FAQ Friday – Understanding Fees Part 1: High-Risk Merchant Account Fees

It should come as no surprise that merchant account fees come standard with any high-risk merchant account. Understanding what these fees are and why you are paying them can help reduce costs in the long run. Some fees are negotiable, some fees can be removed entirely, and others are permanent. In any of these cases, it’s important to know what you’re paying and how you can adjust it to minimize extraneous payments and maximize profits.

This is the first part of a two-part post about fees. Here, we will focus on high-risk merchant account fees. Part 2 will focus on payment processing fees, which will be posted next week. If you want to hear more about your payment processing fees, please check out my podcast, Uncensored Direct Marketing and you can watch me explain and give more details about merchant fees.  Click this link to watch, and don’t forget to like and subscribe for more content. 

First, Understand Your Merchant Services Statement

Before doing anything, you should aim to understand your merchant statement from top to bottom. That might sound tedious and time-consuming, but after the first one or two times, it becomes second nature.

By the end of the month, you should have several documents: your merchant statement, processing statement (complete with a month of processing history), and your bank statement. You should compare these with your merchant contract (not to be confused with your merchant statement) as well as your payment gateway and CRM backlog.

Errors

The first reason you’re comparing these is to find anomalies or errors. These documents may not match up 100%, but they should be close enough to not raise a red flag in your head. Time zone differences and next-day payment processing are a couple of reasons why the data might not be identical. Reconcile the content anyway to understand what you’re being charged, and if there are errors then of course you should bring it up with your high-risk payment processor.

Fees

The second reason is to understand the fees on your statements. There are many transaction and monthly fees on your statements, including a setup fee, and most are looked over without question—but you should question them all. You can do the research yourself about what each fee is, contact us to do it, or use some other 3rd-party reviewer. This level of attention can quickly add some percentage to your bottom line. And if you have a high volume, say $100k per month, even just half a percent adds up to a significant amount.

Discount Rate

One of the most important items on your statement is called the Discount Rate. No, this isn’t an amount you’re saving. Instead, it’s the percentage taken from your sales volume as a fee and they can range by a lot (as low as 1%, as high as 6%).

The discount rate depends on how aggressive your business model is. The goal is to minimize the discount rate as much as possible. However, it’s not something you can negotiate whenever you want. For example, you shouldn’t negotiate this rate if you have a high chargeback ratio (say, over 2%). You also should know how much to negotiate—don’t try to ask for a 1% discount rate if you’re currently on 6%.

The best time is when you’ve been working with a processing company and your business is doing well, or if you’re just starting out (but it’s a little less likely). Remember, it’s always a good idea to aim for a healthy, positive relationship with your processor, acquiring bank, and merchant account provider.

Second, Understand the 3 Ways You’re Being Charged for High-Risk Credit Card Processing

There are three main ways you are charged for credit card processing: flat rate, three-tier, and interchange plus. There have been fluctuations with which method is most popular or “best”, but in the end it all depends on what your business needs and reacts to most positively.

Aim to understand the differences so you can choose or negotiate the method that suits you best.

Flat Rate

This is the method used by popular service providers like Stripe and PayPal. Flat rate means you get charged the same amount for everything. It’s usually on the higher end, like 3% or 4%. So that means 4% will cover all credit card processing fees instead of breaking each fee down into its own item.

You can think of it as an all-inclusive rate. You pay a little more, but everything gets covered and you don’t have to go through hours of scanning your documents because it’s neatly packaged in one percentage. However, this is the least beneficial charge rate for most business owners.

Flat rate processing solutions are good as a backup (e.g., in the case that your own merchant account is not functional, then you can implement Stripe or PayPal as a gateway temporarily), but rarely as your primary. It’s good if you’re just starting out and getting a feel for the industry and how sales works.

Three-Tier

The tiered pricing method gives a little more freedom and leniency when it comes to high-risk merchant account fees. There are three tiers here: qualified, mid-qualified, and non-qualified. Essentially, the processor can break down transactions by associated risk and then charge a separate fee based on that. You can more easily understand each rate and why it’s being processed that way, but it can also lead to higher fees. This is because processors define each tier differently.

