What Are Merchant Account Fees


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If you accept credit and debit card payments in your retail or e-commerce store, you’re charged merchant fees every time a customer pays using any of these electronic payments. Merchant fees will vary depending on the merchant service provider you’re using, the cost of the transaction, the credit card company, and the customer’s bank.

Notably, there are several payment models used by different merchant service providers to determine the merchant account costs. For instance, some providers will charge a flat fee regardless of the transaction cost or the credit card used while others will use a tiered payment model where they’ll charge you different rates depending on the tiered pricing plan the customer’s card is on.

In this article, we take a detailed look at what are merchant account fees and everything you need to know about them so you can make an informed choice when it comes to creating a merchant account for your business.

What Are Merchant Fees

Merchant costs refer to transaction fees that you, the merchant, pay whenever a customer uses a credit or debit card to purchase items from your retail store.

The fees include the money paid to your merchant service provider and the card-issuing bank.  The fees paid to your provider include universal, incidental, and scheduled fees, while those paid to the card-issuing bank cover the cost and risk the bank takes to approve the credit card payments.

Types of Credit Card Merchant Fees

For you to know how merchant account fees are calculated, you’ll need to understand the different pricing models used by various merchant service providers.

The commonly used categories of credit card merchant fees models include:

merchant fees types

Flat Pricing

The flat pricing type of merchant fee charges one flat fee for all the credit card transactions.

Some merchant providers instead of charging a flat fee will charge you a fixed percentage, while others will charge both a fixed percentage and a flat fee.

Usually, the percentage is between 1.75 and 3 percent. For instance, a provider who uses the fixed percentage and flat fee model may charge you 2.5 %+0.10 for every credit card transaction.

The flat fee payment model is an attractive option for most businesses as it’s easy to calculate and predict. This pricing is also recommended for businesses with low monthly credit card processing volume, as it can save you some money.

Tiered Pricing

The tiered pricing also called the bundled pricing groups cards into various tiers.

So, the fee you’ll pay will depend on the type of card the customer uses and the tier rate the card is grouped in. Most credit card processing companies who use this pricing model will group the fees into three general pricing tiers.

While this pricing model presents the fees in an easy-to-understand format, it’s expensive and doesn’t disclose the transactions’ true cost, as it conceals interchange fees.

Interchange Pricing

The Interchange pricing model also referred to as Interchange Plus or Cost Plus is made up of two components.

The first one is the interchange fee which varies depending on the type of card and the type of transaction. This fee is charged by credit card companies.

The second component of this charge is the markup, which is set by the credit card processor and covers the fee of processing the payment.

Compared to other payment pricing plans discussed above, Interchange Plus is the cheapest model, especially for merchants with high credit card payments.

Besides, it’s also transparent as it clearly shows the interchange fee and the markup, meaning there is no room for the credit card processor to overcharge you.

The Universal Merchant Account Fees

Merchant Fees

After choosing the type of merchant fee pricing model for your business, you should expect to pay additional fees related to your merchant account.

For instance, there are fees that will always feature on your monthly statement. These fees are called universal merchant fees.

A good example of such a cost is the authorization fee you pay to your provider every time a customer swipes their credit card. This fee covers the cost of sending information from the issuing to the acquiring bank. Even if the card is declined due to a low balance or any other issue, the authorization fee will still apply.

Other types of universal merchant account fees include:

  • Transaction fee – This refers to all fees that apply to each credit card transaction. This is often a flat fee charged on all electronic payments including the denied ones. Some providers include the authorization fee as part of the transaction fee.
  • Assessment fees – Assessment fees refer to the money paid to credit card companies. These fees are set by the credit card associations and help cover the operating costs that the card networks incur.  The assessment fees are the same for the different card brands. For instance, you may notice a rate of 0.13% for MasterCard or 0.10% for Visa. These fees are passed down to the customers by the merchant account providers and are included in your merchant account monthly statement.

Scheduled Fees

These are flat merchant account fees that a provider will charge to maintain your account.

