Hidden Fees You Must Know About Before Getting a Merchant Account

When first starting a business, you'll most likely be processing credit cards and will need a merchant account. Most business owners understand only a few of the fees associated with getting started. This article will explain a few of the other fees that most merchants would qualify as "hidden" fees simply because they aren't usually explained by the merchant account representative and the business owner doesn't know to ask. So, hopefully this information will not only help you be more informed, but save you money as well.The monthly minimum is a fee based on the discount rate. This is where you'll either pay your discount rate or your monthly minimum, whichever is higher. This fee generally doesn't affect retail accounts but usually always affects internet accounts because it takes internet accounts longer to "ramp up" their sales volume (usually). If you have a monthly minimum of $25, you'll need to process $1000 per month at an average discount rate of 2.5% to have this minimum "covered". If you process only $500 at that same average 2.5% discount rate, you'll be paying $12.50 in discount which is lower than your monthly minimum which means you'd pay the other $12.50 to get to that $25 minimum. Basically, if you're processing transactions on a regular basis and your volume exceeds $1000 per month, you'll likely never notice this minimum.Many merchant service providers are willing to waive this fee. So, especially if you are an internet merchant or seasonal merchant, you should work to get this fee waived. Also, some merchant providers will base your early termination fee on the monthly fees multiplied by the duration of the contract which means that the $25 minimum will add significantly to your overall early termination fee.Transactions are batched together daily usually automatically, but sometimes, if your terminal is programmed not to batch, this must be done manually. These batches of transactions are assessed a batch header fee, usually around $.25 per batch. That I know of, batches can be hundreds of transactions or even thousands of transactions and still only be assessed the one batch. Consider this a daily processing fee not to exceed about $7.50 per month assuming you are processing every day of the month. This is a lesser known fee and not a huge deal, but something you should be aware of anyway.Address verification system or AVS is a fee that is attached to each transaction where the billing address (usually the postal code) is used to verify the validity of the card. This fee is usually $.05 per transaction where the avs is used. This is not necessarily a "bad" fee because when you use AVS, your rates are usually lower. In the case of retail, you'll only use this when you need to key in a transaction. For internet accounts, you'll use this usually all the time. This also helps you as a merchant have confidence in the transaction as well.Some merchant providers will charge an annual fee. This fee is usually negotiable and if you see this, you need to assess whether or not this fee is worth paying depending on how much your other fees are reduced because of this specific provider. There are several pricing structures that can keep your transaction costs very low, but these types of accounts produce very little revenue for the merchant account companies. This is good for you, but obviously the company that sets up these accounts must generate some revenue or else they couldn't stay in business either. In cases like this, the annual fee is a good way to satisfy both parties.When you're ready to be done with your merchant account whether you're going out of business, or whether you are going to switch to another provider, you'll most likely have an early termination fee. This is not unlike any other service company. However, you need to know the duration of your contract, the cost of terminating the contract and what happens in the event you are going out of business. Going out of business is bad enough, but to be hit with an additional fee for terminating your account can add additional financial stress. You should expect something around $200 to $300 for an early termination fee. If it is significantly more than this, be cautious before entering into the agreement with your merchant account provider.There are a lot of fees associated with processing credit cards. Some of these are simplified into one "flat" rate by a merchant account provider which can be beneficial for the monthly reconcile, but may be costing you a lot more than it should. The important thing with any merchant account is to work with a qualified, honest account representative who will make sure all of the fees are explained and make sure you don't have any "surprises" after your first month of processing.Brian Armstrong is a merchant account representative who works for several organizations establishing new ecommerce merchant accounts. You can also find his website online at MerchantHotline.com where he actively promotes payment processing and helps businesses lower their credit card processing fees.