When your business allows customers to use credit cards, you pay fees to the bank that processes these transactions, which is probably the same bank that handles all your business accounts. These fees lower the amount you take in as cash receipts, so the amount you record as cash receipts must be adjusted to reflect those costs of doing business.
Monthly credit-card fees vary greatly depending upon the bank you’re using, but here are some of the most common fees your company may be charged:
Address verification service (AVS) fee is a fee companies pay if they want to avoid accepting fraudulent credit-card sales. Businesses that use this service take orders by phone or e-mail and therefore don’t have the credit card in hand to verify a customer’s signature. Banks charge this fee for every transaction that’s verified.
Discount rate is a fee all companies that use credit cards must pay; it’s based on a percentage of the sale or return transaction. The rate your company may be charged varies greatly depending on the type of business you conduct and the volume of your sales each month.
Secure payment gateway fee, which allows the merchant to process transactions securely, is charged to companies that transact business over the Internet. If your business sells products online, you can expect to pay this fee based on a set monthly amount.
Customer support fee is charged to companies that want bank support for credit-card transactions for 24 hours a day, 365 days a year. Companies such as mail-order catalogs that allow customers to place orders 24 hours a day look for this support. Sometimes companies even want this support in more than one language if they sell products internationally.
Monthly minimum fee is the least a business is required to pay for the ability to offer its customers the convenience of using credit cards to buy products. This fee usually varies between $10 and $30 per month.
If your company doesn’t generate any credit-card sales during a month, you’re still required to pay this minimum fee. As long as enough sales are generated to cover the fee, you should be fine. For example, if the fee is $10 and your company pays 2 percent per sale in discount fees, you need to sell at least $500 worth of products each month to cover that $10 fee.
When deciding whether to accept credit cards as a payment option, be sure you’ll generate enough business through credit-card sales to cover that fee. If not, you may find that accepting credit cards costs you more than the sales you generate by offering that convenience.
Transaction fee is a standard fee charged to your business for each credit-card transaction you submit for authorization. You pay this fee even if the cardholder is denied and you lose the sale.
Equipment and software fees are charged to your company based on the equipment and computer software you use in order to process credit-card transactions. You have the option of buying or leasing credit-card equipment and related software.
Chargeback and retrieval fees are charged if a customer disputes a transaction.
When deciding whether to accept credit cards as a form of payment, you must consider what your competition is doing. If all your competitors offer the convenience of using credit cards and you don’t, you may lose sales if customers take their business elsewhere.
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Source:http://www.dummies.com/how-to/content/credit-card-fees-your-business-may-be-charged.html
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