When you sign a contract with the bank where you have your merchant account, you could possibly be asked to agree to a minimum monthly fee. A minimum monthly fee is becoming industry standard practice, so it is essential that you understand how and why this fee is charged. Although for many bricks and mortar and online merchants, the minimum monthly fee won’t even be charged against their account.
A monthly minimum fee is based on an agreed minimum transaction turnover that is put through your merchant account every month. If in any particular month the total value of the transactions you process using your merchant account adds up to less than the agreed minimum, you will be required to top up to a monthly minimum fee.
To recover setup and maintenance fees, banks expect to make a certain profit margin from your business. Banks usually make their margin through the discount fee they charge you for every credit card transaction that you process. The discount fee is a percentage of the transaction amount that banks withhold. However if you do not have a lot of transactions or in fact do none, your bank will have no opportunity to make a profit on your merchant account facility.
For some merchants this can be quite frustrating, though it is unlikely to be much of a problem for an actively trading online business. If you have just set up your online business and face a couple of months of zero to little sales you could very well end up paying a fee for a service you’re not actually using. Unfortunately, if you are setting up an online business, you will have to be able to accept payment by credit or debit card from the start, online shoppers are highly unlikely to be willing to send you a check or do a wire transfer, if they can pay online at a competitor’s website.
There are of course a few other organizations that will let you start an account with them without paying a monthly minimum fee but it is unlikely that a bank will be amongst these. So-called third party providers of integrated Credit Card Processing facilities may be willing to set up an account for you to use, without applying some sort of minimum monthly transaction turnover. Keep in mind though that you are likely to pay higher fees in some other respects, such as the per transaction fee that you could be charged.
Nevertheless minimum monthly fees usually account for a very, very small proportion of the fees and charges that you will incur throughout the month by using your Credit Card Processing facility, and for the majority of merchants the minimum monthly fee is nothing to worry about. It does happen though that some banks automatically charge a minimum monthly fee to your account, even though you have passed the minimum turnover mark. With any statement a service provider sends you, you should have a careful look to make sure you are not paying a fee that you really shouldn’t be paying.