Qualified means consumer credit cards without rewards. These are the lowest risk, so you get charged the least. In fact, most processors will charge this rate for your cards first, and then change the tier, so pay attention to your statement.

Mid-qualified is for Card Not Present transactions, like when typing in a customer’s credit card payment info over the phone or through the mail. There’s more risk here, so you get charged a higher rate. Some rewards cards also fall into this category, but it’s really up to the processor to decide.

Non-qualified is the highest rate. This is also for rewards cards as well as signature and corporate cards. E-commerce typically falls under this category, even the customer is using a regular consumer card.

Interchange Plus

By far the most beneficial category to date, interchange plus is the most negotiable rate plan available. However, it takes a lot more patience and effort to understand high-risk merchant account fees here as well as timeliness when negotiating interchange plus pricing.

There’s nothing hidden with interchange plus—all interchange rates are published online as the price each card network charges you (i.e., Visa, MasterCard, etc.). The trickiest part is that each rate changes based on your merchant category. For example, if the category states you’re charged a fee of 0.65% per debit card transaction and 1.2% per business card, then interchange plus will say “this transaction is from a debit card, so we’ll charge you 0.65% as cost + the payment processors fee of 1%”

One thing to note about interchange plus is that you’ll always pay far less for personal and debit cards even if your rate is higher, especially in comparison to flat rate processors like Stripe. Transparency is key here; you always know what you’re paying and can easily calculate the associated fees.

Merchant Category Code (MCC)

Back to the tricky part: your Merchant Category Code (MCC). There are upwards of 180 categories of interchange, and it’s not always clear which one your high-risk business falls under. For example, if you are a health and beauty store and you sell a wide range of products, from supplements and skin care to CBD and e-cigarettes/vapes, then you can be categorized under several different MCCs. The one your processor assigns you may not have the lowest rate or be the most fitting according to you. Luckily, you can negotiate this because MCCs are open to interpretation, especially when applying for your merchant services.

One thing to note, not every category can be negotiated. For example, if you work in adult entertainment or other business types that are always categorized as high-risk industries, then you’re stuck with that high-risk category code and the associated processing fees.

Different processors will categorize you in different ways, so it might be beneficial to assign a merchant account as one MCC and another as a different code, then compare the benefits at the end of the month. The results might surprise you. You might even be able to gain a low-risk merchant account category even if your business is technically higher risk. It’s all in the negotiation and the support you can provide to back up your claims.

It’s best to negotiate your code when filing your application, not after. So do the research beforehand and find out which MCCs you’re most attracted to, then plan out your argument for why that code fits you best. Processors won’t be so willing to change it later on. They also won’t be willing to change it if you receive excessive chargebacks

Security and Chargebacks

Lastly, interchange plus rates can be affected by anti-fraud measures like 3D Secure, which can lower rates to 0.1%. There are many 3D Secure integrations available that don’t disrupt the checkout experience, so your customers won’t be deterred from finishing their purchase. Pricing for 3D Secure may cost up to $0.10, but it prevents a lot of chargebacks. Similar statements can be said for AVS and CVV. In the end, you’ll save a lot of money because each credit card transaction is less risky for the credit card processor.

Part 1 High-Risk Business Fees Wrap-Up

By now, you should know interchange plus is favoured, it’s important to read and reconcile your monthly statements, and security pays off in the long run. If you have any questions, DirectPayNet is always here to help you make the best decision for your high-risk business. You can contact our customer representatives at any time. We specialize in high-risk payment processing for e-commerce businesses and are more than willing to help you understand your options and the benefits a merchant account can provide.

Contact us for more information about opening a merchant account with DirectPayNet.

Part 2 will cover processing fees, including chargeback fees, early termination fees, transaction fees, PCI-compliance and reserves (like rolling reserves). Keep reading to stay informed about how we can improve your operations, one fee at a time.

