sent to you at the end of each month. Make sure you look it over very carefully just in case it doesn’t match up with your records. If you’re lucky, your discount merchant account provider will offer you online transaction reporting. This allows you to view up to the minute information regarding your merchant account.

Be aware that some companies may charge other monthly fees, such as the gateway fee, applicable if you conduct Internet/e-commerce sales.  It’s best to find out what the total monthly fee as you compare vendors.   

Monthly Minimum Fee 

This fee comes into effect only when your monthly sales are very low or you didn’t sell anything at all. The merchant account provider will calculate the charge by multiplying your total sales for the time period by your discount rate and then adding on your transaction fees. It may sound a little more complicated than it actually is. But for example, if your minimum monthly fee is $25 and your discount and transaction fees only add up to $20, then you will have to pay the $5 difference to reach the agreed upon $25 minimum. Therefore if you didn’t sell anything at all for the month, you would have to pay the whole $25 to keep the provider happy. Needless to say, a discount merchant account should have a low monthly minimum fee or even choose to waive it.

 Return Fee

A return occurs when a customer who has already paid for their purchase by credit card wants to return the goods. This means the transaction will be reversed on their monthly credit card statement and the money will appear as a credit. Most merchant account providers will charge you a return fee and a transaction fee when this happens.

You need to pay close attention to how your provider handles returns. Unless you don't pay a separate return fee on your merchant account, you have to add the transaction fee to the return fee to see how much you’re being charged to credit card returns.

Address Verification Service (AVS) Fees

 Most credit card processors will offer the address verification service (AVS). This will match up the cardholder's billing address (zip code and/or street address) with the information encoded on the cardholder’s credit card.

 There are various AVS codes that are used to show partial or complete matches. If the credit card address doesn’t match up with the customer’s billing address, you should verify everything with the customer before shipping the goods out to make sure they are headed to the right place. In fact, you should always verify this anyway. The AVS can be very helpful to you in these circumstances, especially if you’re selling goods or services over the phone or Internet. It’s also a useful tool to help detect fraud. At the moment AVS primarily works with American-issued cards, but can also be a functional tool for the United Kingdom and parts of Canada.  

 Termination Fee

 This is also known as a cancellation fee. And yes, in today’s world you even have to pay a fee to cancel your working contract with a merchant account provider when you want to switch to a different provider or opt to go out of business. Be aware of this and make sure you inquire about any potential termination fee before you sign on as you may be surprised how high it can go. In general, the longer you have been with the provider, the lower the fee.  Many vendors waive cancellation fees, providing reassurance to merchants who don’t want to get locked into a contract.

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In these difficult economic times, business owners need to find bargains – and that includes discovering lower fees for credit card processing.  It is very possible to gain big savings by knowing the little fees that exist in the merchant account field in your quest to find a true discount merchant account.

“Do you provide a high risk merchant account?” a gentleman anxiously inquired yesterday.  He seemed puzzled that he would have difficultly gaining credit card processing capability for his collection agency.

It’s just a fact of life that some people and their businesses are considered to be a higher risk when it comes to trying to obtaining services such as insurance and loans. Well, you can also add merchant account to that list as some vendors have a hard time obtaining a provider because of various factors that categorize them as a high risk.  (Merchants who are deemed a high risk need to open a high risk merchant account.)  

Some examples of high risk businesses include internet marketing, the travel industry, membership clubs, telemarketing, and debt collection. However, being considered high risk doesn’t mean you can’t set up a merchant account, but it will probably be a little more difficult because the providers are taking a chance on you as it could lead to financial losses for them.

What makes these businesses high risk in the first place is the fact that statistically they often have a lot of chargebacks and are sometimes susceptible to fraud and criminal activity. High risk accounts are usually necessary for vendors who can’t get a standard merchant account because of their type of business, monthly volume, and target markets.

Most merchant account companies and banks will look at your business carefully before signing you on and weigh the following information: previous merchant accounts, your credit history and how long you’ve been in business. They may also want to see items such as your business license, current processing statements, bank statements, and current profit-loss statements.

The amount of time you’ve been in business is important to merchant account providers as they like to know that you understand how the system works, especially relevant if you’ve previously accepted credit cards. This means you are able to identify and solve possible risks such as fraud and can manage credit card transactions with few problems.

If you’re familiar with merchant accounts it will be in your favor but any previously-terminated accounts will definitely show up on your file, which could scare prospective providers away – especially if the merchant account provider initiated closure of the account.  

A credit report tells the account providers if you pay your bills and if you pay them on time. It will also show if there have been any judgments, liens, or bankruptcies filed against you. Of course, a good credit report will definitely help you out if you’re opening a high risk merchant account.

If you are involved in a high risk business, there are a few strategies that you can employ to help your cause, however it’s still no guarantee that you’ll get an account without any problems.

Again, the most important task is to make sure you have a good credit rating. It’s pretty easy to get hold of your credit report by speaking to a credit reporting bureau or a business that supplies merged credit reports from major agencies. It’s best to check out your report before applying for a merchant account. This way, you can see exactly what’s on it and if it’s good enough to use when applying. If it’s not too flattering, see if it’s possible to get rid of any negative items such as past bankruptcies, late payments, or liens against you.

No matter what your business is, a good credit rating could go a long way when you’re trying to secure a merchant account. Make sure you’re always honest when it comes to your credit report, and past merchant accounts, as you can’t hide anything. In addition, if you encountered difficulties in the past and overcame them, it will improve your credibility.

Be aware that high risk businesses often have to pay higher fees and/or follow special account requirements. So if this is the case, you will have to agree to the terms or forfeit the opportunity to secure a high risk merchant account. Even if you have to dole out a bit more cash to the provider, it will benefit you as it means you’re able to offer customers other options instead of just cash or check. This should help your sales due to higher purchases and impulse buying.  (Of course, as you look for reputable vendors, still scrutinize the complete spectrum of credit card processing rates.)

If you have a sketchy credit report but manage to find a provider, you may also have to set up a reserve account to protect them from possible losses. A reserve account is typically calculated as a percentage of your sales, and the funds are held in your name by the bank for a period of time.

So if you’re running a high risk business, it’s not all doom and gloom out there, but prepare to pay a little bit more money and possibly follow some stricter rules that are laid down by the merchant account provider. In the long run, it should be well worth opening a high risk merchant account.