Common Hidden Merchant Fees and How to Avoid Them

As a business owner, you can only stay afloat if you make more than you put out. It should go without saying, but your bottom line and your income are of the utmost importance. Any threats to that bottom line, and your business could easily go under.

In this tenuous economy, businesses must be increasingly more cautious about every financial move they make, protecting themselves at every turn. A good way to ensure that you’re well protected is to make sure that the merchant services provider you enlist to help you with payment processing systems doesn’t take advantage of you by sticking lots of hidden fees into your contract.

Generally, merchant services accounts come with a variety of fees – it is just part of the deal. Some are periodic, some are determined on a per-transaction percentage basis. Sometimes they’re set by the provider of your merchant account, but it’s actually more likely that the fees are passed through your merchant services provider to a particular credit card’s issuing bank.

These fees are preset by credit card companies like VISA and MasterCard. They’re called interchange fees, and they vary depending on the type of the card and the type of transaction. Basically, transactions that involve swiping a credit or debit card through your own terminal are considered the safest method of credit card processing and therefore will result in a different fee than, for example, a transaction that was keyed in manually.

Commonly, the fees are organized into popular price models, otherwise known as tiers. It’s likely that you’ll run up against 3-tier pricing or 6-tier pricing somewhere along the line. The former is by far the most common pricing method used, because it’s usually the easiest system available. This makes it the system of choice for most merchant service providers and business owners. In 3-tier pricing, every credit or debit transaction a business processes is placed into one of three different risk categories. Each of these groups carries different security considerations and corresponding pricing levels.

Other potential charges include authorization fees, statement fees, monthly minimum fees and batch fees. Authorization fees are charged each time a transaction is sent to the card-issuing bank to be authorized. Unfortunately for business owners, this fee applies whether or not the card is verified. A statement fee is a monthly fee, as opposed to a per transaction fee, and it is sent to the merchant at the end of each monthly processing cycle. Your statement will show how much processing you did during that month, and what fees were incurred as a result.

Another common fee is the monthly minimum fee, which is a way to ensure that merchants pay a minimum amount in fees each month in order to cover the costs required to maintain the account and create profit. A good way to avoid these fees are to ensure that when you sign your merchant services provider’s contract, you give yourself a low monthly minimum barrier – that is, that you don’t overestimate how much you’ll have coming in.

Take these various charges into account when you’re going through the process of setting up your business’s merchant account.

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