Fixed fees destroy low rates

I hate seeing yearly and other fixed fees with merchant accounts. As if its not enough that a business is being charged for every transaction processed, some companies feel the need to charge yearly, monthly, daily, peak-season, miscellaneous, PCI compliance, and other fees just for using their service.

These fees make short work of any great deal that you were supposed to get. Personally, I recommend avoiding providers with high fixed fees unless there is some extenuating circumstance where you can only get approved with a processor that has them.

Let’s take a look at how fixed fees affect overall processing costs:

Let’s say your end of month cost for $8,000 is sales is $150, of effectively 1.88%.

With a $20 fixed fee, this effective rate jumps to 2.13% which is an increase of almost 15%. Add a few more in and the additional cost can easily make up 50% of you bill.

More than just fixed fees can be factored into this equation. If your transaction fee ends up costing $20 more per month with one service provider, it has the same affect as a fixed fee. When you’re looking to get setup processing, it’s important to understand how certain types of fees and the way they are presented will affect your monthly cost. My recommendation is to work backwards. Start by ignoring the discount rate and look at everything else you will be paying.