Understanding Merchant Service Provider Rates

Searching for merchant services can be one of the most time-consuming tasks for a new business owner. Realizing this, some merchant providers have gone to great lengths to make the process as simple as possible so you can get your information out there and get moving with your business. To help you navigate your merchant service agreement, it is important that you understand that different rates and fees attached to a merchant account.
What are the Fees?
Merchant services typically come with a variety of fees. These fees range from batch handler fees to equipment fees, to the monthly service fee. Depending on who you use as your service provider, you can eliminate some of these fees entirely. For most business owners, the two most important fees are monthly free and transaction fees.
Monthly Fee vs. Transaction Fee
There are a lot of factors that go into finding the right deal on merchant services. If you are opening a new business, the reality is that you are simply guessing at the number of customers you expect to receive or the volume of product you hope to move. You can run projections and do industry research, but until you get up and running you can never really be sure. Despite this, you have to use the information available to determine where you stand with monthly fees.
The two most impactful fees, which are universal across merchant services, are the monthly fees and the transaction fees. Ideally, you want both to be as low as possible, but once you start looking at providers you might find that there is a balance in play. When one is lower, the other is higher and this can lead to a conundrum if you haven’t done your due diligence.
Though you may only be guessing at your volume, the key to determining which to focus on lies in how much business you expect. If you are a high dollar business and expect only one or two transactions per day, you might accept a merchant provider that offers higher monthly fees and lower transaction fees. After all, each transaction is going to be substantial, so you want the lowest percentage taken out. If you expect hundreds or even thousands of transactions, then it gets a bit trickier.
Using your estimates, you should figure out the tipping point of monthly fee against transaction fee. If your business makes 500 transactions per month it might be better off with a slightly higher transaction fee and a lower monthly fee. On the other hand, at 600 transactions the balance might tip in the other direction. If you find yourself torn between two companies with this dilemma, remember that your decision can have a serious impact on your bottom line.
Getting the Best Merchant Services
To make sure that you are getting the best deal on your merchant services, it is important to weigh all of these fees against one another. The monthly service fee for one provider might be extremely low, but if you are expecting hundreds of transactions and the percentage on the transaction fee is twice what it is for a competing provider, you might want to rethink your choice.