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Payment
Processing Fees
While third party payment
processors like PayPal have a simple fee structure, a Merchant Accounts/Payment
Gateway combination is a little more complicated.
Here's a breakdown of each
the fees and what they mean:
1. Merchant Account Fees
Application/Set-up fee:
Banking institutions will charge a fee to apply for a merchant account,
regardless of whether your application is successful or not.
Once your application has
been approved, there may be other fees associated with establishing the account
so check before applying.
Monthly Account Fee:
A monthly fee charged by the bank to keep your account open.
Discount/Charge Rate:
The percentage fee you pay to the credit card company (Visa, MasterCard, etc)
for each transaction. For example, if you sell a product for $100 and your
charge rate is 2.5%, you'll pay them $2.50.
Statement Fee:
A monthly fee a bank will charge for issuing your account statement, which
outlines your transactions. Some banks may allow you to avoid statement fees by
receiving your statements in an electronic format rather than in print.
Chargeback Fee:
The fee which is charged in the event a customer disputes a transaction on their
statement (e.g. fraud, not happy with purchase, etc).
2. Payment Gateway
Fees
Application/Set-up Fee:
A flat fee charged to set-up your payment gateway account.
Monthly/Yearly Fee:
A flat monthly or yearly fee charged by your payment gateway provider to gain
access to their service.
Transaction Fee:
A flat fee charged by your payment gateway to process each transaction (e.g. 50
cents per transaction).
What is a 'Chargeback'?
A chargeback occurs when the
owner of a credit card successfully disputes that they are not responsible for a
charge appearing on their statement.
A chargeback can occur if:
- A
credit card is stolen and used fraudulently
-
Goods or services are not delivered within the specified time frame
-
Goods are received damaged
- The
purchase was not authorized by the credit card holder
In general, a chargeback
usually goes in favour of the consumer, so prevention is definitely the best
cure.
The best way to avoid charge
backs is to:
1.
Make sure all the
details of your products and services on your website are accurate and clearly
explained.
2.
Cover all aspects of
your purchase policies in the 'Terms and Conditions' page of your website.
3.
Ship goods and services
on time and contact your customer if there is going to be any delay.
Screen for fraudulent orders
and monitor for suspicious purchasing behaviour.
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