Credit Card Merchant Accounts
In order for a business to accept credit cards as
payment for their goods and services, they must
first apply for a merchant account. New businesses
with little or no credit may have trouble establishing
a merchant account or they may pay higher fees than a
business with a better credit history.
Using credit cards costs money
The fees are paid by merchants each time they process
a transaction using a credit card or debit card. The
fees can vary depending on which merchant account provider
they use and by the type of transaction. For example,
swiping a credit card generally costs less than keying
it in manually. And using a business card usually costs
less than a regular credit card.
Fees consist of both a fixed fee for each transaction
processed plus a percentage of the amount charged. Other
fees merchants may be charged with include Authorization
Fees, Chargeback Fees and Monthly Statement Fees. Most
account providers also charge a minimum monthly fee. If
a merchant's fees fail to meet the monthly minimum,
they will be charged the minimum amount regardless.
Who pays for it
A fact that many consumers don't realize is that these
fees are built in to the price they pay for all of their
goods and services. Critics complain that this is unfair
to those who pay cash because they are in effect helping
to subsidize the purchases of credit card users. They
argue that charging credit card users a separate fee would
lower prices for those who pay cash, and fairly distribute
the extra cost to those paying for the convenience of credit cards.
Of course, credit card companies do not want merchants to
charge credit card users more than cash-payers as this would
discourage the use of credit cards and eat away at their
profits. Indeed, many countries have passed legislation
prohibiting this practice on the grounds that it discriminates
against credit card users.
It is also questionable why credit card fees should be treated
differently than other fees merchants must pay, such as rent,
utilities, and insurance. Should a customer who phones his
order in be forced to pay a 'telephone surcharge'? This would
open up a Pandora's Box of fees and surcharges that would
quickly get out of hand.
It seems that the system currently in place is the most
equitable for all parties. Credit card fees should be bulked
together with all of the other fees a merchant must pay to do business.
Ed Lathrop is a successful real estate investor and a series 3 commodities futures broker.
He has extensive knowledge of the credit/mortgage markets. He has built the financial
calculator Website, ezcalculator which is free to use and includes the calculator, "Pay Your
Credit Card Debt Quick." Ezcalculator can be found at Mortgage Calculator or by going to
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