A Brief Look At Merchant Accounts

A bank allows businesses to accept credit cards, gift cards and debit cards by having a merchant account.  A merchant account is a specialized bank processing account that uses a credit card terminal. 

A credit card terminal is an electronic piece of equipment that allows the merchant to swipe or key in a credit card’s information.  This type of terminal allows merchant’s to also be able to accept gift cards and debit cards and it check verification while processing.  Merchants can use these terminals need to be connected to phone line, internet, or cellular service. There are many ways to obtain a merchant account.

Merchants can lease a terminal if they do not want to buy one or some banks will give the merchant a terminal for free in exchange for a long term contract.  AS we all know though nothing in life is free, there are fees involved every time the terminal is used.   Actually there are a variety of fees that are involved with merchant accounts.  There are even different fees depending on if you swipe the card or punch it in manually. 

There is an authorization fee that is charged each time a card is sent to the bank to be authorized.  This is usually between 10 and 45 cents.  This fee is charged even if the transaction is declined.  A statement fee is a monthly fee that is charged to the merchant at the end of every month.  This charge is usually a flat fee of $5-$10 dollar. 

There is a monthly minimum fee to ensure that merchants pay a minimum fee each month to cover maintenance and minimal profits to the provider.  If the merchants account does not meet the monthly minimum then the merchants will be charged a minimum fee usually around $25.

A batch fee or a header fee is charged to the merchant at the end of every day when the terminal is settled for the day.  This is when a merchant is balancing their drawer at the end of the day and closes out the terminal to get a total amount of credit cards that were used for the day.  If this is not done every 24 hours a higher rate will be assessed.

There can also be customer service fees, annual fees and numerous other fees.  Before you get a merchant account set up you need to get a look at all these fees from your bank and see if you are going to have enough activity to make it worth your while to have a merchant account.