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The Ins and Outs of Your Credit Card Processing Bill

When businesses open merchant accounts for credit card processing, there are many ins and outs to be learned. Aside from learning how to operate their POS system, they must also learn about the fees associated with the bill. While it may seem overwhelming, it is in fact relatively simple to understand by asking a company representative for explanations to various terms.

Start Up Fee
Also known as an annual fee, this covers the administrative costs associated with the merchant account. Generally, these range between $25-$50 and cover the costs of starting the account as well as the hardware and software used for payment processing. While many companies charge annual fees to merchants, others charge no annual fees in an effort to attract new businesses.

Discount Rate
While sounding like a business is receiving a discount on its services, this fee is actually the percentage of the transactions as charged by the bank. Since virtually all credit card processors have their own rates, shopping around for the lowest per transaction rate is crucial to most businesses.

Transaction Fee
One of the most important fees on any credit card processing bill, the transaction fee is the amount taken for each transaction. Usually these can be shown as a fixed fee of 10-25 cents per transaction on the bill, and like many other fees businesses should look around for the best rates when examining merchant accounts. For businesses that process a high volume of transactions each month, the fee usually goes down as their monthly purchasing volume increases.

Termination Fee
All contracts for merchant accounts have clauses that allow for a business to end the relationship. However, when doing so a termination fee is almost always charged. A standard within the industry, termination fees can be calculated as either a flat fee or an amount based on how many months are left on the contract. As with other aspects of these agreements, businesses should shop around for the best deal. As more businesses have started to balk at these fees, some processing companies now charge no fees for early cancellations and don’t require businesses to sign contracts.

While understanding credit card processing bills may take some time, eventually the terms associated with them will become as familiar as those on any other statement. By shopping around for the best deal, there will be few if any surprises when the next bill arrives.

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