Understanding Credit Card Transaction Fees Cedarburg WI

Q: I'm starting a new business and want to accept credit cards. It seems that all the credit card processors charge a lot of fees for each transaction. What are these fees?

A: Each credit card processing company operates somewhat differently, but there are a number of fees that are common to all of them. Here are some examples of various fees associated with a typical merchant account.

The Application or Setup Fee is a one-time charge for processing a merchant application and activating your new merchant account. Some processors waive this fee to promote their businesses and attract new merchant accounts.

The Address Verification Service Fee (AVS) is a fraud prevention measure that provides merchants with an additional fraud-detection tool to determine the validity of a sale, which is especially useful when the card is not present. AVS matches a sale's shipping information with the cardholder's billing address. When addresses do not match, merchants should discuss the discrepancies with their customers before shipping orders. AVS only works with cards that are issued in the United States. When AVS is used, there is a per-transaction fee for the service.

The Discount Rate is the percentage charged on the dollar amount of a sale or a returned transaction. Discount rates vary depending on the type of business, such as a traditional brick-and-mortar business, a mail-order/telephone-order business, a restaurant or an e-business. Discount rates also vary depending on whether a card number is keyed into the point-of-sale terminal or swiped into the terminal. Swiped rates are generally lower because of the data encoded on the card's magnetic stripe, which eliminates key-entry errors.

The Secure Payment Gateway Fee is a charge assessed to e-commerce merchants to enable them to process transactions securely over the Internet. This is usually a monthly fee.

The Customer Support Fee is a monthly charge assessed by some processors, which enables them to provide high-quality customer service 24 hours a day, 365 days a year, often in multiple languages and dialects.

The Monthly Minimum Fee is charged to the merchant if the total monthly discount rate amount for MasterCard and Visa transactions does not reach a minimum threshold. If the merchant reaches the minimum threshold, no monthly minimum is charged. Virtually all credit card processors initiate this fee, and generally it ranges from $10 to $30 per month.

The Reprogramming Fee is a one-time charge a processor may assess for converting a merchant from one credit card processor to a new credit card processor.

The Transaction Fee is assessed for each transaction authorization submitted by a merchant, such as a sale or a return. This fee is also charged on transactions where the card is declined. In addition, transaction fees are incurred for American Express and Discover card transactions.

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