GavaldaFX Forex Blog

Making sure that you can accept credit cards is an important part of starting a small business. To facilitate credit card transactions your business will require a merchant account, which is basically a bank or payment processing company that specializes in such transactions.

Merchant account fees and charges depend on a number of factors; volume of transactions, the type of input device that is getting the credit card info (POS scanner in a grocery store versus someone typing in their credit card over the internet), the type of product or service you are providing, and the location of your business.

The more risk involved in the merchant account the more you should expect to pay for one. For example a merchant account for a brick and mortar POS (point of sale) swipe system in a grocery store will cost less than one for an off shore adult website. Here are the 3 major types of merchant accounts.

Merchant Account #1 Retail

Retail accounts are needed for companies which have a physical presence, like a grocery or supermarket. Such accounts require a physical device to collect and send the credit card information. These devices called POS (point of sales) systems are mandated for the majority of transactions by merchant account providers.

Merchant Account #2 MOTO (Mail Order Telephone Order)

MOTO accounts are tailored for merchants that take credit payments over the phone or by mail. As a result these types of accounts do not require you to have special point of sale equipment to swipe cards. Another characteristic of MOTO accounts are that they charge a higher discount rate, which is the charge that the purchaser’s card issuing company takes from a purchase transaction.

Merchant Account #3 Internet

Once people started to do business over the internet a third class of merchant account was developed. An internet merchant account is essential for anyone doing business online. They require a shopping cart application or payment service gateway in order to facilitate the transaction with the merchant account.

So there are the 3 main types of merchant accounts. You can decide which account is best suited to your business. You may find that it is more than one.

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What most merchants don’t realize is that they are significantly overpaying for their existing account. Some merchants may even have a good idea that they are overpaying, but don’t realize how easy it is to switch their account. The more volume you are processing as a merchant, the more you’ll save by switching to a less expensive merchant account.

When you initially researched your merchant account for pricing information, you probably did so looking for the least expensive discount rate or percentage rate. Many advertised rates pull the “bait and switch” where you are drawn in with some insanely low rate only to realize after you start processing that the low rate originally advertised isn’t for you. Most merchant accounts have a qualified rate, a mid-qualified rate and a non-qualified rate.

You have a discount rate that represents a percentage of your overall volume, but you’ll also have a per transaction fee which is a flat fee charged on all transactions. This fee is charged to cover the cost of sending those transactions electronically. This is a revenue center for both the banks as well as the merchant account companies but should still be something you’re aware of as a business owner.

For you merchants who are processing smaller ticket items, the per transaction fee usually represents a larger percentage of the overall transaction amount. Keeping this per transaction low is even more important that your discount rate if you have a low average per transaction.

Business owners that have a higher ticket item should be more concerned with the discount rates they’re paying far more than the per transaction fees as that represents a larger percentage of the overall fees. If you divide the total amount of fees by the gross volume that you process each month, you’ll have your “effective” rate.

If you are ready to switch merchant accounts, you should start by looking at one of your statements and calculating your effective rate. If you’d rather not have to learn anything about rates and fees and simply want to get someone else to do this for you, find a competent merchant services professional who will evaluate your current rates and provide you some data on what it would cost to switch and estimate your savings. Finding someone you trust is critical as merchant services professionals don’t always have the best reputation for integrity thanks to some in our industry that use deceptive practices and are dishonest.

Some small business owners are hesitant to switch to a new account simply because they have an early termination fee hanging over their head from their current processor. You can look for merchant service providers that can help you by offering a reimbursement or voucher that will pay you back for any termination fee that you incur.

Getting new equipment during a switchover often makes good sense because you will literally have no down time. If you choose to keep your same equipment, you will have to reprogram your existing equipment to point to the new merchant account which typically takes about 30 minutes to 1 hour depending on the connection speeds. The terminal will download the new program over the internet if you have a terminal with internet capabilities or it will download the new programming over the phone line.

