When a credit card
transaction occurs, the merchant gets charged a
minimum of two fees:
- Transaction
fee
- Discount
rate fee
Most processors
charge around 20-25 cents each time a credit
card transaction occurs. If you sell a lot of
small ticket items (drinks, donuts, etc) then
this is the MOST important fee to
negotiate. Sometimes, sales people
merge the two fees listed above into what's
called a bundled rate. This
means you pay a flat rate that includes both
fees.
For the best
deal, make sure the discount rate is
different for each type of credit card. If it
is not, then you are definitely paying too
much. Depending on where you are in the USA,
expect to see rates from 1.49% for DEBIT cards
up to 2.49% for higher risk transactions (like a
bar/strip club).
Of course, there
are many other fees that the merchant will likely be
charged in addition to the two listed above.
If you see a gateway fee on your
statement, this means your credit card
transactions are being sent through a third
party before they are processed.
Obviously, this indicates you are paying a
middleman.
A settlement
fee is charged when you submit your credit
card batch at the end of the night/shift.
Sometimes, in no-tipping environments, the
settlement fee can be reduced or eliminated by
switching to HOST based processing.
The monthly
statement fee is for producing and mailing a
printed statement to your business address. If
you are doing a lot of business, often this fee
will be waived or paid by the processor. If you
don't have sales volume yet, ask about an online
statement instead to save money.
Sometimes, you
will be charged for leasing equipment.
Recently, a typical rate is $29 to $79 per month for 36-48
months. Unless you cannot afford your own card
terminal, be careful about signing leases.
Often processors
will quote a monthly minimum fee. This
means that regardless of your account's
activity, a monthly fee will be charged.
Contract
termination fees also appear frequently.
If you ever decide to change processors, this
fee (or a pro-rated portion of this fee) will
become due. Often a termination fee is required
in order to get the most competitive rate... so
don't be turned off by this type of fee. If
the processor knows you are in this for the long
run, they will work harder to earn your
business.
Many processors
will charge fees on "gross amounts" versus on
the "net amount". For example, a $24.00 meal
with a $5 credit might be charged on a $19 basis
or on a $29 basis. Check out the
computation method carefully.
Also be aware
that some processors charge a transaction fee
for each authorization and then another
transaction fee when a tip is added. You
should be careful to pay a fee only on
settled transactions... not authorizations.
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