Comments

108 responses to “FAQ Friday – Understanding Fees Part 1: High-Risk Merchant Account Fees”

  1. 创建Binance账户 Avatar

    Your article helped me a lot, is there any more related content? Thanks! https://www.binance.info/sl/register?ref=PORL8W0Z

  2. EnriqueAxown Avatar
    EnriqueAxown

    bataraslot alternatif: bataraslot 88 – bataraslot

  3. Jamessot Avatar
    Jamessot

    EverGreenRx USA: EverGreenRx USA – EverGreenRx USA

  4. Jamesimpew Avatar
    Jamesimpew

    cialis medicine: EverGreenRx USA – when does cialis patent expire

  5. Gregorypub Avatar
    Gregorypub

    prices on cialis EverGreenRx USA EverGreenRx USA

  6. Jamessot Avatar
    Jamessot

    EverGreenRx USA: cialis directions – cialis bodybuilding

  7. Jamesimpew Avatar
    Jamesimpew

    how long does it take cialis to start working: maxim peptide tadalafil citrate – EverGreenRx USA

  8. RobertVaw Avatar
    RobertVaw

    https://evergreenrxusas.shop/# is tadalafil the same as cialis

  9. Gregorypub Avatar
    Gregorypub

    EverGreenRx USA EverGreenRx USA uses for cialis

  10. Jamessot Avatar
    Jamessot

    EverGreenRx USA: EverGreenRx USA – online tadalafil

  11. Jamesimpew Avatar
    Jamesimpew

    cialis not working first time: EverGreenRx USA – EverGreenRx USA

  12. Gregorypub Avatar
    Gregorypub

    does tadalafil work cialis online with no prescription EverGreenRx USA

  13. RobertVaw Avatar
    RobertVaw

    https://evergreenrxusas.com/# tadalafil oral jelly

  14. CarrollPruth Avatar
    CarrollPruth

    https://mediquickuk.com/# generic and branded medications UK

  15. JamesilliG Avatar
    JamesilliG

    pharmacy online fast delivery UK: order medicines online discreetly – MediQuickUK

  16. Stuarttex Avatar
    Stuarttex

    fast delivery viagra UK online http://mediquickuk.com/# cheap UK online pharmacy

  17. Albertdiown Avatar
    Albertdiown

    pharmacy online fast delivery UK order medicines online discreetly UK pharmacy home delivery

  18. JamesilliG Avatar
    JamesilliG

    trusted online pharmacy ivermectin UK: MediTrust – ivermectin cheap price online UK

  19. Stuarttex Avatar
    Stuarttex

    BluePillUK https://intimacareuk.shop/# confidential delivery cialis UK

  20. CarrollPruth Avatar
    CarrollPruth

    https://bluepilluk.com/# viagra online UK no prescription

  21. JamesilliG Avatar
    JamesilliG

    IntimaCare: cialis cheap price UK delivery – tadalafil generic alternative UK

  22. Albertdiown Avatar
    Albertdiown

    confidential delivery cialis UK IntimaCareUK cialis cheap price UK delivery

  23. Stuarttex Avatar
    Stuarttex

    order viagra online safely UK https://mediquickuk.shop/# order medicines online discreetly

  24. Miltonbem Avatar
    Miltonbem

    https://intimacareuk.com/# weekend pill UK online pharmacy

  25. JamesilliG Avatar
    JamesilliG

    generic stromectol UK delivery: MediTrust UK – MediTrust UK

  26. Stuarttex Avatar
    Stuarttex

    BluePillUK https://mediquickuk.com/# MediQuick

  27. CarrollPruth Avatar
    CarrollPruth

    http://mediquickuk.com/# online pharmacy UK no prescription

  28. JamesilliG Avatar
    JamesilliG

    sildenafil tablets online order UK: sildenafil tablets online order UK – viagra discreet delivery UK

  29. Stuarttex Avatar
    Stuarttex

    fast delivery viagra UK online https://meditrustuk.com/# generic stromectol UK delivery

  30. Albertdiown Avatar
    Albertdiown

    sildenafil tablets online order UK generic sildenafil UK pharmacy viagra discreet delivery UK

  31. JamesilliG Avatar
    JamesilliG

    branded and generic tadalafil UK pharmacy: IntimaCare UK – confidential delivery cialis UK

  32. Miltonbem Avatar
    Miltonbem

    https://mediquickuk.shop/# generic and branded medications UK

  33. Stuarttex Avatar
    Stuarttex

    sildenafil tablets online order UK https://intimacareuk.com/# tadalafil generic alternative UK

