We will first take a look at the fees that we will most likely need to pay first. Once we have explored those fees we will take a detailed look at the three different processing methods, these include manual, retail, and real-time.

General Fees:

These fees are charged on all merchant accounts. These are the details of the fees listed below:

» The first fee you will encounter is the Discount Rate Fee. The discount rate is a percentage the merchant account provider charges on each sale you process, the lower the percentage the better. You will notice there is a big difference in rates for retail merchants then online merchants. Retail merchants enjoy a lower fee of 1.60% to 1.80% while online merchants pay a higher fee of 2.19% to 2.49%.

The reasons for higher fees for online merchants is pretty obvious: Credit Card Fraud and also the huge spike in Identity Theft leaves a bigger risk for fraudalent purchases and leaves a larger risk for the merchant account provider. If your credit history is sub standard you may be required to pay a slightly higher fee. As with any business the higher the risk the higher the fees. You can see more information and advice on credit card processors on this website.

» The next most common fee is the Transaction Fee. This fee is a charge for each individual transaction or sale that you process. These fees range from 10 cents to 35 cents. If you process a high volume of sales you will probably want to go with a Merchant who has the lowest transaction fee.

» Most merchant account providers will charge a Monthly Statement Fee. This fee is charged by the bank that processes the statements for the merchant account provider. These fees are usually $10 but can be as high as $30.

» Some merchant account providers will charge a Monthly Minimum Fee. This fee only applies if you fail to reach certain criteria that is listed in the contract. An example is: If the monthly minimum is $20.00 and the discount rate is 2.20% and your sales for one month was $700 the way to calculate it is $700 X .0220 = $16.10 Since the minimum is $20 you are assesed an additional $3.90 to meet the monthly minimum charge.

Once you have enough sales and surpass the monthly minimum the fee is waived and your not required to pay it. It's their way of saying thank you for producing sales. 

» This fee is almost becoming extinct but still exists among some Merchant Account providers and it is widely knowns as the Application Fee. The reason application fees are almost becoming extinct is because of the high competition. These fees can range from $100 to $400+. You can check and see if your application fee will be refunded to you in the event your not accepted. Make sure you get the information documented from company in case your not accepted. 

» The most important fee that could cost you your merchant account is the Chargeback Fee: If your customer disputes a sale or transaction on his or her credit card and it is successful you are then assesed a chargeback fee. These fees range from $10 to $35. If you recieve a lot of these fees it could put your account in crisis and could be at the discretion of the merchant account provider, be cancelled. Once terminated your elgibility for a new account could take several years. Chargeback fees are critical and need to be addressed right away. Make sure when your selling a product or service it is not defective or fraudalent because it could wreak havoc on your ability to perform future credit card transactions.

» Some Merchant Account Providers require that they hold a certain percentage of sales per month, this is known as a Reserve or Holdback Fee: If your involved in a high risk business these fees are quite common and help protect the provider from any chargeback fees.

» Another method to reduce chargebacks is an Address Verification Fee: This helps maintain integrity with the customer who submitted their information. Some companies do this for free and some assess a fee per transaction.

» If you are left in the dark when the power goes out, voice authorization technology will help you get up and running. All you need is a telephone and your back in business. The fees associated with this technology is called the Voice Authorization Fee: You may be assessed a fee for this service.

After reviewing all of these fees you must be wondering how it will save you money over paypal. Well lets take Charge.com for this example.
Charge.com offers a 1.66% rate for retail merchants and 2.39% for Internet, Mail and Phone Merchants. Lets assume you have an online business that sells software for $50. Your business is a couple years old and makes 100 sales per month.

That is a modest $5,000 in sales per month. So in discount rate fees you would be paying $119.50 with Charge.com and $147.50 with paypal. In transaction fees this would amount to $25 with Charge.com and $30 with paypal. Your also able to process retail transactions with Charge.com with paypal you don't have this ability. The total savings by switching to Charge.com would be $33 per month $336 per year. If you average $50,000 per month in sales then your saving a whopping $3,360 per year. That's two months of mortgage payments!

Featured Merchant Account Provider »» Free Credit Card Processing.com

With real time merchants there are separate fees that are applied, they are: » Set Up Fee: For real time accounts you can count on a one time Set Up Fee being applied. It ranges from $100 to $1000. There are some companies that don't charge a set up fee, one such example is Free Credit Card Processing.com. Again, just check and find out what fees are charged and what plan works best for you. » The chances of being charged a Gateway Fee is high. The reason for this fee is to cover the costs the merchant account incurs when utilizing the real time service. This fee is usually in the $15-$35 range and is expected on most real time merchant accounts.

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Manual Online Credit Card Processing Fees:

Usually this method only has one fee, it is for the Software that is being used to process the transactions. Right now Free Credit Card Processing.com is offering a free software package when you sign up for one year. You own the software as soon as you signa one year contract committing to do business for one year with Free Credit Card Processing.com. It is a stellar deal!. Usually the software is $495 or more. Your not even tied into a lease which is 12 months or more... you own this software right away when you sign the contract. If your Merchant Account Provider charges you for software it is a better idea to purchase it then lease it. If your business fails you will still be required to make monthly payments on the lease. Leasing is only a viable option if your unable to spend the funds to purchase the software outright.

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Retail Credit Card Processing Fees:

» If your a retail merchant your biggest expense is the Retail Terminal Equipment. It can range from $200 to $1000. Free Credit Card Processing.com offers this equipment free if you sign a one year contract. Charge.com is also comparable and both are trusted merchant account providers. Again, don't tie yourself into a lease if you don't have to. Getting yourself stuck with monthly payments isn't very fun.

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NEXT: Find out how to prevent fraud and expensive chargebacks.