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Monthly Minimums on Merchant Accounts

omupasomupas subscriber Posts: 7
Today`s topic, Monthly Minimum fee on a merchant account.
Many merchant account set ups found today contain a monthly minimum stipulation.  What is the monthly minimum?  Be sure you find out if the account you are signing up for contains a monthly minimum stipulation, many companies do not disclose this fee.  And even if they do disclose it, many companies misrepresent how to calculate this fee!
There is a large misconception that a monthly minimum fee is the amount that you need to charge in a given month.  The typical monthly minimum fee today is $25.  Many times a business will reply by saying, "so if I charge a $25 transaction I`m good right?"   The typical response by the rep is "that`s correct" and then they blow over it and move to another topic of conversation.  This is NOT correct.  The monthly minimum fee is the amount of discount fee you must generate in a month.  If you do not generate the minimum, you are billed the difference.  Here are a few examples:
1)You are an online based business and you do $2000 in sales and have a $25 minimum:If your processing rate was 2.29% you would take $2000 x 2.29% = $45.80 in discount fees.  Your account generated over the $25 minimum so the minimum would not affect you.
2)You are an online based business and you do $500 in sales and have a $25 minimum:If your processing rate was 2.29% you would take $500 x 2.29% = $11.45 in discount fees.  You would be billed an additional $13.55 to get your account to the monthly minimum level.
3)If you did no business in any given month, you would be charged the full monthly minimum.
It is very important to find out if you are subject to a monthly minimum.  For a small business, a monthly minimum negates any rates you may be quoted.  On a more important note, if you sign up an account that has a contract term (typically 36 months, the cancellation fee is often calculated by taking your monthly basic service fee + monthly minimum x number of months remaining).
For example, if your account had a $10/monthly service fee, a $25 minimum and a 36 month agreement, and you cancelled after 12 months, your cancellation fee could be $35 x 24 = $840!
In my opinion, there is simply no need for a monthly minimum.  However, most accounts that are offered in the market place have them (typically $15 - $25/month).  Be sure to find out about this fee before you sign up for a merchant account.
Hope this helps.  I`ll be back with another topic soon.  If anyone would like me to cover a particular topic, please don`t hesitate to ask.  I`d be happy to share the knowledge that I have about the industry at any time.


  • NuevolutionNuevolution subscriber Posts: 30 Bronze Level Member
    Good topic, You know what I noticed on my account? as long as I make a sale of $25.00 dollars a month, thats all they care. My monthly minimum is $25.00 but they have never charged me the $25.00 dollar fee since most of my tickets are above $300.00 plus I have recurring payments being generated every month. Now here is what I want to ask you. Are recurring payments counted as part of your monthly minimum? or is it based on unique transactions per month. The reason is because I get about 3,000 in recurring payments per month. But since there`s payments being processed every day. I never checked to see if they charge the fee. Let me know... Oh and a 3 year contract is too long. I offer 6 month Virtual Terminal Contracts.
  • omupasomupas subscriber Posts: 7
    The monthly minimum is on total processed Visa/MC transactions in any given month.  It shouldn`t make a difference if it is recurring billing or not.  I have not heard of companies not including the recurring billing volume toward the monthly minimum, but nowadays, you never know.
    I agree with you completely, a 3 year contract is entirely too long.  I do not set up a contract term with my clients.  I set them up with no cancellation fees.  The way I see it, a business should not be forced to stay, they should stay because they are happy with the service that they are receiving.
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