  34. JamesilliG Avatar
    JamesilliG

    buy ED pills online discreetly UK: tadalafil generic alternative UK – IntimaCareUK

  35. Albertdiown Avatar
    Albertdiown

    MediQuick UK online pharmacy UK no prescription MediQuickUK

  36. JamesilliG Avatar
    JamesilliG

    confidential delivery cialis UK: IntimaCare UK – weekend pill UK online pharmacy

  37. Albertdiown Avatar
    Albertdiown

    discreet ivermectin shipping UK stromectol pills home delivery UK safe ivermectin pharmacy UK

  38. JamesilliG Avatar
    JamesilliG

    BluePill UK: generic sildenafil UK pharmacy – viagra online UK no prescription

  39. CarrollPruth Avatar
    CarrollPruth

    https://bluepilluk.com/# viagra online UK no prescription

  40. Albertdiown Avatar
    Albertdiown

    order medicines online discreetly cheap UK online pharmacy pharmacy online fast delivery UK

  41. Charlespot Avatar
    Charlespot

    SaludFrontera: medicine mexico – pharmacies in mexico

  42. TeddyWailt Avatar
    TeddyWailt

    TrueNorth Pharm: canadian pharmacy online store – canada drugs online reviews

  43. MichaelUrinc Avatar
    MichaelUrinc

    cross border pharmacy canada TrueNorth Pharm the canadian pharmacy

  44. Carlosindes Avatar
    Carlosindes

    http://truenorthpharm.com/# canada drugs online

  45. JeremyChoor Avatar
    JeremyChoor

    http://truenorthpharm.com/# canadapharmacyonline legit

  46. Charlespot Avatar
    Charlespot

    percocet india: CuraBharat USA – buy medicines

  47. TeddyWailt Avatar
    TeddyWailt

    CuraBharat USA: medicine purchase online – best online pharmacy no prescription

  48. MichaelUrinc Avatar
    MichaelUrinc

    CuraBharat USA CuraBharat USA CuraBharat USA

  49. Charlespot Avatar
    Charlespot

    SaludFrontera: mexican pharmacy – mexican meds

  50. TeddyWailt Avatar
    TeddyWailt

    mexican pharma: mexico pharmacies – SaludFrontera

  51. Carlosindes Avatar
    Carlosindes

    https://curabharatusa.shop/# order adderall from india

  52. MichaelUrinc Avatar
    MichaelUrinc

    buy medicine from india to usa oxycodone in india CuraBharat USA

  53. JeremyChoor Avatar
    JeremyChoor

    http://truenorthpharm.com/# best canadian pharmacy

  54. Charlespot Avatar
    Charlespot

    pharmacy mexico city: SaludFrontera – SaludFrontera

  55. TeddyWailt Avatar
    TeddyWailt

    SaludFrontera: SaludFrontera – pharmacy in mexico online

  56. MichaelUrinc Avatar
    MichaelUrinc

    SaludFrontera SaludFrontera pharmacy mexico online

  57. Charlespot Avatar
    Charlespot

    CuraBharat USA: CuraBharat USA – online drugs

  58. TeddyWailt Avatar
    TeddyWailt

    my canadian pharmacy review: canada pharmacy world – TrueNorth Pharm

  59. MichaelUrinc Avatar
    MichaelUrinc

    CuraBharat USA CuraBharat USA indian pharmacy online

  60. Charlespot Avatar
    Charlespot

    buy norco online: indian drug – CuraBharat USA

  61. TeddyWailt Avatar
    TeddyWailt

    CuraBharat USA: CuraBharat USA – online pharmacy india

  62. MichaelUrinc Avatar
    MichaelUrinc

    canada pharmacy 24h legitimate canadian pharmacies is canadian pharmacy legit

  63. Charlespot Avatar
    Charlespot

    SaludFrontera: mexican pharmacy – SaludFrontera

  64. TeddyWailt Avatar
    TeddyWailt

    SaludFrontera: mexico pharmacy – farmacia pharmacy mexico

  65. MichaelUrinc Avatar
    MichaelUrinc

    SaludFrontera SaludFrontera can i order online from a mexican pharmacy

  66. Charlespot Avatar
    Charlespot

    mexico prescription online: SaludFrontera – mexican pharmacies that ship to the united states