Some of them include:

  • Monthly or annual fee – Some providers will charge you a monthly or annual fee for the use of their service or software. This charge will often be a small percentage of the revenue you get from credit card transactions.
  • Monthly minimum fee – Some payment processors will expect you to pay a certain amount of processing fee monthly. If you don’t reach the provided threshold, the provider will charge you the difference.
  • Statement fee – The statement fee covers the cost of printing and mailing you a hard copy of your credit card monthly statement. You can easily do away with this fee by requesting an online statement.
  • Processing commitment fee – If your business commits to process agreed credit card transactions every month, your provider may agree to waiver the monthly minimum fee. However, if you fail to meet this amount in a month, you’ll be charged the monthly processing commitment fee.
  • Payment gateway fee – Some merchant account providers will charge you a fee for using their gateway to process online transactions. Other providers use third party services and may pass on the gateway fee to you

Situational Merchant Account Fees

Situational merchant account fees are incidental fees that you pay in certain cases. The most common ones are highlighted below.

  • Address verification system (AVS) fee – If the merchant service provider feels the need to verify your address or ZIP code with the card issuing bank due to security reasons, then you’re charged a fee to enable this transaction. The address verification system fee is often $0.01 for every transaction
  • PIN debit transaction fee – Sometimes you’ll be required to enter your debit card PIN for a transaction to be processed. Once such a transaction is processed, you’re charged this flat rate fee
  • Chargeback fee– If a customer successfully disputes an item on their statement, you’ll be charged chargeback fees by the credit card network to cover the transaction
  • Retrieval request fee – In case a customer enlists a card issuing bank to investigate a transaction on their monthly statement that they seem not to remember, the issuing bank will charge you a small fee to facilitate the investigation.
  • Batch fee – Each time you settle a large transaction, you’re charged a small fee for it
  • Application fee – Some merchant service providers will charge you an application or set-up fee. However, most providers don’t charge this fee.
  • Voice authorization fee – This fee applies when a merchant has to call the card issuing bank help desk to authorize a given transaction due to security reasons.
  • Termination fee – If you terminate your account before the agreed period, you may be charged an early cancellation fee
  • PCI non-validation fee – A credit card processor will usually give you 90 days to become PCI compliant. In case you aren’t compliant by the end of the given period, the processor will start charging you the PCI non-compliance or non-validation fee.

Fees That Are Red Flags

Some unethical processors will make up their own fees or even add some hidden fees to your cost.

Ensure you carefully read and understand all the fees included and the terms and conditions before signing a contract with any merchant account provider.

Some of the fees that are red flags include:

  • Creative processor fee – Be on the lookout for fees that you don’t understand as some fraudulent credit card processing companies come up with their own fees
  • Integrity fees – Also referred to as ERF, this is a fee that should only be charged when you don’t follow the credit card transaction rules, or you don’t meet the requirements for the credit card authorization type
  • Jacked-up assessment fees – You should be aware of the various credit card companies’ charges as some unethical providers will charge you more than what is required
  • Fluctuating discount rates – You shouldn’t do business with a merchant service provider who inflates their rate without letting you know.  Such providers will raise their rates from time to time in the hope that you won’t know or ask.

Which Credit Card Merchant Fees Are Best

Merchant account costs

Not all businesses are created equal. This means that the merchant card fees you pay may not be similar to what other businesses pay.

However, with the help of this guide, you should be able to determine the credit card processing fees that apply to your business. 

Hopefully, you are also now aware of the red flag fees to look out for.

Ensure before you sign your contract, you are aware of the fees your provider is charging you, why they’re charging you, and how they calculate the fees they’re charging you.


In closing, credit card merchant fees shouldn’t be confusing. When choosing your provider, go for a company you can trust.

While most merchant services providers add unnecessary fees to your already inflated merchant account cost, you can trust eMerchant Authority to be transparent with our costs. We don’t charge any of the red flag fees explained above.

Besides, since we endeavor to create long-lasting relationships with our customers, we give you a detailed breakdown of the cost you’ll pay for our merchant account services.

We also advise our customers on how they can lower their merchant account fees in instances where they feel the cost is too high.