Understanding Additional Fees Related to Credit Card Processing
Outside of the processing rate, there are a number of per occurrence fees that might be charged by your payment processor.
Understanding what each fee is can help you avoid bad processing agreements and unfair billing practices. With any of the fees listed below, there is the potential for excessive processor inflation and unjustified billing. It is up to you as a well-informed merchant to do your homework, ask the right questions, and get rate comparisons to ensure you’re getting the best arrangement for your business.
The actual fees charged by payment processors will vary, these are just some of the fees that can be charged by payment processors.
Many processors will charge a monthly minimum on top of their standard monthly fees. This monthly minimum is the minimum amount you must pay the processor in processing fees alone. This means that if you don’t reach this minimum amount, you’ll be charged a difference by your provider as a penalty. Some processors will blame Visa or Mastercard for these minimums, but these fees have nothing to do with Visa or Mastercard and are instead pocketed by the processor charging them.
Statement Fee & Admin Fees
Many processors will charge additional statement fees or admin fees on top of their standard monthly fee. It can be a good idea to ask why they are charged or what they actually cover.
Quarterly Fees & PCI Fees
Many processors have recently started charging quarterly fees or monthly PCI fees. Sometimes processors will roll their legitimate cost of keeping a merchant PCI-compliant into their monthly fee, or even into a percentage of transactions fees. Some processors will grossly inflate this fee, in some cases up to 1% of the total transaction, in order to profit off the merchant.
If your business is following the data security standards set out in the Payment Card Industry Data Security Standard (PCI DSS), then you would be considered PCI Compliant. The requirements for compliance will vary based on your business, but if your business does not meet the PCI DSS requirements, then a PCI non-compliance fee could apply in order to incentivize compliance going forward.
Processing fees for the processed funds are generally removed from your bank account at the end of each month, as well as any applicable fees (such as the monthly fee). It is your responsibility to keep an appropriate balance in your bank account for these fees. In the event that these fees cannot be debited, an NSF fee will apply, and another withdrawal may be attempted within the same month. If these additional withdrawals fail, you will be notified of the overdue account. Merchants with an overdue account risk having their account closed.
Setup & Application Fees
Many processors will have a setup fee for your merchant account. Some will even charge a separate application fee, which is non-refundable even if your merchant account application is declined.
International Cross-Border Fees
Visa and Mastercard charge a cross-border fee if the customer is outside of your business’s home country to help manage currency exchange costs. This fee varies depending on your processing currency.
Early-Termination, Contract Closure & Leasing Fees
Many processors have a 3-5-year processing contract, with cancelation fees ranging from $250 to $5,000 or more. Merchants who sign equipment lease agreements can also face large equipment buyout rates. We’ll talk about why you should avoid terminal leases at all costs later.
A monthly fee typically covers some of the costs the processor needs to pay to be able to provide payment processing to the merchant and shouldn’t necessarily be considered a non-starter. What this fee includes will vary depending on your payment processor and it’s worth asking what it covers, and what it doesn’t, before you sign your merchant contract.
Processors that do not have a monthly fee often have these costs built into their margin which usually results in higher processing fees. This is why processing volume is so important because if you are processing above a certain amount per month, a monthly fee can often be absorbed by the savings your processing volume affords you.
Bank Account Change or Business Name Change
This per-occurrence fee may apply in the event that you decide to change the business name that appears on your customer's credit card statements, or if you decide to change the bank account that receives your processed funds.
In the event that a customer files a complaint with their issuing bank against a transaction you processed, you will be notified and given a 30-day window to dispute the complaint. A chargeback fee will be levied against you for the occurrence. If you ultimately win the dispute, some processors will reimburse the chargeback fee, but most will not.
Voice Authorization Fee
In the event that a cardholder’s bank requires further information to authorize a transaction, the terminal or virtual terminal may display the message "CALL AUTH CENTER," giving you the option to call the voice authorization center and obtain approval code. In such a case, a voice authorization fee will be applied.