A Guide to Understanding Credit Card Fees

Accepting credit cards is a crucial way to increase your revenue and help you attract more customers, but the inevitable fees can also cut into your sales to the point where it’s difficult for your business to make a profit. Not all merchant accounts are created equal, though. The right processor will help you find ways to lower your fees while providing transparency about what you’re being charged.

At Merchant Service Group LLC we believe it’s vital for you to understand your credit card processing fees. Here are a few key terms to help you understand what fees you’re being charged and why.

Interchange fees

Interchange fees are the percentage of the transaction charged by the credit card company (Visa, Mastercard, etc) to your business every time you accept a credit or debit card. The amount of this fee depends on many factors and varies by card type, with debit cards charging the lowest rates and rewards and business credit cards charging some of the highest.

Flat rate fee:

 Many processors will simplify the pricing model and charge your business a flat rate for every credit card transaction. The processor is still covering the interchange fee, but instead of passing that rate to you, they keep your rates the same no matter what type of card you accept.

A flat rate set-up is more straightforward and easy for you to see exactly what you’re being charged, but overall, you may end up paying more than you would under interchange plus. That all depends on the rate your processor sets for your account and what kind of cards you typically accept.

Other fees:

Your merchant account may also come with various monthly and one-time fees that are standard with most accounts. Some processors may cover these fees for you under a flat rate set up.

·      Monthly fee: This is set by your agent or processor. Some may charge a low monthly fee while others may charge a higher fee as a way to cover other fees and simplify your charges.

·       Chargeback fee: This is one fee that very few merchants can avoid paying when the situation arises. Chargebacks are costly expenses to businesses and processors, with an additional charge of about $25 every time one is filed, so it’s best to take steps to prevent them before they occur.

·       PCI Compliance: This fee is charged to businesses who have not registered through PCI to show that their terminal or PC connection is secure. Unsecured connections leave processors and customers at a greater risk for stolen information, which is why this fee cannot be removed until your business becomes PCI Compliant.

Understanding your fees is the first step to building a stronger business. With our innovative technology, Merchant Service Group LLC can lower your fees, and our expert technical and boarding teams can answer any questions you may have about your application, fees, or other account information.

For more information, please email us at hello@merchantservicegroupllc.com

Frequently Asked Questions

Opening a merchant account is a big step for your business, and with an industry this intricate, it’s natural to have a few questions. To help you get started, here are a few of the ones we get often:

Why do I need a merchant account?

A merchant account allows you to accept payments from credit and debit cards. A business must go through an application process in order to open one in which your financials and credit history are examined. It’s possible to work with a third-party processor to accept credit cards instead of opening an individual account, but without an account of your own, your options with equipment, rates, and funding are more limited.

Do I have to sign a contract?

Every merchant account requires a signed application that shows you agree to the conditions and rates of the processing company. The application itself does not require a length of time for the account to stay open, although some processors may ask you to agree to keep the account open for a certain period of time and will charge an early termination fee if the account is cancelled before that date.

Why do I need an agent?

Your agent provides personal attention for your merchant account. They help you set up the account and are your point of contact with the bank processor to deal with any problems that may arise.

How long does it take to open an account?

Your merchant account can be up and running within a day of submitting your application depending on the business type and equipment.

How much will my equipment cost?

Terminals begin around $100, while POS systems can cost $1000 or more. Cash discount accounts may qualify for free terminal placement, where you are provided with a terminal to use as long as the account is open.

When will I receive my deposits?

Many accounts qualify for next-day funding depending on the type of business and the equipment used. Others may be subject to a one day hold.

What is a high-risk account?

A high risk account is a business type that processors have deemed risky to work with and thus is more difficult to open. Because of a history of chargebacks or industry regulations, businesses such as firearms, e-cigarettes, and furniture stores may have to do more searching to find a processor that will be able to approve their account and offer competitive rates.

What is interchange?

