What Fees Can I Expect for a Merchant Account?

With all the money that’s being thrown around online, an important question for someone starting out in e-commerce is, “Who can I get to accept credit cards online for me?” It’s a tricky question, especially considering how many companies there are out there. That’s why, in this article, we’ll discuss the basic terminology of merchant accounts and the basic fees you can expect.

First, let’s follow what happens when you use a credit card on a website.

After you make the transaction, the website uses a payment gateway. The payment gateway basically gathers up all the information necessary to process the card, encrypts the information, and sends that information to Visa or Mastercard, or whatever type of card it is.

Next, the card company verifies that there is enough credit to complete the transaction, and tells the gateway that the transaction is good to go.

Then, the gateway tells whatever internet merchant account you have chosen that it is okay to complete the transaction. The internet merchant account then transfers the money into the merchant’s account, which generally happens within two business days.

So, the key parts that you, as a merchant, have to worry about are your internet merchant account and your payment gateway. Since most internet merchant accounts come with a payment gateway, that basically means you only have to worry about the account.

Associated with that merchant account are fees. In general, most reputable companies will waive a Setup Fee, but this still leaves you with a few other fees.

One of these fees is a Per Transaction Fee. This can vary from about 25 to 30 cents, and it is just like it sounds: A fee that gets charged with every transaction made, regardless of the amount of the transaction.

The next fee is a Minimum Monthly Processing Fee. The monthly processing minimum is the minimum monthly fee you must pay to the credit card company. For example, let’s say you have a $30 Minimum Monthly Processing Fee. Let’s say that, one month, you make $1000 worth of sales. Normally, this would only mean $20 in fees for you. However, since your minimum fee is $30, the company will round your fee up to $30.

Next up is the Discount Rate. Usually, the discount rate will be between 2 and 4 percent. The discount rate is the sales commission the provider earns on each sale. For example, if the discount rate offered is 5%, and you receive a sale over your web site for $20, you will owe $1 to your internet merchant provider.