Photo Gallery

Credit Card Processing Buyer's Guide - Pricing For Credit Card Services

Credit Card Processing Buyer's Guide - Pricing For Credit Card Services

Published: 03/28/2011

» Merchant Services
»» Credit Card Processing


Pricing For Credit Card Services

The primary fee on a merchant account is the discount rate, a small percentage the provider charges on each transaction. Banks and larger providers will base this fee on criteria including: your company's evaluated risk, average sales ticket, transaction type, and total charge volume.



Because of the difference in risk, most providers have two different rates, one for card‐present transactions and one for MOTO (mail order/telephone order, also includes Internet transactions) or card‐absent transactions.



Currently, card‐present transactions usually carry a discount rate of 1.5% to 2%, while card‐absent transactions are at 2.2% to 3.0%. Some credit card services set a monthly minimum fee ranging from $20 to $35 per month, so if you do a low volume of credit‐card transactions, be sure to ask about this.



Another processing fee charged by the merchant bank is the per transaction fee. The per transaction fee is generally $0.20 to $0.30 for card‐present transactions and $0.30 to $0.50 for card‐absent transactions.



There is also a fee to cover the cost of issuing monthly credit card service transaction summaries, usually around $10.



Equipment and start-up costs


For card‐present transactions, the biggest up‐front cost will be for the terminal, the machine used to swipe cards. Basic terminals typically go for between $150 and $300, terminals with printers are $200 to $500, and wireless terminals can run from $500 to $1000. You may want to lease a terminal instead. Leases can run as little as $25/month, although prices can vary depending on the sophistication of the terminal and the length of the lease.



If you're setting up a new merchant account, it's usually best to get your terminals as part of the deal. But you can also buy them separately.



Terminals are not required for card‐absent transactions: instead, you can get software to verify transactions from your PC. These "virtual terminal" programs are often provided free as part of an e‐commerce package, or sold on their own for as little as $150. Some providers even support card verification directly over the phone.



Be careful with application fees. Some providers charge application fees of up to $200, and they may be non‐ refundable, even if your business is turned down for an account. You may also have to pay setup or account activation fees. Make sure you understand exactly what you will be paying for before you sign anything.




Still more costs?


In addition to these basic fees, there are an astonishing number of fees that merchant services providers can charge: annual fees, programming fees, Internet processing fees, shipping and handling, American Express setup fee, customer support fees, etc. Essentially, these are arbitrary‐jack‐up‐the‐bill fees. We cannot stress this enough: make sure you have a complete understanding of all the charges you will incur before making your decision.



It's also important to make sure you're not shopping on price alone. Saving a fraction of a percentage point or a few hundred dollars up‐front is not worth the headaches you can wind up with if you choose a vendor who can't provide the service you need to stay up and running.