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HOW MUCH ARE YOU PAYING FOR YOUR HIGH RISK MERCHANT ACCOUNT?

A merchant account is absolutely essential for the success of your business in the competitive business world of today. However, you should be careful not to pay more for your merchant account or it will be eating into the profits of your business. Also, the small business owners biggest frustration is, they do not understand what they are paying as fees and charges to the merchant providers. They are also unable to calculate what their fees for the next month will be as they have not understood the fees and rates. The reason that is causing this confusion is because the merchants are not worried or do not take the pains to understand anything else other than the discount rate that is applicable to them. Unfortunately, many account providers take advantage of this fact.

The discount rate is one of the many fees that the merchant will have to pay. Some of the other fees and charges which are applicable to any merchant account are:

  • Batch or ACH fee
  • Monthly statement fee
  • Non-qualified discount rate
  • Mid-qualifies discount rate

According to the terms and condition of your processing company you may be charged other fees such as:

  • Customer Service Fee
  • Equipment fee
  • Early cancellation fee
  • Merchant club fee
  • Monthly fee
  • Annual fee
  • Monthly Minimum fee

The most efficient method to find out how much you are paying for your merchant account each month is: the amount of fees that is charged should be divided by the total processed volume for the month. For example, suppose you have to pay $80 as fees for a processed volume of $2000 then, you have to calculate 80/2000 which is 0.04. Therefore, your merchant account provider is charging you 4% a month as his fees. This is called the effective rate.

The industry standard for effective rate is 2% and therefore, if you are paying 4% then you will be paying a high rate which is not advantageous for your business. “The Effective Rate” is the sum of all the fees that is charged on a merchant account which includes qualified discount rate, per transaction fees and statement fees, among others.

Beware of the fact that, if you sign a contract with a discount rate of 1.69% and think that you have made a good deal, then you will get an ugly shock when you see your monthly statement.

Therefore, to get a good deal for your company you must look into all the different types of fees, before signing any contract. Do not hesitate to ask questions as it is you who will be paying the money. Therefore, look for merchant providers who offer transparent contracts, no matter if the company offers a little higher discount rate. One more important factor to keep in mind is what kind of transactions you will be doing and its frequency. You should never get an account for one kind of transaction and perform another kind.

Contact one of our helpful account representatives to assist you in the setup of a high risk merchant account or offshore merchant account for a high risk merchant.