Merchant Account Rates & Fees

Merchant Account Rates & Fees Explained

Here are common terms you may come across when setting up a merchant account or reviewing your merchant statements.

Discount Rate

The discount rate is the percentage charged on each transaction you process. It varies depending on the type of credit card and the type of transaction.

Transaction Fee

A transaction fee is charged to process each individual transaction, whether the transaction is approved or declined. The fee is determined by the type of transaction; for example, swiped or keyed.

PIN Debit Transaction Fee

A transaction fee that applies when you process debit cards that require the cardholder to enter their PIN (personal identification number).

Address Verification Service Fee (AVS)

AVS is recommended whenever a card is not physically present, requiring that the account information be keyed-in. AVS checks that the address and zip code provided by the cardholder matches the information on file with the card issuer. This security feature is a first line of defense against credit card fraud.

Daily Batch Fee

A fee that is charged when you settle your daily transactions (also known as the batch) with your credit card processor. If you have no credit card transactions to settle on a particular day, you are not charged this fee.

Monthly Statement/Support/Service Fee

Credit card processors charge this fee on a monthly basis. It remains the same regardless of the number of transactions you process and helps cover the cost of your statement and any customer support you may require.

Internet Gateway Fee

This applies if you use an internet payment gateway. This fee is billed by the gateway provider, which may also charge per-transaction fees (in addition to any transaction fees charged by your merchant account provider).

Voice Authorization Fee

The voice authorization fee applies when you use a telephone dial-up service for transaction authorization. A fee is charged for each call that is made. Voice authorization is useful in the event your terminal or software malfunctions or your internet connection isn’t working.

Monthly Minimum Fee

Your merchant account agreement typically stipulates a minimum amount of transaction fees that your provider expects you to generate each month. If your monthly fees fall below this minimum, you pay the monthly minimum fee.

Network Access Fee

You are charged this fee every time your processing system makes a connection with the network. This includes: voice authorizations, attempted sales that are declined, voids, operator error and invalid card numbers.

PCI Non-Validation Fee

A fee charged if you do not return a PCI Compliance Validation Certificate, which can be obtained by completing and passing an annual Self-Assessment Questionnaire (SAQ) and/or Quarterly Network Scan (for merchants that electronically store cardholder information or whose application systems are connected to the internet).

Surcharge Fee/Partially-Qualified Fee/Non-Qualified Fee

These are three different names for fees related to an additional discount fee that applies to certain types of credit cards. These typically include business, corporate, rewards and international cards.

Application/Setup Fee

This fee is a one-time, upfront charge for setting up your merchant account.

Reprogramming Fee

This fee is charged for reprogramming your existing equipment or software and covers the time and effort involved on the part of your processor and terminal/software vendors.

Chargeback/Retrieval Fee

A chargeback (or retrieval) fee applies when a cardholder or issuing bank disputes a transaction. You are provided the opportunity to address the dispute with a written response and documentation. The merchant account provider mediates the dispute with the issuing bank and charges this fee to do so.

Annual Fee

The amount charged by a processor for your merchant account on an annual basis.

Cancellation or Termination Fee

If you cancel or terminate your merchant account before the date stipulated in your merchant account agreement, your provider will most likely charge this fee. There is usually room for negotiation, however, especially in the event that you have unresolved problems or issues that the provider cannot or will not resolve. The fee is typically a fixed dollar amount, not a variable fee. Check your merchant account agreement regarding how the cancellation/termination fee is calculated.

Hidden/Junk Fees

This category covers a variety of “surprise” fees that some questionable or unrealiable merchant account providers charge. Included in this group are the extremely low “teaser” rates that escalate shortly after you sign your contract. Beware of other hidden fees — including increases in your discount rate without prior notification — which may be buried in the fine print of your agreement. These so-called junk fees can include: security fees, audit fees, conversion fees, over-limit fees and bill back fees.

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