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Merchant Services Fees: What You Can Expect to Pay and When Staff
Merchant Services Fees: What You Can Expect to Pay and When
We are fast moving to a cashless society where the use of credit cards is vital to 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 (MSP) for their business, whether it’s an onsite store or an ecommerce site. 

Often, choosing the best MSP is dependent on the types of credit card processing fees involved. Read below to learn all about the different types of credit card merchant fees and which fees you can expect to pay in different scenarios. 

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 (also known as a merchant services provider).

Fees – How the Money is Made

When a credit card transaction takes place, everyone plays a role in that transaction. Additionally, almost everyone 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. 

The main type of fee is the transaction fee. This consists of a percentage of the transaction amount plus a small fixed fee. Any time the processing equipment makes contact with the network, merchants are charged a transaction fee.

Here are some other types of processing fees to be aware of: 

  • 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.
  • Monthly/Annual Fee – This fee is paid by the merchants so they can maintain their merchant accounts.
  • 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.
  • Minimum Monthly Fee – This fee will be charged if the merchant doesn’t meet the minimum monthly transaction amounts required by the service provider.
  • PCI compliance fee. The Payment Card Industry (PCI) Data Security Standard is a standard mandated by credit card issuers requiring merchants to handle credit card information securely. Some MSPs charge an annual fee for ensuring PCI compliance.
  • 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.
  • 1099-K fee. Form 1099-K is an IRS form for reporting payments received through payment card transactions and settlements from third-party payment services. Some MSPs charge for sending you this form.
  • Chargebacks. A chargeback occurs when a credit card provider instructs a business to refund a customer for a disputed or fraudulent transaction. 

How Much Should You Expect to Pay in Credit Card Processing Fees?

The main role of a merchant services provider is to enable businesses to accept debit and credit card transactions. Merchant services providers come in three different types, and average credit card processing fees can vary depending on which one you choose. 

  • Acquirers are banks or financial institutions that process credit/debit card payments on the merchant’s behalf. The acquirer allows merchants to accept payments from credit card associations like Visa, Mastercard, and American Express. The largest and best-known acquirer is First Data. 
  • Independent Sales Organizations (ISOs) are organizations that provide services on behalf of acquirers. For example, well-known ISOs like Leaders, Flagship, and Payment Cloud offer First Data services. 
  • Aggregators, or third-party processors like Square (offline/online) and PayPal and Stripe (online only) allow merchants to accept credit cards without having to set up a merchant account.

Why are we telling you all this? Because the type of MSP you choose will determine how you get charged. 

Aggregators and acquirers typically charge the same flat, per-transaction fee for all customers and don’t bother you with other fees such as annual fees, setup fees, or PCI compliance fees. If you’re looking for credit card processing for a small business with no monthly fee, then these types of providers are best. For example, Square charges 2.6% + 10c and First Data charges 2.69% plus 19c when a customer swipes, taps, or dips their card in person. Both charge an extra 1% for transactions that are keyed in. 

ISOs charge a different per-transaction fee for each merchant, based on the merchant’s level of risk, but bury a range of other fees into the fine print, such as setup fees, cancellation fees, and compliance fees. For low-risk merchants, they might charge as low as 1% per transaction (plus 15c – 25c flat fee), but for higher-risk merchants (i.e. merchants at increased risk of chargebacks and complaints) this can rise as high as 5%. However, some high-risk merchants may have no choice but to go with ISOs because aggregators and acquirers have stricter requirements.

Here’s how much you can expect to pay for ISOs for other fees:

  • Monthly fee: $8 - $15
  • Setup fee: $0 - $25 (one-off charge)
  • PCI compliance fee: $100 - $130 per year
  • Cancellation fee: $250 - $1,000 for ISOs that lock you into a contract
  • Chargeback fees: $25-40 each, not including the loss of money you earned in the sale (note that all types of MSP charge these fees – acquirers and aggregators included).

Finding the lowest credit card processing fees depends on what type of business you’re in and your volumes. With ISOs, you can expect to pay hundreds of dollars in additional fees each year compared to what you would with acquiring banks or aggregators. But if the ISO agrees to charge you low per-transaction fees, it may be worth it. As always, read into the fine print before signing an agreement with a merchant services provider and calculate what is best for your business. Staff'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.