An application fee is any charge paid by a potential customer who is asking to be granted permission, access, credit or other services from any institution, financial or otherwise. Application fees for merchant accounts are fairly standard.
The application fee pays for the rather strenuous credit and background check into the merchant’s and his business’ financial history. If there is a hint of criminality, or a pattern of poor credit such as bankruptcy, court settlements or worse, than the application will be denied and the fee, having been spent on the background checks, is non-refundable. At this point the merchant may choose a more costly credit card processor who will also charge an application fee for checking into his background with the possibility of granting his request.
If an applicant has a good, solid background, the application process typically should go quickly and smoothly. This may leave one wondering why an application fee is necessary in the first place. It helps to understand that the application fee also helps fund the efforts by merchant account providers to protect merchants and consumers from fraud.
Overall, application fees are a necessary requirement for all requests where a vigorous background check is employed before the application can be accepted or in cases where there are many applicants requesting a limited service. However, unscrupulous businesses which charge exorbitant application fees for little or no service, or for requests that are granted for free or a lot less by other, similar institutions should be avoided.
Furthermore, before you pay the fee you should always check whether or not it is refundable and under what circumstances. In this case it really does pay to ask questions and do your homework before simply forging ahead and assuming that the application fee is an absolute necessity or is always non-refundable.