Discount Rate and Other Charges Credit Card Merchant Account
As a business merchant you may be aware of the importance of accepting credit card payments. In order to accept the credit card payments you will have to open a credit card merchant account. Before opening a credit card merchant account its important to know about the various charges and fees that could be charged on you while you accept the credit card payments. A brief explanation on these charges on credit card merchant account are given below which if understood will help you in reaping more benefits by accepting credit card payments.
The most common charges that is levied on credit card merchant account is the discount rate. It’s a fixed percentage charged on every credit card transaction. The discount rate may range from 2% to 8%. This forms the major portion of your expense in the credit card merchant account. The discount rate is lower for a standard credit card merchant account when compared to the online credit card merchant account. This is because the online business is considered to be of high risk nature. Based on the nature of business the discount rate will also differ. However while opening the credit card merchant account you can negotiate with the provider and strike a fair deal.
Another charge is the transaction charge which will be levied by the credit card merchant service provider. This is also a fixed percentage on the total amount of purchase by the customer. If you have opted with the credit card merchant service provider for address verification service then the transaction charge will be at a higher rate. However based on the volume of business you can opt for this service. This is called the AVS-Address verification service. The credit card merchant service provider will verify the address provided by the credit card holder with that of the issuer. If you have high volume of business transaction through credit card payments then its better to opt for the address verification in spite of the heavy charges. This will protect you from credit card fraud to a greater extent.
Gateway fees are yet another charge found in the credit card merchant account. This is actually charged by the gateway provider who will be a third party other than the credit card merchant service provider. This is charged on a monthly basis to your credit card merchant account. The credit card merchant service provider will also charge a fees called the monthly minimum. This is the minimum fees that you must incur. This is calculated on the basis of discount fees and your transaction charges. If the discount fees and the transaction does not add up to the minimum fees then you will have to pay the minimum fees.
Apart from the above charges some of the credit card merchant service provider will also charge annual fees. This is towards the maintenance and the up gradation of the terminals. This is charged only once in a year however while opening the credit card merchant account its better to confirm about the annual fees.
Discount rates and other charges form a major portion of your monthly statements from the credit card merchant service provider. A clear understanding of these charges are important to make the best use of the credit card merchant.