Banking and accounting is directly related to monetary terms and costs. Banks charge a certain amount to provide services to the customers. There are also various costs involved in different merchant account types. In economic terms, merchandise business would be of mutual advantage if one merchant has absolute advantage over another in one line of production and the other merchant also has an advantage over the first merchant in another line of production. When the comparative advantage is different then the trade will rise and can be continued for a longer period of time. Let us discuss the matter with an illustrative example.

Let us assume there are two merchants doing the same type of business - Merchant ‘A’ and Merchant ‘B’.

Merchant A’s business = marginal cost of processing VISA card is 5 dollars and marginal cost to process MASTERCARD is 10 dollars.

Merchant B’s business = marginal cost of processing MASTERCARD is 6 dollars and the marginal cost to process VISA card is 4 dollars.

In such case, we can see that Merchant B can process both VISA and MASTERCARD at a cheaper rate than Merchant A. But the comparative costs are higher for processing MASTERCARD in Merchant A’s business. On the other hand, Merchant B has an advantage for processing both the credit cards at a cheaper rate.  Thus Merchant A and Merchant B’s business ratio is 1:2. Merchant A will, therefore, pay the Merchant B to specialise in processing of credit cards.

Monthly statement fees are charged by most of the service providers. The fee varies below ten dollars. The more number of transactions take place, the more discounts a merchant account holder gets for processing. A minimum monthly fee structure is also set up and it is mandatory. This monthly fee may be around twenty five dollars. Commission in the form of discounts are given to the merchants for processing credit cards. A fixed amount per transaction is charged. It may be 1 dollar per transaction. Whatever the value of sales may be but the fee per transaction remains the same for any sales volume. If a merchant’s discount rate is fixed to 3 percent of the sale then if he/she makes a sale of twenty dollars then the merchant gets a discount of sixty cents.

If a customer is not satisfied with the services, he/she may ask for refund. Refunding is also done through the same credit card which a person holds. But there is a chargeback fee of about ten dollars to twenty dollars. Dealings or transactions made through internet banking merchant account does not require a card terminal. But in merchant businesses like restaurants and other businesses, where the merchant and the customer are present face to face, a credit card terminal is a must. A credit card terminal costs ranges from one hundred and twenty dollars to one thousand dollars. Other devices like a computer, a barcode reader and cash drawers are also needed for these kinds of businesses. This increases the cost of the merchant account holder but it is compensated by the margin of profit.

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.