Merchant account – What does it cost?

Answering the question ‘how much does a merchant account cost?’ is difficult, if not impossible. This is simply because there are so many different options on the market today that it is virtually impossible to forecast how much the monthly fees and associated costs will be. It really does depend upon the type of merchant account set up, the type of business, whether or not it is high risk or low risk, and a number of other variables that depend completely upon you and your choice of merchant account.

One thing that remains constant between all of the various merchant account providers is the simple fact that the services are going to revolve around a monthly statement fee. This can be as low as $10 a month, and in some cases even less, but if you don’t have a high volume of credit card transactions there could also be a minimum fee associated with the account, upwards of $25-$30 a month. Depending on the number of transactions, your statement fee on a monthly basis could range from $10 to even $50 per month. In addition, every merchant account service provider earns a commission, also referred to as the discount rate, on every single credit card transaction processed through the company. This can range from 2-5%, although it could be lower or higher depending upon the provider.

If your company is considered high risk or you are a new business with little to no track record or a poor credit history, your discount rate could be considerably higher. In addition, merchant accounts also tack on an additional fee per transaction that can range from 20-80 cents per transaction. This is regardless of whether the sale is for $10, $200, or $2000; the transaction fee remains the same no matter how much money is actually processed during the transaction. And, if the customer decides they want a refund at some point processed back to their credit card, there will also be a chargeback fee that is dependent upon the merchant account provider.

A good example would be to say that if you make $2000 from 40 different sales in a month through credit cards and you have a 3% discount rate in conjunction with a $10 statement fee and a $.25 transaction fee, with four refunds and chargebacks at $15 each, your total charges for the month would be $140, which is 7% of your credit card income. Not too bad for the cost of doing business, but bear in mind that this is an example only and your rates could be higher or lower depending upon your credit record and the type of business you are running, not to mention which merchant account provider you have selected.

There are literally hundreds of merchant account providers around the world, and who you select will determine your exact monthly fees.