I have been helping merchants establish their ecommerce merchant accounts for about 7 years. I specialize in Authorize.Net gateway accounts as well. If you are interested in learning more about internet merchant accounts you can visit my Youtube channel on the topic at youtube.com/merchanthotline or my website MerchantHotline.com.

This is a brief introduction to some components of pricing that you should be aware of as a business owner. This article will help you know enough about pricing a merchant account so that you don’t get taken advantage of when you’re negotiating with your merchant service provider on your account.

The first part of pricing that everybody uses to compare one provider against another is the discount rate. Business owners always want to know the discount rate. This is the rate that typically results in the most fees paid by merchants so with good cause is the one that merchants should definitely try to keep low.

Your discount rate is determined by the risk your business may represent to the bank. The more risky your account, the higher the discount rate. The type of cards you process may also influence your discount rate, such as a business credit card vs. a check card, or rewards card for instance.

Another fee charged is the per transaction fee which is typically about $.20 per transaction. These can get as low as $.15 to $.16 per transaction but it wouldn’t be worth negotiating that low unless you have an incredibly low average ticket item. If you have a $10 average transaction, a $.25 per transaction would be a 2.5% effective rate. If you add a 1.5% discount rate, you’d end up with an effective rate of 4%.

If your per transaction fee is closer to $.18 per transaction, your effective rate is reduced by 1.7% which is significant. So, you should know what your average ticket item is going to be or at least a good estimate in order to most effectively determine whether your power of negotiation would best be used to get your discount rate as low as possible or your per transaction fee. Try to get your overall rate or “effective rate” as low as you possibly can.

Business owners will typically have a monthly fee, usually in the form of a statement fee, customer service fee, or monthly account maintenance fee. This fee is usually about $10 per month.

There is also a monthly minimum that is usually charged on merchant accounts as well. This is a $25 minimum fee based on the discount rate. Any given month, the $25 worth of discount fees is charged. So, if you process $1000 per month at 1.7%, you’ll be assessed $17 worth of discount fees. If your minimum is $25, you’d pay the extra $8 worth of fees to equal the $25.

These are the primary fees that accompany each merchant account. There are several other fees that may apply depending on whether your are processing through a wireless terminal, an internet-based account, or mail order / telephone order.

Be sure to work with a merchant service provider and a sales representative that you can trust. The industry is a lucrative one and attracts both the honest and dishonest sales reps. Having said that, make sure you review the “fine print” and pricing pages for the application before you commit to work with a merchant services provider.

Brian is an expert at helping businesses just like yours reduce expenses on their ecommerce merchant accounts. If you’re serious about reducing your expenses and doing so without a major hassle, contact Brian through his website dedicated to internet business merchant accounts.

If you run a business, there’s a good chance that you already accept credit cards. If you’re new to starting a business, there are some things you should know about credit card processing that will save you a significant amount of money in the long term.

Each business owner will pay a discount rate which is a percentage of the gross volume processed. If the discount rate is 1.7%, the merchant will pay $1.70 for every $100 of volume. So, for merchants processing $10,000 or more per month, each .1% represents $10. So a discount rate of 1.3% vs. a discount rate of 1.9% will save that merchant $60 per month on just the discount alone which is an annual savings of $720. This can add up quickly, so it’s important to keep this rate low.

Your discount rate is determined by the risk your business may represent to the bank. The more risky your account, the higher the discount rate. The type of cards you process may also influence your discount rate, such as a business credit card vs. a check card, or rewards card for instance.

If you have a lower average ticket item or average transaction, the per transaction fee represents a higher percentage and can even represent a higher percentage of your overall fees than the actual discount rate or percentage. If you have an average ticket item of $10 and a per transaction of $.20, the effective rate on this transaction is 2%. If you add the discount rate of 1.8%, the effective rate on those $10 transactions is 3.8% which is higher than it could be.

If you have a per transaction of $.17, the same $10 transaction would have a 1.7% transaction rate which would reduce your overall effective rate on those smaller ticket items. Your goal should be to get your effective rate as low as you possibly can.

