Today, in business transactions, credit cards are a common form of payment. If your company accepts credit cards as a type of payment, it pays to be aware of the specific credit card fees involved and how to record them. In addition, the bank may charge a start-up fee as well. An awareness of these fees in conjunction with the services to customers the bank provides will help your company evaluate if this arrangement is worthwhile.
Monthly Credit Card Fees
There are a variety of potential fees and hidden fees that might not be obvious. After reviewing this long list of potential fees, a business really needs to evaluate if it conducts enough credit card transactions to off-set the expenses of offering the option to customers.
- Address Verification Service Fee (AVS): This is a pre-transaction fee designed to prevent credit card fraud. It is primarily valuable for businesses taking credit card information by phone or online because they don’t have the card in hand to verify the signature.
- Discount Rate: Based on a percentage of the dollar sale or return transaction. The rate varies from business to business depending on it’s classification.
- Secure Payment Gateway Fee: A set monthly fee which gives a service to e-commerce merchants to process transactions securely online.
- Customer Support Fee: A monthly fee is charged to offer the business support and help 24 hours a day all year long.
- Monthly Minimum Fee: The least a store must pay to accept credit cards even if the credit sales don’t generate enough in transaction fees. Typically, the cost is $10-$30.
- Transaction Fee: Anytime a credit card transaction is made or even attempted, a fee is charged.
- Equipment and Software Fees: Most credit card equipment is purchased or leased for a fee. A fee may be charged for use of credit card related computer software.
- Chargeback and Retrieval Fees: If a transaction is disputed, fees are charged.
Credit card costs are recorded monthly in the Cost of Sales section of the Proft & Loss statement. In the chart of accounts, make sure you have an account marked “Credit Card Fees” to accurately record the specifics of these expenses.