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CHARGES APPLIED TO HOLD A MERCHANT
ACCOUNT
Charge and cost is applied in any
business. The policy of any business is
give and take. In the past, when money
was not into use, there was a give and
take policy called as the barter system.
After the introduction of monetary
value, in the recent time, many
traditional financial institutions have
emerged in the form of commercialised
banks to provide financial assistance to
the merchant account holders. There are
large scale merchandise businesses as
well as small scale merchandise
businesses that exist, today. However,
the banks charge certain amount on
various services and facilities.
When a merchant applies for a new
merchant account, a certain amount of
setup fees or registration fees is
charged. This fee is a onetime fee which
has to be paid at the time of opening a
new merchant account. A fee called as
settlement fee is also charged to the
merchant. This fee is charged on the
delay of time when the credit card
issuing companies charges the card till
the time the merchant receives money in
the merchant account. This type of fee
is important for the growth of the
merchandise business as the merchant can
invest the money and can invest the same
into the business. The merchant account
holders are also charged a fee called as
discount rate. It is the percentage of
money depending upon the sales volume of
the merchant. This rate ranges between
2% and 10%. There are various merchant
account providers who offer at lower
rates, so a merchant should also be able
to find the cheapest and the best way to
avail a merchant account. The discount
rate is beneficial because it totally
depends only on the sales. It is not
like fixed monthly fees. Some of the
merchant account providers charge
monthly fees as they provide statements
of the account, free shopping carts,
online secure payment gateways, free
technical support, etc. When opening a
merchant account, a merchant should know
that the monthly fees and discount rate
are probable. These charges are fixed
charges. A merchant may not have any
sales in a particular month but monthly
fee has to be paid to the merchant
account provider.
A merchant should have a low discount
rate, with huge business and with
monthly fees, the business flourishes.
Sometimes, for a good merchandise
business, if the overall sales in a
month are very high then the amount may
exceed the monthly fee rate. There is
also a policy called as reserve funds in
merchant account. It is like a guarantee
for the merchant account provider
against any risk. A certain percentage
of money is kept by the merchant account
providers as their insurance. Now, it is
like a structured settlement. The
merchant has to agree upon the lump sum
value or the monthly instalment system.
If a merchant wants instant money, then
he can apply for lump sum money. There
is very less risk involved as there is a
guarantee of future payments. A certain
processing limit is fixed by the
providers. It is actually the monthly
turnover of sales. |
