How Payment For Merchant Services Work

The fees for merchant services may seem complicated, especially when you consider its number. However, when you look into its basic components, it can be quite simple. This is because the fees can be classified into three types. Understanding how the payment scheme works is important, especially when looking for a merchant account service.

In any case, the payment for merchant services can be classified into these: the one-time fees, the monthly fees and the transaction fees. These three are standard; more often than not, merchant accounts use this when charging an account holder.

The very first fee you need to pay when getting merchant services is the one-time fee. Usually, this includes the application fee payment (the payment you need to render to be part of the service) and the payment gateway fee (to be able to use the gateway service). As the term implies, you only have to pay for these fees once.

Next, you need to pay for the transaction fees of the merchant service. Again, as the term implies, transaction fees are the ones charged every time a credit card transaction is done. Two basic transaction fee examples are the discount rate and the transaction fee. The discount rate is a percentage that’s derived from the amount on every credit card transaction, while the transaction fee is fixed.

To distinguish the two, the discount rate is charged by the credit card company or credit card provider, while the transaction fee is a charge for the use of the payment gateway service and the credit card processing service.

There are numerous transaction fees involved in merchant services. Of course, those fees depend on the type of merchant account used, as well as the service rendered by the merchant account provider.

Lastly, you need to pay for the recurring fixed monthly fees. Take note: the payment for transaction fees are also done monthly, although it varies due to its nature. Fixed monthly fees include the monthly statement fee and the monthly gateway fee. There’s no industry standard for these fees, as it depends from provider to provider.

Although the actual concept is more complex, this is how merchant services charge account holders.

By: Kate Hammond

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