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How To Find the Best Merchant Account For Your Business

by Diane Hughes    

Let's take a look at some of the phrases you'll encounter (in layman's terms) when you begin to search for a merchant account.

--->> Merchant Account Provider - The company who arranges for    your payment hardware or software and your ability to    accept credit cards.

--->> Nova - The company who processes the credit card    transactions and forwards them to the appropriate credit    card company for payment (Visa, MasterCard, American    Express, etc.)

--->> Set Up Fee - The one-time amount the merchant account    provider charges to set up your company in their system.    For this example, we'll use a set up fee of $65.00.

--->> Discount Fee -One amount (there are others) that Nova and    the merchant account provider deduct from each sale as a    portion of their payment for your merchant account. We'll    use a discount fee of 2.25%.

--->> Per Transaction Fee - This is a second amount that the two    companies subtract from each transaction as a portion of    their payment. For our example, we'll pick a per transaction    fee of $.35.

--->> Terminal or Gateway Fee - Whether you have a real terminal    or a virtual gateway via the Internet, you will be assessed    monthly charges to cover the use of that service. Let's say    $10.00 for our example.

--->> Statement Fee - The fee for your merchant account provider    to send an itemized statement each month. An average amount    we can use is $15.00.

--->> Annual Fee - An annual fee just for having your merchant    account. For the annual fee example, we'll choose $35.00.

I know what you're thinking! But don't give up before you start. Remember, I'm going to show you a way to decipher all this information.

Choose a number -- any number. This will be the total number of transactions you think you might conduct during the course of a year. For our example, we'll use 100. Next, choose an average transaction amount for your product or services. We'll say $175.00 for now. Finally, we'll calculate a year's worth of charges by using the amounts above and within the definitions.

Set Rate Charges: Set up Fee = $65.00 (one time only) Gateway Fee = $10.00/mth Statement Fee = $15.00/mth Annual Fee = $25.00/yr

Then multiply your estimated number of transactions by the $ .35 per transaction fee. That equals $35.00. Next, multiply the average transaction amount ($175) by the discount rate of 2.25%. That equals $3.94. You've estimated that you'll have 100 transactions per year, so again, multiply the $3.94 by the 100 transactions. The total equals $394.00. All that is left is to add them all up.

Set up Fee = $65.00 (one time only) Gateway Fee = $10.00 x 12 months = $120.00/yr Statement Fee = $15.00 x 12 months = $180.00/yr Annual Fee = $25.00/yr Per Transaction Fees = $35.00/yr Discount Rate Fees = $394.00/yr

Total Fees & Charges For One Year = $819.00

Let's look at one other quick example just to show you that looks can be deceiving.

This company offers the following rates:

Set up Fee = FREE Gateway Fee = $15.00/mth Statement Fee = $10.00/mth Annual Fee = FREE Per Transaction Fees $ .30 Discount Rate Fees = 2.35% Software Lease = $24.95/mth

Based on our same $175 average transaction and 100 transactions per year, we come out with the following figures:

Set up Fee = FREE Gateway Fee = $15.00 x 12 = $180.00 Statement Fee = $10.00 x 12 = $120.00 Annual Fee = FREE Per Transaction Fees (100 transactions x $ .30 = $30.00) Discount Rate Fees = $175 avg. transaction x 2.35% = $4.11 x 100 transactions = $411.00) Software Lease = $24.95 x 12 = $299.40 (an additional fee our first provider didn't charge)

Total Fees & Charges For One Year = $1040.40.

Even with free set up and no annual fee, this company still charges over $200 per year more than the first merchant account provider we previewed. Be very careful - the word "free" can often times be deceiving.

Merchant accounts can open a world of new business for your company. They can provide a very convenient way for your clients to pay - and for YOU to get your money. However, when you shop for a merchant account, be sure to use a standard unit of measure like we've outlined above to be very sure that you are getting the deal best suited for your company.


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Diane Hughes is an accomplished internet entrepreneur and editor of the popular ProBizTips Newsletter. Subscribe to her newsletter for more tips, tricks, and secrets of the trade -- plus get HUNDREDS of eBooks, software and tools just for subscribin