Annual Fees – What are they?

You’re unlikely to see this very often, but some banks that offer merchant accounts charge their customers an annual maintenance fee for the facility. It really is no longer industry practice to charge annual maintenance fees, banks usually incorporate a maintenance charge either into a monthly customer service fee or into a monthly minimum fee. Banks do have costs to cover when they set up and maintain a merchant account facility for a customer. For one, a merchant account holder will rely on their bank for customer support ñ if a question arises about the Credit Card Processing system in general, or if a question arises during the processing of a transaction you will want to talk to your bank for advice.

One way of making sure that you do enough business with your bank for them to recover their costs is to lock you into a fixed term contract, often for multiple years, with a substantial exit fee. If you decide to break the contract before the end, you will be liable for an exit fee that could run into thousands. However fixed term contracts are becoming few and far between, as banks find it difficult to offer merchant account products that outshine their competitors in a substantial way.

Monthly minimum fees are the most common way of charging for support and maintenance, in fact you will find that most merchant account providers charge a monthly minimum fee, as it really is industry standard practice. Monthly minimum fees are the main way in which banks charge you for customer support and other maintenance services.

Fortunately, you could possibly avoid paying monthly minimum fees. From the bank’s viewpoint, if you are turning over a sufficient amount of transactions, their costs are covered ñ and more. However if your merchant account turns over very few transactions or indeed sees no transactions at all, your bank will be running at a loss.

The monthly minimum fee only springs into action if the total transaction turnover on your merchant account is less than a pre-agreed amount, an amount agreed to when you signed the contract with your bank. This fee is usually a fixed amount that kicks in if your transaction turnover falls below a certain level so you don’t pay the minimum monthly fee unless your transaction turnover is low.

A monthly fee based on a minimum transaction turnover is probably a fairer way of charging for support and maintenance than a fixed, recurring monthly fee or an annual fee. If you do enough business you won’t need to pay the fee at all. However if your business turnover is low, you could be obliged to pay the monthly minimum fee month after month, in which case you should probably look for a merchant account provider that still practices an annual fee policy.

Whatever your scenario, fees and charges can eat deeply into your profits and it is something you should plan for thoroughly.

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