Can I get a Free Merchant Account?

One of the most confusing things about Merchant Accounts is why there is so much variation in costs. In a way it works a lot like buying an airline ticket--you might be paying twice as much as the person sitting next to you for the same quality seat, the only difference was when and who you purchased the ticket from. In the same way, Merchant Account costs can vary widely, depending on even more factors, from the amount of risk the Merchant Bank feels they are taking on you, to how many middlemen are between you and the merchant bank, and what fees they decide to add in to make their profits.

Money isn't everything, but it is important to most small businesses trying to make a buck, so you need to be aware of all the possible fees so that you don't unexpectedly end up paying more money than you thought you would. It is easy to overlook certain fees if you are too focused on the discount rate or the monthly fee. To help orient you to what to expect, we have outlined the common fees below...

Application Fee - An application fee is a one time fee charged by the Bank to process a merchant account. This fee is usually $99-$175.

Set up Fee - Some providers will charge large setup fees for merchant accounts. This is a fee simply for starting up a merchant account, and is a popular way for them to get more of your money up front.

Discount Rate - The Discount Rate is a percentage of the total credit card sale and is computed for each transaction. A discount rate of 5% would mean you would pay a fee of $5 for every $100 a customer charges with you. A discount rate of 3% would only be $3 on a $100 sale. The discount rate is a very important variable. The difference in just 1/2% could mean hundreds or even thousands of dollars in revenue - either lost or gained for your business, depending on the amount of volume you do.

Transaction Fee - Per-transaction fees are flat rate charges on each transaction and range from $0.20 to $2.00 each. This is the fee for each time a card is authorized or declined, or for each time you use your credit card terminal to connect to the toll-free authorization network.

Monthly Minimum - The monthly minimum is the minimum amount you will pay each month in fees regardless of sales. This means that even if you didn't make any sales in the month, you still have to pay a minimum amount, often this is $25 or more.

Statement Fees - Monthly Statement Fee is a fee charged by the processing bank to issue a detailed statement at the end of each month. The statement should detail all of your charges and what was deposited into your checking account. Statement fees range from $5 to $45 per month.

Equipment Fees - Equipment cost is the purchase or lease of your authorization software, or authorization swipe terminal. For online-only stores, you may not need an authorization terminal, because most of the authorization can be done using a secure web browser.

Real-time authorization -If you choose to use a real time authorization system such as cybercash or authorize net, you may incur additional fees such as a monthly gateway fee (usually around $35.00 per month) and a set up fee.

Be on the lookout for additional fees. There really shouldn't be any fees other than the ones outlined above. But you can see how confusing it can be to try and predict what your expenses will be when using a merchant account. We suggest that you divide your fees into 3 categories: one-time setup fees, flat monthly fees, and per-transaction fees. This makes it easiest to figure out what will be left in your bank account at the end of the month.