By understanding true costs associated with merchant account pricing, you can make an educated decision as to which merchant account is really best for your needs.

You have opened your business and realize that accepting credit cards will increase your sales dramatically. It is now time to choose merchant account that will be best for you.

You’ve received emails, postcards and have surfed Internet and have seen some great promotions. Which of these merchant account providers will give you a good deal? Before signing any merchant account agreement it is important to understand all of rates and fees that will be associated with your account.

Qualified Discount Rate – This is percentage that will be charge on all of your credit card sales.

Swiped credit cards will have a lower discount rate due to fact that cardholder is present and risk is lower.

Keyed credit cards will have a higher discount rate due to fact that there is more risk involved in accepting credit card due to fact that cardholder is not present.

Mid & Non-Qualified Surcharge – These surcharges are very important to understand, as some Visa/Mastercard transactions will have an additional surcharge applied to qualified discount rate.

Mid-Qualified Surcharge applies to swiped merchants only. When a credit card is swiped and magnetic strip cannot be read in terminal, you will key in transaction. When you have a telephone order, mail order or Internet order, you will key in transaction. A surcharge will be applied to transaction. In other words, if your qualified rate is 1.66% and your Mid-Qualified surcharge is .85%, you will pay 1.66% + .85% = 2.51% for that transaction.

Non-Qualified Surcharge applies to both swiped and keyed merchants. Whenever a corporate or foreign card is used, or you do not utilize Address Verification System when keying in a credit card, Non-Qualified Surcharge will apply. In other words, if your qualified rate is 2.39% and your Non Qualified surcharge is 1.95%, you will pay 2.39% + 1.95% = 4.34% for that transaction.

Transaction Fee – Merchant providers will also charge a per transaction fee on each of your sales. Some providers will also include a per item fee, or a watts fee in addition to transaction fee. Make sure you understand true cost of transaction fee structure.

Address Verification System (AVS) – Address Verification applies to keyed transactions. The AVS determines whether street address and zip code is actually a match for cardholder. AVS does not work for foreign transactions. The AVS fee is a separate fee charged for each transaction.