Over the past two weeks, we have been discussing the fees related to the credit card processing industry. We walked through Interchange (the base of the fee structure) and the costs associated with Capturing, Authorizing & Settling the transactions we process every day. Today we look at all of those 'miscellaneous' fees that show up on our monthly merchant statements and we will count on our bicycle shop to give us some real life explanations of each one.
Monthly Minimum Fee: 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.
Our bicycle shop had a great month! Most of their customers paid with cash (hey- it could happen!) and so their monthly processing fees totalled just $5. Since their minimum processing fee is $10, they will see an additional $5 on their statement to reach their $10 minimum processing fee.
Monthly Statement Fee: charged by your processor or merchant services provider and it is a fixed fee, regardless of the number of transactions processed. For many processing companies, the cost of support and the monthly statement are covered by this fee.
Monthly Service Fee: some processors call their statement fee a service fee and there are some processors who charge both (we do not agree with this practice).
The bicycle shop owner only has one of these fees. Each month, they see a monthly statement fee, on the statement that is delivered each month. They are not charged for additional service related calls.
Annual Fee: fee charged on an annual basis (be AWARE of bi-annual fees) by the processing company. This annual fee can range between $0 and $160.00 and typically covers the expense of boarding a merchant account.
One time per year, the bicycle shop owner pays their annual fee- it shows up on their monthly statement and they receive a reminder before the fee is charged.
Regulatory/IRS Reporting Fee: a relatively new fee caused by the recent regulations requiring all merchant processing activity to be reported to the federal government.
Our bicycle shop owner pays this fee in February of each year and they receive a 1099K each year, that outlines their annual processing activity.
Monthly Supply Programs: fee charged for 'free' supplies or equipment replacement service.
Supply programs are great solutions for merchants who run through 6 or more rolls of paper per month (on average). Our bicycle shop does not use enough supplies to warrant this added expense and simply calls in to order paper when they need it.
PCI Annual/Non Compliance Fees: fee charged annual for PCI (Payment Card Industry) compliance- a Non Compliance fee is typically charged monthly if a merchant is out of compliance. MORE PCI INFO
Our bicycle shop owner was educated and understands the importance of PCI COMPLIANCE. Each year, he/she receives a reminder and walks through the self assessment questionairre to make sure their system is in compliance. Because he/she maintains compliance, they've never had to pay a non compliance fee.
The CRAZY thing about the credit card processing industry is that there are so many ways to HIDE these fees! If your monthly processing fees are high enough, processing companies say that they do not have these fees (your higher rates cover them). Checking the fine print of your merchant agreement for any of these 'extra fees' (and others we may have missed) is your best defense against paying too much. Fees are a part of accepting credit cards and they are a cost of doing business: minimizing the fees, educating our merchants and making sure they are paying a fair price is what we are all about.
Our bicycle shop owner has been advised to treat the processing rates and fees associated with accepting credit cards as a cost of doing business- just like the parts they purchase to make the bicycles, the employee expense and the tax burden. They calculate their overall 'Effective Rate' each month to make sure their rates are in line and to make sure they are budgeting properly.
Remember that accepting credit cards helps you gain more business and there is a price to pay for that convenience- it is our goal to help you understand the rates/fees and understand when you are getting a fair deal!