Payment Processing Fees Part 3: Situational Fees

By: Zakry Chami August 22, 2018

In Part 2, we took a look at the different "fixed" fees that a payment processor could be charging you every month for their services. This week we'll cover the fees that are only charged when an event occurs; some of which you should really never be charged. Hence their name: situational or incidental fees. Some months you may have no situational fees show up on your bill, other months you will. Lastly, we'll leave you with a few tips when reviewing your current or prospective merchant provider's fees. 

NOTE: Grab your merchant statement and compares with the fees listed.

SITUATIONAL FEES

Some months you may have no situational fees show up on your bill, other months you will. 

Cancellation fee

This fee is charged when processing services are terminated prior to the end date of one’s contract.

Chargeback fee

If a chargeback (or dispute) occurs, a chargeback fee is charged to the merchant. For more information on chargebacks, check out our blog.

International fee (cross-border fee)

This fee is charged when an international credit card is used for payment. Most processors will markup this fee. For example, when a European Visa is used in Canada.

Foreign transaction fee

This fee is charged on top of an international or cross-border fee as a markup for processing a credit card transaction with a foreign issuing bank.

Monthly minimum fee

This fee is charged to merchants who do not reach their total monthly minimum amount of transactions or sales. This amount is usually laid out in a merchant’s contract and varies depending on the processor. For example, if your minimum is $20/month and you only pay $13 in processing fees that month, your monthly minimum fee will be $7 for that month.

NSF (non-sufficient funds) fee

This fee is charged if a merchant does not have enough money in their bank account to cover that month’s payment processing fees.

AVS (address verification service) fee

This fee is charged to eCommerce businesses for the use of this anti-fraud service that verifies the identity of a cardholder by comparing the address and name entered with the card brand’s data.

AVOIDABLE SITUATIONAL FEES


PCI non-compliance fee

This fee is charged on top of a PCI fee to merchants who are not compliant. You should always pick and MSP that helps in getting your business PCI compliant.

Liquidated damages fee

This fee is another kind of cancellation fee and another way for a processor to recoup the loss of your merchant account. It can get very expensive and is usually only in the interest of your payment provider.

THINGS TO LOOK OUT FOR:


Now that you've familiarized yourself with the different processing fees your business could be charged - having read Parts 1-3 - here are some things to be wary of when reviewing your merchant statement, or when shopping around for a new provider. 

Unnecessary fees

Every avoidable fee shown above is just a way for processors to profit even more from you, the merchant. Almost all of them can be negotiated and if they can’t, it may be time to look for a new processor.

Hidden fees

It’s very important to ask your processor to walk you through your statement and explain each fee and whether that fee is negotiable or if it has been marked up. It is also always a best practice to ask your provider for lower fees where you can.

Discounted rate sales tactics

On average, only 10% of all Canadian consumers pay with a basic credit card and these processors will draw you in by advertising the qualified rate as their only interchange rate, but your statement will surely prove to be more expensive.


Stay tuned for our next series, where we'll learn about the pros and cons of the 4 pricing models in this complex payment processing landscape. Every processor uses a different pricing model; some are more confusing and questionable than others. 

 

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