Costs of Merchant Accounts

A good article by Merchant Select reviews the fee structures that apply when you select a merchant account provider, and what to look out for. Typically, you will need to consider the following costs:

• Discount Rate: Percentage taken from a sale that the merchant pays the acquiring bank to cover the costs of the transactions and the risk involved. Usually 1.5 percent to 3.5 percent.
• Transaction Fee: A flat rate charged for each transaction. Between $0.20 and $1.00 US per transaction.
• Equipment and Installation: Software can cost nothing or range from $500 to $1200 US or more depending on whether you have batch or real-time processing. Costs for hardware (POS terminals) can range from $500 to $1,500 and could be more depending on the model you purchase (real-time or manual).
• Monthly Fee: Typically around $25 US and could vary depending on whether you meet your minimum monthly transactions.
• Reserve and Charge Back Fee: Cost charged by the bank to cover contested charges. Can be higher for riskier businesses. Between $20 and $50 US. As an example, a customer purchases a coat from your site worth $100 through an online credit card transaction and later contests the sale. As the merchant, you will have to pay the bank $100 in addition to a charge back fee of between $20 and $50.

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