Merchant Account Services

Merchant Accounts 101

Everything You Need to Know to About Merchant Accounts


Author: Jim Conners

Rating: 10.0

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Other Fees

There are many potential fees that may be incurred while accepting credit cards as payment. There is no way for us to list all of them and that's okay. The odds are you won't incur most of them. The fees listed below are some of the few remaining fees worth mentioning. If you see another fee on your statement call your merchant account provider for an explanation as to what the fee is and why you incurred it.

Voice Authorization

Occasionally a merchant may be instructed by their credit card terminal to call for a voice authorization. All merchants are provided with a voice authorization phone number when their merchant account is established. If they call this number and receive an authorization or decline they will be billed a voice authorization fee.

With computerized systems being more advanced then they were twenty years ago voice authorizations are less common then they used to be. However, they are still common for some merchants. A merchant may call for a voice authorization for their own reasons and not because they were prompted to do so. Typically this is used by mobile merchants for large purchases to verify the order before they give away their merchandise. By receiving authorization for their transaction over the phone they can be sure they will be paid before they part with their merchandise.

Chargeback/Retrieval Fee

This fee is only charged when a transaction processed through your merchant account is disputed. This is always a fixed fee usually in the $15 - $35 range. It is charged for each chargeback and is incurred regardless of whether the chargeback is successful or not.

Batch Fee

This fee is incurred each time your credit card terminal or payment gateway settle the transactions stored since the last time a settlement occurs. This fee is charged for each batch that is settled. Typically a merchant settles their sales once per day but occasionally a merchant may have a reason to settle their sales more frequently (their credit card terminal's memory may be full). Each batch settled will incur this fee. The number of transactions do not affect this fee. The same amount is charged whether one transaction is settled or one thousand. This fee is not incurred if there are no transactions that need to be settled.

Most merchant account providers charge a higher fee for batches. Some merchant account providers simply consider a batch just another transaction and only charge a transaction fee which is no different then running a regular transaction (no percentage is charged, just a flat transaction fee).

Read our blog post Save Money By Batching Your Terminal to see why you should settle your transaction every day.

Application Fee

Some merchant account providers charge a fee when a merchant submits an application for a merchant account. This fee is designed to cover the merchant account provider's costs for processing the application and submitting it to their processing bank for approval. Since merchant account providers do not make any money from a merchant account until after the account is established they may charge this fee to make sure if the application is declined they did not lose any money attempting to establish the merchant account.

This is not a standard or common fee for establishing a merchant account.


Address Verification (AVS) is required on all non-swiped credit card transactions. Failure to do so will cause a transaction to incur a surcharge thus doing so is important whenever a transaction cannot be swiped through a credit card terminal (which is every transaction for all non retail merchants).

Most merchant account providers include AVS for free with all non-swiped transaction but not all do so. Some will list this as a separate fee in order to make their costs appear to be lower. Be sure to calculate the cost of AVS into all non-swiped transaction. Non-retail merchants should add their AVS fee to their transaction fee to get an accurate understanding of their real costs.

Be sure to read our blog post The AVS Game and Always Decline Transactions That Fail AVS? to learn more about AVS.

Setup Fee

This fee is very similar to the Application Fee except it is not incurred unless a merchant account is established. Only at that point is this fee incurred. Merchants whose applications are declined do not incur any fees (unless an application fee is also charged).

This is not a standard or common fee for establishing a merchant account.

Reprogramming Fee

This fee is charged to cover the costs of labor when reprogramming an existing credit card terminal or computer software.

This is not a standard or common fee for establishing a merchant account.

Cancellation/Termination Fee

Just as the name implies this fee is charged when a merchant account is terminated. Since most merchant account providers do not charge an application fee or setup fee they incur a loss for every merchant account they establish until the merchant processes enough sales volume to make their account profitable. To ensure that each merchant is profitable most merchant account contracts contain a clause that imposes a penalty if the merchant leaves before the contract expires.

Some contracts are open ended and do not have a cancellation fee. This contracts allow the merchant to leave at any time. Some have a fixed term where if the merchant reaches the term without terminating the contract they will not incur a fee if they terminate the contract after that point. So if your contract is for two years you can leave anytime after two years has passed without incurring a cancellation fee. Some fees reduce in size as the contract progresses. For example, if a merchant leaves during the first year of their contract they may occur a $300 cancellation fee but if they leave during the second year they only incur a $200 fee.

Recurring Fees | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | 9 | 10 | 11 | 12 | 13 | Establishing An Account