Let’s face the truth. Most of the small business owners do not understand merchant services fees and overpay for credit card processing every month. That’s unfortunate.
The single biggest reason is the complexity of fees structure for merchant services. There are multiple level of fees involved when you swipe a credit card at your terminal. Below are just some of the fees you need to lookout for on your monthly statement.
1. Statement fees
It’s a fees charged for printing the credit card statements and sending to your address by courier or postal mail. Some companies charge as much as $15 per month that may appear as miscellaneous fees in your statement.
You may get away with statement fees by opting for electronic statements. Check with your merchant to find out the pricing difference between online statements and printed statements.
2. Batch fees
Merchant receives authorization code from the issuing bank after the transaction is completed. Batch of authorization codes are processing by merchant (generally at the end of the day) for payment settlement and a fees is charged to submit those authorization for you to get paid. If you do not ”batch out”, also called ”Settle”, at the end of the day, you do not get paid for those transactions.
It’s also a good idea to batch out everyday since some merchant companies will downgrade those transactions to non qualified transaction resulting in higher fees for you.
3. Basis point (Also known as volume fee, other fee)
Basis point is 1/100 of a percent and the term is used in financial domain to represent very small fees on transactions. To simplify, 1 basis point means 1 cent of fees on $100 transaction. Looks ignorable? but it becomes a significant amount on large volume of transactions.
Let’s assume your merchant is charging you 25 basis point fees on credit card processing. If you have $100,000 of transactions in a month, then you will be charged 0.0025 * 100,000 = $250. More the volume, more the fees – that is why it’s also called volume fees.
4. PCI Non Compliance fee
Some portion of fees is paid to Payment Card Industry. If your business is not compliant with PCI standard then you will be charged for PCI-Non Compliance fees, mostly in the range of $19.99/month and higher.When compliant, you still have to pay fees to your merchant for keeping yourself within regulations.
Check with your merchant services company if you are being protected by PCI compliance and how much you are being charged for this service. More information on PCI Compiance
5. Terminal Fees
Terminal fees are the rental fees being charged to you for using the actual machine/hardware that enables you to process the transactions.
There are many options when it comes to hardware ownership. The best option is to buy your own equipment/hardware and avoid these fees. You end up paying 3-4 times the cost, overtime the course of rental or lease agreement and can range from $15-$30 per month.
A brand new EMV compliant terminal, like Verifone Vx520 can be bought for around $180 online and will save you thousands in the long run.
Besides the fees listed above, there are various other fees that merchants need to lookout for. Some are negotiable and some are not.
Contact us today for a free analysis of your statements.