IPSKeith

Besides the fees incurred directly for processing credit cards there are other fees associated with establishing and running a merchant account. These fees occur on a regularly scheduled basis and may be indirectly related to the merchant's processing levels. Many processors will try and apply all of the fees listed in my article. IPS takes each account on its own basis and only charges the fees necessary to make the account profitable enough for us to absorb the risk as the processor. Each merchants business model, volume, history and charge back ratios are just some of the factors which determine what fees will be applied.

Statement Fee

The statement fee covers the cost for creating a statement for the merchant each month that details the processing history for the previous month as well as a breakdown of the fees incurred from that month's processing. It also typically includes the costs for customer service and technical support as well. However, some merchant account providers will separate their monthly fees for statements and customer service and tech support.
Most providers will not waive this fee even if you decline a paper statement being mailed to your business. This is because they still aggregate that data even if you don't elect to receive it. Plus it also includes your customer service and tech support costs for the month.

Monthly Minimum Fee

The monthly minimum fee is a fee which guarantees the merchant will be paying a minimum amount each month in processing fees. If a merchant's discount fees do not equal their monthly minimum fee they will be charged the difference between the two in addition to their discount fees. Example: A merchant has a discount rate of 2.50%, a monthly minimum of $25, and a monthly volume of $600. The discount fees for the month will be $15.00 (.025 x $600). Because their discount fees are less then their minimum fee ($15.00 < $25.00) they will be charged an additional $10.00 as a monthly minimum fee ($25.00 - $15.00).

Annual Fee

Annual fees are exactly what their name implies. They are charged each year that the merchant has their merchant account through their current provider. Some merchant account providers charge this fee on the anniversary that the merchant account was established while others charge this fee on a set date each year. There are several different types of annual fee including membership fee and merchant club fees. Regardless of the name they all serve the same purpose. This is not a standard or common fee for establishing a merchant account. IPS does not charge annual fees for any established merchant accounts but some sponsor banks may charge some sort of maintenance fee.

Other Fees

There are many potential fees that may be incurred while accepting credit cards as payment. There is no way for us to list all of them that many processors may charge. The odds are you won't incur most of them if they are a reputable company. The fees listed below are some of the few remaining fees worth mentioning. If you see another fee on your statement call your merchant account provider for an explanation as to what the fee is and why you incurred it. If your current provider is hesitant to explain their fees in leman terms that probably means you should question their business practices.

Voice Authorization

Occasionally a merchant may be instructed by their credit card terminal to call for a voice authorization. All merchants are provided with a voice authorization phone number when their merchant account is established. If they call this number and receive an authorization or decline they will be billed a voice authorization fee.
With computerized systems being more advanced then they were twenty years ago voice authorizations are less common then they used to be. However, they are still common for some merchants. A merchant may call for a voice authorization for their own reasons and not because they were prompted to do so. Typically this is used by mobile merchants for large purchases to verify the order before they give away their merchandise. By receiving authorization for their transaction over the phone they can be sure they will be paid before they part with their merchandise.

Chargeback/Retrieval Fee

This fee is only charged when a transaction processed through your merchant account is disputed. This is always a fixed fee usually in the $15 - $50 range. It is charged for each chargeback and is incurred regardless of whether the chargeback is successful or not. If there is excessive chargeback issues these fees can be higher or even cause your merchant account to be shut down. It is very important that you have a strategic partner like IPS who will help you keep your chargeback ratios down.

Batch Fee

This fee is incurred each time your credit card terminal or payment gateway settle the transactions stored since the last time a settlement occurs. This fee is charged for each batch that is settled. Typically a merchant settles their sales once per day but occasionally a merchant may have a reason to settle their sales more frequently (their credit card terminal's memory may be full). Each batch settled will incur this fee. The number of transactions do not affect this fee. The same amount is charged whether one transaction is settled or one thousand. This fee is not incurred if there are no transactions that need to be settled.

Most merchant account providers charge a higher fee for batches. Some merchant account providers simply consider a batch just another transaction and only charge a transaction fee which is no different then running a regular transaction (no percentage is charged, just a flat transaction fee). That is the way IPS chooses to charge their batch fees. We do not nickel and dime our merchants.

Application Fee

Some merchant account providers charge a fee when a merchant submits an application for a merchant account. This fee is designed to cover the merchant account provider's costs for processing the application and submitting it to their processing bank for approval. Since merchant account providers do not make any money from a merchant account until after the account is established they may charge this fee to make sure if the application is declined they did not lose any money attempting to establish the merchant account. In most cases IPS does not charge an application fee. In the cases where the account is high risk or more importantly an offshore entity needs to be set up then fees may occur.

Setup Fee

This fee is very similar to the Application Fee except it is not incurred unless a merchant account is established. Only at that point is this fee incurred. Merchants whose applications are declined do not incur any fees (unless an application fee is also charged). IPS only charges such fees when there is costs incurred to establish offshore entities for merchant accounts. This is pass through cost only. If there is any integration fees charged for the account IPS treats them only as pass through and does not pad any such fees.

Reprogramming Fee

This fee is charged to cover the costs of labor when reprogramming an existing credit card terminal or computer software. IPS never charges such fees which are considered padding of a merchant account.

Cancellation/Termination Fee

Just as the name implies this fee is charged when a merchant account is terminated. Since most merchant account providers do not charge an application fee or setup fee they incur a loss for every merchant account they establish until the merchant processes enough sales volume to make their account profitable. To ensure that each merchant is profitable most merchant account contracts contain a clause that imposes a penalty if the merchant leaves before the contract expires.

Most of this information may be basic for the merchants out there that have experience with payment processing. Hopefully this can be of help to some people. Please do not hesitate in contacting me with any questions you may have or if I can be of service to you.

Regards,
Keith
[email protected]
O.800.439.1974 ext.122

RRACY

__________________
Sig Free