Understanding Merchant Account Pricing
- Pass Thru I/C Plus
- Authorization Fee
- Monthly Management Fee
- Pin Debit Transaction Fee
- Batch Fee
- Chargeback Fee
- ACH Rejection Fee & Retrieval Fee
- Voice Authorization Fee & Operated Assisted Voice Authorization Fee
- AVS Transaction Fee
The cost of accepting credit cards can be difficult to understand. At Cheddar we strive to make the various fees as transparent as possible. The following is a description of each fee typically associated with a merchant account. Specifically, the fees on the Gravity Payments merchant account application are explained.
The main fee is "interchange". This is a standard fee across all merchants no matter who the bank is. Interchange is a published rate, which in itself is difficult to understand. It is what it is, however. The VISA chart is here: https://usa.visa.com/dam/VCOM/download/merchants/Visa-USA-Interchan...
There are two ways to bill for interchange. One is called Discount Rate and the other is "Interchange Plus". A discount rate is a somewhat high percentage that stays the same for every transaction. It tends to be high (usually around 2.2-3.5%) because the bank is taking the risk of the interchange rate. They must cover the cost of interchange so they want to make sure they pass it onto you (and make some money in the process). "Interchange Plus" pricing is what Gravity Payments uses. This means that the actual interchange rate for each transaction is passed through and marked up by a small amount by the bank (called Basis Points). So, for example if the markup is 30 BP and the interchange is 1.6%, the effective rate would be 1.9%. A Basis Point is one hundredth of a percent. So, for 30 BP, add 3 tenths of a percent to interchange.
Now, the easy parts:
Each time a card is "authorized", there is a small charge. An authorization includes any transaction that results in the potential to cancel funds. In other words, if a payment is declined, this is not an authorization.
This covers the MSP's overhead for managing the account including sending monthly statements to the merchant.
This fee is for debit transaction with a PIN. E-commerce sites will typically not have this type of transaction.
This is the charge for bundling up all of the transactions for the day (or the batch period) and funding the batch into your account. This charge is typically only incurred once per day.
You don't want this one to happen. This fee will be charged if a customer disputes a transaction with their credit card issuer. Be careful to avoid this fee. The greatest protection is to ensure that all of your customers know who you are and what they are paying for. Make it easy for them to find out if they can't remember who you are.
Both fees are related to ACH transactions. Cheddar does not support ACH so merchants will typically not incur these fees. However, merchants may choose to use ACH outside of the Cheddar system using the gateway interface directly.
These fees will only be incurred if the merchant accepts payments via a telephone automated or operator assisted system.
If a merchant chooses to leverage the Address Verification Service (AVS), this fee will be charged for each AVS request. This fee is charged whether or not the transaction is declined.