Credit card processing companies, like other companies, must make a profit or
go out of business. To achieve this goal, they charge fees.
These fees can be numerous. This can lead to some irritation. As in:
What is all this stuff?
In the belief that knowledge is power, heres a quick breakdown of what all
that stuff is.
Application Fee
Generally speaking, reputable companies do not charge this fee. They dont
need to. They get enough business without charging up-front. Application
fees are, by and large, bogus.
Startup Fee
Some work is involved in setting up a credit
card processing account. A startup
fee in the range of $25 can be justified, as long as the system thats set
up works great.
Statement Fee
Credit card
processing companies usually provide detailed statements at the
end of each billing cycle. These statements show how many credit cards were
processed, the times and dates of the swipes, good stuff. The organization
of that information has value. So they charge for it.
A statement fee of seven to ten dollars per month is common.
Monthly Minimum
Credit card
processing companies take a percentage of each transaction, so
if no transactions are occurring, theyre not making any money. For this
reason, they may put a andquot;monthly minimum not metandquot; charge into the
contract. That way, they are assured of some revenue from each account.
Discount Rate
The discount rate is the primary fee charged by credit card processing companies.
It is customarily between 1.5 and 2 percent of each transaction.
Charge Back Fee
Refunds complicate matters. If credit card transactions are repeatedly being
charged back and forth, and the credit
card processing company is being asked
to void transactions after the fact, and so on, a charge back fee may occur.
Often, a certain number of charge backs are allowed per month before this
fee kicks in.
Gateway Fee
This fee is related to the ability to process Internet credit card transactions.
In order to do that, a credit
card processing firm must provide some basic
Web site services, such as a shopping cart function for the customer and/or
a portal that lets the client accept and monitor payments.
A gateway fee in the neighborhood of ten dollars per month is common.
Termination Fee
Typical contract lengths are between one and three years, with early termination
fees ranging from one to three hundred dollars. There are credit
card processing providers who do not charge a termination fee. However, that may mean they
charge a bit more in other areas.
How Much Is Too Much?
As a general rule of thumb, processing
credit cards is a great deal if the
cost is at or around two percent of total credit card purchases. If $100,000
of credit card purchases flow through a restaurant per month, processing
credit cards might cost $2,000 per month.
When offers are flying around at less than that, be wary. Remember: credit
card processing companies have to pay fees too, to the credit card companies
themselves.
Without that two percent or so, credit
card processing companies dont have
a business.
Sources
Forbes
FDIC.org
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