There is a monthly fee for most merchant accounts. There is a cost associated with providing customer support, physical or even electronic statements, and account maintenance. This is usually a $10 monthly fee that is known as a customer service fee, account maintenance fee or a statement fee.

If you have a merchant account, you most likely have a monthly minimum which is what a flat fee charged every month based on the discount fees. If the discount fees exceed $25, the monthly minimum is met. If the discount fees are based on a slower month or lower volume month, the minimum is charged still at $25. If your volume is only $500 that month, the $25 represents a 5% effective rate, no matter what the discount rate is. Many providers now will waive this fee, so if you anticipate at all that fee being an issue, work with your provider to make sure that fee is either reduced or waived.

These fees represent the typical fees charged by merchant providers. There are usually other fees that will show up on your merchant account application, so be sure to ask your merchant account sales representative about any fees that you don’t recognize or know. These fees must be disclosed, even if the sales rep doesn’t tell you about them. When it comes to pricing, trust what’s written on the application because this is what you’ll be agreeing to when it comes to processing.

Finding a sales rep that you can trust and work with on your account will save you significant hassles later on and will be a relationship you can leverage to make this important part of your business hassle free.

Brian is an expert at helping businesses just like yours reduce expenses on their ecommerce merchant accounts. If you’re serious about reducing your expenses and doing so without a major hassle, contact Brian through his website dedicated to internet business merchant accounts.

This is a brief introduction to some components of pricing that you should be aware of as a business owner. This article will help you know enough about pricing a merchant account so that you don’t get taken advantage of when you’re negotiating with your merchant service provider on your account.

Each business owner will pay a discount rate which is a percentage of the gross volume processed. If the discount rate is 1.7%, the merchant will pay $1.70 for every $100 of volume. So, for merchants processing $10,000 or more per month, each .1% represents $10. So a discount rate of 1.3% vs. a discount rate of 1.9% will save that merchant $60 per month on just the discount alone which is an annual savings of $720. This can add up quickly, so it’s important to keep this rate low.

Your discount rate will depend on which type of merchant you are. If you’re a supermarket, for instance, you’ll pay significantly less than a website dedicated to travel reservations. You’ll also have a lower discount rate if you process mostly check cards vs. corporate cards, for instance.

Another fee charged is the per transaction fee which is typically about $.20 per transaction. These can get as low as $.15 to $.16 per transaction but it wouldn’t be worth negotiating that low unless you have an incredibly low average ticket item. If you have a $10 average transaction, a $.25 per transaction would be a 2.5% effective rate. If you add a 1.5% discount rate, you’d end up with an effective rate of 4%.

If you have a per transaction of $.17, the same $10 transaction would have a 1.7% transaction rate which would reduce your overall effective rate on those smaller ticket items. Your goal should be to get your effective rate as low as you possibly can.

You will typically have a monthly fee associated with any merchant account. This is sometimes referred to as a customer service fee, statement fee, or monthly account maintenance fee. You shouldn’t be paying too much for this fee. It shouldn’t be more than about $10 per month.

Many merchant accounts have a monthly minimum. This is typically priced around $25 per month. What this means is that the minimum amount of discount fees will equal $25. If, for instance, a merchant processes only $1,000 per month with a discount rate of 1.29%, the discount fees would be $12.90. With a monthly minimum of $25, the effective rate would be 2.5% ($25 of $1000). Of course if the merchant processes $10,000 per month at the same discount of 1.29%, the fees would be $129, far in excess of the $25 minimum.

These are the primary fees that accompany each merchant account. There are several other fees that may apply depending on whether your are processing through a wireless terminal, an internet-based account, or mail order / telephone order.

Be sure to work with a merchant service provider and a sales representative that you can trust. The industry is a lucrative one and attracts both the honest and dishonest sales reps. Having said that, make sure you review the “fine print” and pricing pages for the application before you commit to work with a merchant services provider.

You can contact Brian through his website dedicated to providing information on ecommerce merchant accounts. He has been setting up merchant accounts for all types of businesses now since 2001. You can find more information on his website about internet merchant accounts.