Gateway Fees

Gateway fees are the costs charged by companies like First Data Corporation for access to the networks that handle the financial data processing of credit card purchases. They are thus quite similar to the fees paid to the ISPs (Internet Service Providers) whose networks allow consumer’s access to the Internet.

Gateway firms provide much more in the way of services than ISPs and the access that they enable is both more specific and more complex.

The fees charged by gateway platform firms apply only if the merchant is using an Internet Payment Gateway such as Authorize.net. A different set of fees apply if the merchant is using software or an electronic scanning device.

Most gateway fees are charged monthly and are usually billed directly from the gateway firm to the merchant, although sometimes, depending on the firm, these fees can be charged to your merchant account and billed by the processor.

Fees for gateway services vary and some of the gateway firms charge additional per-transaction fees. Gateway, monthly and per-transaction fees are all charged in addition to any other fees or percentages charged by the merchant account provider and the credit card issuing banks.

Gateway companies have hardware and software networks in place that can process financial information sent from anywhere in the world, on any type of electronic transmission equipment whether or not the sender is a contract customer with the receiver. This is why an ATM machine in India will accept your credit or debit card, process the information and return a decision on the transaction.

There are perhaps half a dozen major players in the gateway industry, with variations in their services that result in minor differences in the fees they charge. The fee structure normally includes a one-time set-up fee associated with the creation of the account, recurring monthly fees for ongoing business transactions and account maintenance, and, with some of the gateway firms, per-transaction fees.

Today, most merchant account providers have one of the prominent gateway firms packaged with their processing service to make acquiring and setting up a merchant account easier for first-time users. This “one-stop” shopping model has made it easier for merchants of all types to get their credit card processing done quickly and easily. However, there is some time invested in explaining the complex fee structure to new firms.

Usually the set-up fees for establishing the merchant account and the connection with the gateway are combined in a package. Businesses are advised to read these contracts carefully as there may be additional fees and charges for software licensing or other items. In addition, there might be lower recurring charges in some plans but they may have higher transaction costs or fees for technical support. As with any other business set-up, the merchant must spend time comparing the plans offered by different companies to find the structure that best suits his business model.

A merchant account/gateway setup fee can be as low as $149.00. Read carefully and determine if this one-time charge includes the application fee and whether or not that fee is partially or completely refundable should your application for a merchant account be declined.

Monthly charges for gateways can vary depending upon the provider and merchant account company with which you are initiating service. A fee of approximately $10-$30 per month is standard and usually includes online payment cancellation services for membership websites, as well as transaction reports.

Another fixed monthly charge is the statement fee charged by merchant account providers. A more accurate description of this fee would be the monthly service/support/statement fee which would cover all of the services provided by the merchant account provider collecting the fee.

The discount rate is the fee charged by credit card issuing banks for processing transactions and handling your merchant account business. Companies such as Visa and MasterCard typically charge around 2-3% of the total amount of the transaction while other cards charge more. This discount rate structure accounts for the fact that many places will not handle credit cards that charge higher percentages. In addition, many card companies charge a monthly minimum if there are too few transactions in a given month whose total does not exceed a certain minimum amount.

The per-transaction fee is a nominal charge, deducted from the funds deposited into a merchant’s account, that covers the costs of transmitting the information back and forth between the merchant and the credit card issuing banks. It is usually15¢ or so per transaction and there are some plans that eliminate transaction fees in exchange for a higher monthly fee.

For new merchants, the best advice is to estimate the monthly flow of transactions both in dollar amounts and volume, and weigh the costs and features of different plans offered by the merchant account providers and gateway firms.