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WHAT ARE MERCHANT ACCOUNTS?

There are four most common Merchant Accounts:

o Visa Merchant Account

o MasterCard Merchant Account

o American Express Merchant Account

o Interac (Debit Cards/Bank Debit Cards) Merchant Account

When you are setting-up your Payment Processing System you will apply for Merchants Accounts on each Card that you would like to be able to allow your Customers/Clients to be able to pay by (if they so desire to do so).

You do not have to have Merchant Accounts on all Cards. You can pick and choose which Cards you wish your Payment Processing System to process. You can usually always add additional cards as time goes on.

Most Merchants will initially get set-up with, at least, a Debit Merchant Account and usually Visa & MasterCard Merchant Accounts.

Once you have been approved for each Card you will be given an individual Merchant number for each Merchant Account that is programmed on your Payment Processing System.

WHAT ARE THE FEES ASSOCIATED WITH ACCEPTING DEBIT & CREDIT CARDS?

What you have to take into consideration is that all Payment Processing Companies structure their Monthly fees in different ways. It is not a good idea to compare Debit costs to Debit costs, Credit Card costs to Credit Card costs, or POS Terminal costs to POS Terminal Costs.

The best way to compare pricing and costs from provider to provider is to make sure you have all the questions answered that I have listed in the article called "The 17 Essential Questions for selecting a Payment Processing Provider" which can be found at Once you have all those questions answered then total up the over all costs with each provider and see which one comes out on top. (Scroll down the Page for Examples)

EXAMPLES:

DEBIT CARD MERCHANT ACCOUNTS:
Each Merchant Account has different rates and fees associated with them. Typically Retail Debit Transaction Fees are just a flat rate. An example Debit Transaction rate would be: 12 cents per Debit Transaction. It does not matter whether the Transaction processed was for $5 or $5000 the fee would be 0.12cents for the transaction to take place. Now some Payment Processing Companies will charge you a Low Transaction rate on your Debit Transactions (like 0.05cents) and a % of your sales (like 0.0025%) that is a quarter of 1 percent. This may seem like a good deal, but rarely is.

Example 1:

Debit Transaction at 0.12 cents

576 Debit Transaction that month

Total Monthly Debit Business Volume $13,876.00

Average Ticket: $23.56

0.12 cents X 576 = $69.12 in you monthly Debit Fees

Example 2:

Debit Transaction at 0.05 cents + 0.0025%

576 Debit Transactions that month

Total Monthly Debit Business Volume $13,876.00

Average Ticket: 23.56

0.05 cents X 576 = $28.80

$13,876.00 X 0.0025% = $46.94

$28.80 + 46.94 = $75.74 in your monthly Debit Fees

You can see that Example 1 is cheaper by $6.62 even though it may initially look like Example 2 would have been less expensive. Typically, it is always better to have a flat Debit Fee only on your Debit Merchant Account. The only time the lower Debit Fee + % works in your favour on Debit Merchant Accounts is if you have a very high Debit transactions on with a very low average Debit ticket price.

CREDIT CARD MERCHANT ACCOUNTS
Again each Merchant Account has different fees associated with Credit Card Processing. Typically, it is a % of your monthly sales amount + a flat transaction fee. However, Payment Processing Companies do not charge a flat transaction fee, just the % on the monthly sales volume. When is comes to Credit Card Merchant Accounts it usually the % that you want to keep as low as possible and it is not usually as much an issue with the flat transaction fee.

Example 1:

Credit Card Discount Rate: 2.65%

No Transaction Fee: 0.00

327 Transactions

$18,267.00 in Credit Card Sales that month

Average Ticket Price: $55.86

2.65% X $18,267.00 = $484.07 in Credit Card Processing Fees that month

Example 2:

Credit Card Discount Rate: 1.89%

Transaction Fee: 0.10 cents

327 Transactions

$18,267.00 in Credit Card Sales that month

Average Ticket Price: $55.86

327 Transactions X 0.10 cents = $32.70

1.89% X $18,267.00 = $345.24

$32.70 + $345.24 = $377.94 in Credit Card Processing Fees that month

It is obvious in this Example that example 2 is the better Merchant Account to go with.

*IT IS VERY IMPORTANT THAT YOU LOOK AT THE OVER-ALL PROGRAM TO FIND WHICH MERCHANT ACCOUNTS RATES ARE BEST FOR YOUR BUSINESS.