  67. TeddyWailt Avatar
    TeddyWailt

    SaludFrontera: SaludFrontera – SaludFrontera

  68. EnriqueCex Avatar
    EnriqueCex

    https://gesunddirekt24.shop/# online apotheke versandkostenfrei

  69. StevenHAM Avatar
    StevenHAM

    gГјnstigste online apotheke gunstige medikamente direkt bestellen internet apotheke

  70. IsraelGat Avatar
    IsraelGat

    eu apotheke ohne rezept: viagra ohne rezept deutschland – online apotheke rezept

  71. StevenHAM Avatar
    StevenHAM

    beste online-apotheke ohne rezept MannerKraft online apotheke versandkostenfrei

  72. IsraelGat Avatar
    IsraelGat

    ohne rezept apotheke: Gesund Direkt 24 – online apotheke

  73. Donaldpeere Avatar
    Donaldpeere

    internet apotheke: Blau Kraft De – günstige online apotheke

  74. Donaldpeere Avatar
    Donaldpeere

    potenzmittel diskret bestellen: IntimGesund – Viagra online kaufen legal in Deutschland

  75. Williamagove Avatar
    Williamagove

    http://potenzapothekede.com/# tadalafil erfahrungen deutschland

  76. StevenHAM Avatar
    StevenHAM

    internet apotheke PotenzApotheke PotenzApotheke

  77. IsraelGat Avatar
    IsraelGat

    online apotheke rezept: rezeptfreie arzneimittel online kaufen – eu apotheke ohne rezept

  78. EnriqueCex Avatar
    EnriqueCex

    http://intimgesund.com/# kamagra erfahrungen deutschland

  79. Donaldpeere Avatar
    Donaldpeere

    online apotheke günstig: potenzmittel ohne rezept deutschland – eu apotheke ohne rezept

  80. IsraelGat Avatar
    IsraelGat

    kamagra kaufen ohne rezept online: IntimGesund – Sildenafil Schweiz rezeptfrei kaufen

  81. StevenHAM Avatar
    StevenHAM

    In welchen europäischen Ländern ist Viagra frei verkäuflich generisches sildenafil alternative kamagra oral jelly deutschland bestellen

  82. Donaldpeere Avatar
    Donaldpeere

    ohne rezept apotheke: apotheke ohne wartezeit und arztbesuch – online apotheke deutschland

  83. IsraelGat Avatar
    IsraelGat

    rezeptfreie medikamente fur erektionsstorungen: wirkung und dauer von tadalafil – medikamente rezeptfrei

  84. StevenHAM Avatar
    StevenHAM

    online apotheke deutschland schnelle lieferung tadalafil tabletten wirkung und dauer von tadalafil

  85. EnriqueCex Avatar
    EnriqueCex

    https://potenzapothekede.shop/# rezeptfreie medikamente fur erektionsstorungen

  86. Donaldpeere Avatar
    Donaldpeere

    online apotheke günstig: rezeptfreie arzneimittel online kaufen – shop apotheke gutschein

  87. IsraelGat Avatar
    IsraelGat

    potenzmittel diskret bestellen: preisvergleich kamagra tabletten – Viagra rezeptfreie Schweiz bestellen

  88. Donaldpeere Avatar
    Donaldpeere

    IntimGesund: kamagra kaufen ohne rezept online – Potenzmittel Generika online kaufen

  89. StevenHAM Avatar
    StevenHAM

    online apotheke cialis generika ohne rezept rezeptfreie medikamente fur erektionsstorungen

  90. Williamagove Avatar
    Williamagove

    http://blaukraftde.com/# eu apotheke ohne rezept

  91. IsraelGat Avatar
    IsraelGat

    online apotheke: apotheke ohne wartezeit und arztbesuch – online apotheke versandkostenfrei

  92. Dennisarorp Avatar
    Dennisarorp

    ed treatments online: low cost ed meds online – best online ed meds

  93. DerekWew Avatar
    DerekWew

    Clear Meds Hub: ClearMedsHub – ClearMedsHub

Leave a Reply

Your email address will not be published. Required fields are marked *