Interchange is the rate that credit card companies like Visa and Mastercard charge for every credit card transaction a business accepts. This charge may depend on the type of card that is used and is typically higher for keyed transactions than swiped/EMV transactions. Some processors will set up your account with flat rate pricing instead, in which the charge is the same for all card types.

What determines my rates?

Many factors go into this. The interchange rate provides the base of your fees, and while this is the same for everyone, your agent and processor determines how much you will pay above interchange. This may be higher for certain business types, such as those considered high risk.

Will my rates ever increase?

Your rates will never change without your signed consent, unless required by the card associations, which we would pass through at cost.

What kind of customer service do you offer?

Our technical support is available 24/7 and we have in-house technical expertise and language support for all of your account needs.

Have any other questions? The customer service and in-house technical team at Merchant Service Group LLC is always available to answer them.

For more information, please email us at hello@merchantservicegroupllc.com

Boarding Merchant Accounts for High-Risk Adult Businesses

The adult entertainment industry is a lucrative industry that has only grown as technology has developed. Businesses such as adult websites, adult toy and novelty retailers, online lingerie shops, dating and escort businesses, strip clubs, adult book and video stores, and other legal adult businesses can increase revenue and reach a wider customer base through the internet. The internet makes it easier for customers to access these businesses, and it provides the privacy that many customers desire when making these types of purchases.

While the internet has allowed more discrete purchasing, it comes with a higher risk of chargebacks and customer disputes. Any business that processes transactions where the credit card is not present, such as transactions taken through a website or payment gateway, may be considered high risk, but there are specific situations that make adult merchant accounts more vulnerable than other businesses. Subscription-based or pay-by-the-minute services may lead to more frequent chargebacks if the charges are not made clear up front. Customers looking for more secrecy in their purchases may be more likely to dispute a purchase when it shows up on their bill because they’re unwilling to admit to the purchase or simply do not recognize or recall the company that the charge came from.

The high number of chargebacks is usually enough for other processors to decline adult merchant accounts, but there are additional factors that contribute to the industry’s high risk status. Other processors may consider the adult industry to be high risk due to its strict regulations and legal restrictions, the controversial nature of the content, or simply because of the large volume of daily transactions. The more revenue, the more risk to the processor.

However, with an experienced team, there are ways around these restrictions. Merchant Service Group LLC boards these accounts quickly and easily with a number of payment options for storefront or online purchases, including an online shopping cart through company websites or a payment gateway. We can help set up a customized solution for your business, give advice on how to avoid chargebacks, and provide 24/7 customer service to keep your business running and in demand.

For more information, please email us at hello@merchantservicegroupllc.com

A Brief Guide to the 1099-K Form

When you begin accepting credit card payments, you open your business to a greater stream of revenue, but it comes with a few extra complications. In addition to handling the day to day maintenance of your merchant account, you also need to make sure you are complying with IRS rules and regulations when you file your taxes. Although it’s a relatively new requirement, the 1099-K is an important form you’ll want to be aware of if you accept credit, debit, and gift card payments.

In 2008 Congress added an unrelated amendment to the Housing Assistance Tax Act that requires businesses to report all card payments as a way to increase voluntary tax compliance and ensure that all income is reported accurately, especially for those accepting payments online. The 1099-K form is used to report your payment transactions and includes the gross amount of all reportable payment transactions. It also includes any third party payment network transactions in which the total exceeds $20,000 and includes more than 200 transactions.

This information must be reported on your income tax return and should be included when calculating the full business income for the year. While the IRS was lenient about this addition to begin with, they have begun contacting businesses whose gross business income is less than the amount reported on their 1099-K.

It is important to check your merchant statements to make sure that the 1099-K accurately reflects your payments received for the year including your total gross payment. There are several situations that may cause this amount to be incorrect including:

  • If you shared your credit card terminal with another person or business
  • If you bought or sold your business during the year
  • If you changed your business structure during the year (e.g., converting from a sole proprietorship to a partnership

If your total gross payment is incorrect, contact your payment service provider to report inaccuracies and receive a corrected form. You can also contact your processor if you need copies of your merchant statements or a copy of the 1099-K itself.