1. Startup fees
When you select a credit card provider or bank, you’ll most likely be charged what’s called a "startup fee." This fee may include setting up your account, generating company-specific credit card processing equipment and administrative costs. There’s a difference between an account-startup fee and what’s called a "gateway fee," which is a one-time fee to set up an online store. Be sure you ask what’s included in your startup fee and if there’s an extra charge to help you get your e-commerce platform up online.
Tips to avoid paying: Costs can vary but should be no higher than a one-time $50 fee. Also be sure you verify that this fee is one-time only—sometimes the fee is really an annual fee.
2. Monthly fees
It’s still common to charge a monthly administrative/account maintenance fee. This includes providing you with a detailed transaction summary and a paper statement.
Tips to avoid paying: If there’s a paperless option, you may be able to get the fee waived or pay a lower fee.
3. Credit card transaction fees
Credit card transaction fees represent a flat fee per transaction. Here again, fees can vary by payment method and also by overall volume of credit card business your company generates (higher credit card volumes usually lowers transaction fees).
Tips to avoid paying: Be aware of minimum monthly limits and penalties as well as how volume will impact your fees before selecting a provider.
4. Credit card discount fees
Discount fees are fees deducted from each sale. They’re typically calculated as a percentage of each sale. These fees will vary between e-commerce providers (including banks and credit card processing companies). Also, discount fees can vary by card type. Debit cards typically have the lowest discount fees while American Express and international credit cards have the highest fees.
Tips to avoid paying: The best option for controlling these fees is to control payment options.
5. Shipping fees
This is not a fee you can avoid, per se, but more of an opportunity cost you may want to consider. Research shows that the number one reason why customers don’t follow through to purchase items in their shopping cart is because of high shipping costs (this especially holds true in highly competitive industries). Here are three alternative shipping fees options to consider.
- Consider offering a free shipping option: If at all possible, the ability to advertise "Free Shipping!" is the number one incentive for customers to choose you over an online competitor.
- Offer customers a shipping calculator: Using a shipping calculator, complete with variable options for ship time versus ship cost and different shipping options (for instance, UPS versus FedEx versus ground) can build customer trust and guard against lost sales.
- Offer a flat-rate shipping option: If you can gather enough sales and shipping history to estimate your average shipping cost and delivery time per order, you can offer a flat-rate shipping cost to try to provide the best option at the most reasonable price.
6. Chargeback fees
Chargeback fees will typically only occur if a customer a) decides the purchase was unauthorized, or b) cannot pay (e.g., declares bankruptcy or a similar reason). In these cases, you’ll be charged for the cost of reversing the charge. In addition to customer chargebacks, if your e-commerce site is vulnerable to credit card hackers, you may incur fraudulent chargebacks as well. Your best protection here is to ensure the highest level of encryption and security for accepting online payments.
Tips to avoid paying: The best safeguard against chargeback costs is to monitor each instance closely and use it as a learning tool to reduce future chargebacks. High customer satisfaction is positively correlated with low chargeback fees. Also, be sure you ask prospective banks and/or credit card processing providers if they offer a "chargeback grace period" for new customers—select one with this option wherever possible.
7. Leasing charges for equipment
If you lease your credit card processing equipment, you will incur fees to do so. The choice to lease versus buy is an individual one, so consider your options carefully before making your choice.
Tips to avoid paying: Carefully price out the cost to lease versus buy your credit card processing equipment. Most of the time, buying it is cheaper, but be sure to factor in maintenance, repair and replacement costs before making your final decision. Also, if you do decide to lease, ask if you’ll pay less if you pay an annual lump sum rather than monthly installments.
NOTE: If you’re using an online payment processing service through Paypal, Etsy, Café Press or another third-party e-commerce platform, your fees may differ from what’s above, so be sure to read the fine print before activating your account!
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