We earn a commission from brands listed on this site. This influences the order and manner in which these listings are presented.
Advertising Disclosure

Merchant Service Fees Explained

Top10.com Staff
This is what's involved in a merchant service transaction
With the Internet playing such an important part in the business world, the use of credit cards is vital to both customers and merchants.

The credit card processing/merchant services industry plays an important role in the success of a business. What’s equally important to the business’s success is choosing the best merchant service provider for their business, whether it’s an onsite store or an ecommerce site. Often, choosing the best merchant service provider is dependent on the type of fees they charge as well as the amount of these fees. Read below and learn who’s all involved in credit card transactions, where the money goes and various types of merchant service fees a business owner can expect.

Who’s Involved in Credit Card/Merchant Transactions?

There are generally several people or companies involved in a credit card merchant transaction: you (the merchant), your bank, the customer making the purchases, the credit card issuing bank, the credit card company (MasterCard, Visa, etc.) and the credit card processing company.

Fees – How the Money is Made

When a credit card transaction takes place, everyone plays a role in that transaction. Additionally, almost every gets their cut of the transaction in one way or another, generally in the form of fees. This is why it’s so important to shop around when looking for a merchant service provider. While you can’t get around paying some fees, you can choose a company that has the fewest and cheapest fees. Here are a few of the many fees involved in credit card transactions.

Account Maintenance Fee – This merchant is charged this fee to pay for any maintenance or updates the provider makes to the merchant’s account, such as name, address, banking information changes.

ACH/Daily Batch Fee – This fee occurs when the merchant settles their daily transactions (aka batches) with the credit card processing company. It only occurs on days when there is a settlement.

Annual Fee – This fee, charged annually, is paid by the merchants so they can maintain their merchant accounts.

Authorization Fee – This fee is charged each time the credit card processing machine must obtain authorization for a transaction.

Cancellation Fee – This fee occurs when a merchant cancels his or her account with the merchant service provider.

Debit Network Fees – This monthly fee allows the merchant to have access to many debit card networks.

Early Termination Fee – This fee is charged when a merchant cancels their account prior to the expiration date mentioned in their original transaction agreement.

Minimum Monthly Fee – This fee will be charged if the merchant doesn’t meet the minimum monthly transaction amounts required by the service provider.

PIN Debit Transaction Fee – This fee is charged when a customer uses a debit card that requires the entry of a PIN number.

Statement Fee – This fee, charged monthly, is a payment the merchant must make in exchange for getting a monthly statement of their account. Statement fees may be integrated into monthly fees, maintenance fees or support fees, depending on the service provider.

Transaction Fees – Transaction fees occur every time a transaction is approved, whether it’s approved or denied. The amount of the fee may vary depending on if the transaction was keyed or swiped. Any time the processing equipment makes contact with the network, merchants are charged a transaction fee.

Wireless Service Fee – This card is charged when the merchant uses a wireless network to transmit the transactions wirelessly. 

Top10.com Staff
Top10.com's editorial staff is a professional team of editors and writers with dozens of years of experience covering consumer, financial and business products and services.