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Costs associated with a merchant account
A merchant account offers you, the online entrepreneur, an opportunity to accept credit cards and increase your sales. But merchant accounts aren't cheap. Depending on the amount of the transaction, the fees can be substantial.
Here is a list of the fees that you can expect to pay in order to get and use your own merchant account:
- Merchant account application fee - Most merchant account providers will charge you a substantial fee simply for the privilege of applying for a merchant account. This fee can range from $50 up to several $100s.
- Setup fee - New merchant accounts sometimes come with a setup fee, which is a one-time fee that ranges from just a few dollars to several hundred dollars.
- Merchant account transaction fee - This is a set fee that you'll pay the merchant account provider for each and every credit card transaction, regardless of the amount charged. They typically range from $.20 - $.35 per transaction. If you make a lot of sales, these fees add up quickly!
- Discount rate - I get a chuckle out of the name of this fee because it sounds like something that is good for the merchant. It isn't. Your merchant account's discount rate is another fee that you'll pay for each transaction.
The discount rate typically ranges between 1.6% and 2.5%, but it can be much higher depending on your particular merchant account provider, your credit rating, and your volume of transactions. These fees add up very quickly!
<< Part 1 - Merchant accounts explained
>> Part 3 - Qualifying for a merchant account
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