All
banks and merchant providers require credit
card merchant fees from you for accepting
credit cards on your Web site. Typically,
these fees are broken down into 3 categories:
a discount rate, a transaction fee, and
monthly fees. For the bank's purposes, a
transaction is usually defined as any communication
between you and the processing network.
A "credit" transaction is treated
the same as a regular transaction. Settling
a batch is usually considered a transaction
as well, as it involves communication with
the processing network.
Discount Rate
This is the percentage of
the total transaction amount that the bank
will usually deduct prior to transferring
your deposit into your bank account. Typical
discount rates range from 2.1% to 2.6% for
Visa/MasterCard merchant accounts, depending
on your type of business and other factors.
A higher rate may be charged on individual
transactions if the transaction doesn't
conform to certain qualifications, as described
by your bank or merchant provider. For instance,
accepting a "Visa Business Card"
credit card may cost you 1% more than regular
transactions. The reasons for these non-qualified
transaction surcharges and complete details
on all transaction qualifications should
be discussed with your bank or merchant
provider. Address Verification (AVS) may
also fall into this category when not used
properly. Address Verification (AVS) is
described below. See Interchange Plus pricing
shown below.
Transaction Fees
This is a flat amount that
you pay for each transaction. Typical transaction
fees range from 10 cents to 50 cents per
transaction. In some cases transaction fees
can be $1 or $2 per transaction, but these
are rare and usually apply to Adult sites
only.
Monthly Fees
These are fees charged for
other account related services, such as
customer service, your monthly statement,
network access fees, and minimum monthly
fees.
All the fees and charges
are required to be disclosed to you prior
to your commitment to the merchant agreement
between you and your bank or merchant provider,
and are usually enumerated carefully to
you in the merchant agreement itself.
Interchange Plus
Pricing
One of the components that
affect your merchant account discount rate
is the Visa or MasterCard rate which is
part of the merchant discount rate. Visa
and MasterCard have about 35 different rates
known as Interchange, which determines the
rate a merchant must pay for a particular
transaction, depending on whether is a standard
consumer credit card, or business credit
card, or corporate card, or debit card,
or reward card, or if the transaction is
card swiped, has address verification or
not.
Interchange
Plus pricing consists of three categories
of fees namely: Qualified, Mid-Qualified
& Non-Qualified. The Qualified discount
rate is the standard for all transactions
and only covers a few Interchange rates.
When a merchant processes a transaction
that goes through one of the more expensive
Interchange rates, providers add the Mid-Qualified
or Non-Qualified rate to the merchant's
Qualified rate.
Qualified Discount Rate
is about 2%. Mid-Qualified is about 1%,
and Non-Qualified is about 1.6%. In addition
to the Interchange fee (for the issuing
bank), there is also acquiring bank fee
inserted into the overall Discount rate.
For example, for a transaction which is
with a corporate credit card and no address
verification, the Discount rate can be as
high as 3.9% = (Qualified (2%) + Acquiring
bank rate (0.3 for underwriting) + Non-Qualified
(1.6%)).
For retail merchants, the
mid-qualified will apply to any keyed-in
transaction. For Internet & Mail/Phone
order merchants, the mid-qualified generally
only applies to the reward cards.
Unfortunately the merchant
account fees and pricing is unnecessarily
complicated and it will always remain controversial
since many believe that it is designed as
such in order to confuse businesses and
corporations by the banking industry.
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