Monthly Minimum Discount Fees

Most merchant accounts today include a monthly minimum stipulation. The typical monthly minimum charged by most companies on a merchant account is $25. What is the monthly minimum and how does it affect your business?

There are many misconceptions about the monthly minimum fee charged on a merchant account. The main misconception is that the monthly minimum is the minimum charge that needs to be run through the credit card terminal for a given month. It is easy to see how this can be confused in this manner and it is a large misconception and misrepresentation made by many sales agents.

So what exactly is the monthly minimum? A monthly minimum is the minimum amount of processing fees that needs to be generated by an account in any given month. Here are a few examples:

1) Worse case scenario, if you have $0.00 in credit card transactions, you will be billed the full $25 for the monthly minimum (if your account has a monthly minimum).

2) Let's assume your business did $1000 in volume in a given month and your processing rate was 1.69%. The monthly minimum would be calculated as follows: $1000 x 1.69% = $16.90 in processing fees. $25 minimum - $16.50 processing fees = $8.50 short of minimum. On your bill, you would see an adjustment of $8.50 to get your account to the $25 minimum. You would pay the difference of $8.50, not the full monthly minimum in this case.

3) Let's assume your business did $1500 in volume in a given month and your processing rate was 1.69%. $1500 x 1.69% = $25.35 in processing fees. Because you are over the $25 monthly minimum, you are unaffected by the minimum fee.

Monthly minimums typically do not affect a business consistently doing $1500/month in credit card volume. However, the monthly minimum typically affects new businesses who are still in the "ramp up" phase of building the business or small or seasonal businesses who's volumes fluctuate.

Before opening a merchant account, be sure to find out the monthly minimum stipulation. There are different accounts available. Make sure you are consulted on the best program for your business.

Be sure to check out our recommendation for the best merchant account provider without a monthly minimum stipulation.