Revenue: The Real Scoop About Merchant Account Rates & Fees

Ted S

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Feb 19, 2004
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Ted S submitted a new Article:

Revenue: The Real Scoop About Merchant Account Rates & Fees

So... you've decided to setup your own merchant account. You've seen the many different options available to you on the Internet. Chances are, you have even received some e-mails or postcards with great promotions and offers.

The big question now becomes - which merchant processor to select? And how can you tell whether the merchant account proposals you are getting are really a good deal or not?

Many merchants do not fully understand the nuances of merchant account pricing - and so they are often at a disadvantage when comparing proposals from various providers.

The purpose of this article is to explain common merchant account terminology and describe the various rates & fees that you should specifically look for and ask about.... before signing off on any merchant account application or agreement.

Understanding the "hard costs" behind Merchant Accounts
The first thing to understand about merchant account pricing is to get a handle on the costs associated with a merchant account.

First and foremost, ALL banks and merchant processors have the same core cost - the InterBankExchange ("Interchange") costs, dues & assessments from Visa and MasterCard. It is important to note that the very same Interchange fees apply to ALL banks and ISO/MSP's across the board - regardless of their size or volume.

On top of these costs, there are network costs. These network costs are the transactional costs that are incurred to send a credit card transaction request across the bankcard networks to interact with the cardholder's issuing bank.

Beyond the Interchange and network costs, there are other costs such as the payment gateway fees that are incurred, the "account on file" and other costs that are assessed to merchant providers for maintaining their merchant account portfolio, BIN sponsorship fees, risk reserves and customer service costs associated with operating a portfolio of merchant accounts. All of these fees do vary from one processor to another but are all generally in the same ballpark.

All of these costs add up and must be covered by the pricing structure that the merchant provider sets up for their merchants. Now that you have a little background on the costs of a merchant account, we will discuss the various pricing line items that you will commonly see on a merchant application / agreement.

Merchant Account Pricing Terminology and Descriptions
Here is a lit of common line items that what you need to know...

Read more about this article here...
 
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dune

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Feb 6, 2004
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When I setup my store and was looking for a merchant bank, I ended up using Echo (echo-inc.com) and their fees are VERY reasonable. The application was lengthly (someone even came to my house to take pictures of my "business" and I'm forced to hold a reserve account (5% of revenue), but I'm glad I got the account...
 

fedupsally

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Joined
Dec 21, 2005
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Merchants to avoid in order of priority

1. FIRST HORIZON (RISK DEPARTMENT WILL HOLD 50% OF YOUR MONTHLY SALES FOR 9 MONTHS WITHOUT WARNING IF YOU RECEIVE 2 CHARGEBACKS WITHIN 12 MONTHS)

2. CARDSERVICES INTERNATIONAL (RISK DEPARTMENT TAKES UP 3 WEEKS TO REVIEW PURCHASE ORDERS) KIM IN RISK DEPARTMENT IS VERY, VERY RUDE.

3. NORTH AMERICAN BANKCARD (MICHIGAN HEADQUARTERS) YOU RECIEVE DEPOSITS ONCE A WEEK EVEN IF YOU PROCESS EVERY DAY.

4.I PAYMENT - CALLS YOUR CUSTOMERS TO VERIFY THAT THEY'VE MADE A PURCHASE. (EMBARASSING) SUSAN IN RISK DEPARTMENT IS VERY SLOW, RUDE AND DOES NOT RETURN PHONE CALLS UNDER ANY CIRCUMSTANCES

AND NEVER, UNDER ANY CIRCUMSTANCES DO BANKING WITH A NEW BANK CALLED BEST BANK! RUN!
 

daisygrl

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Joined
Jul 24, 2007
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1
merchant processor

When I setup my store and was looking for a merchant bank, I ended up using Echo (echo-inc.com) and their fees are VERY reasonable. The application was lengthly (someone even came to my house to take pictures of my "business" and I'm forced to hold a reserve account (5% of revenue), but I'm glad I got the account...

Thanks for the heads up with Echo. I was recently researching a merchant processor for my new website ill check them out.
 
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