posted on July 21, 2010 12:52
Deciphering Monthly Versus Daily Discount Costs on Merchant Accounts
A common concern merchants have regarding their merchant accounts is, “when will the processing fees be deducted from my merchant account?” The frequency of deductions depends upon the merchant account provider, and will differ with each provider. There are two types of deduction frequencies: monthly discount costs and daily discount costs.
Knowing which category your current processor (or potential ones) falls in can eliminate headaches, and possibly additional fees. Here is a breakdown of when discount costs are charged.
Monthly Discount Costs
All merchant account-processing fees are deducted from the merchant account once a month. This sum includes qualified rates, downgrade surcharges, and monthly account fees. Some providers will deduct at the beginning of the monthly, others at the end of the month. Again, this depends on the individual provider.
Daily Discount Costs
The daily discount costs include monthly and daily deductions of processing fees. This practice usually involves a daily deduction of the qualified discount rate when the batch is settled. There is also a monthly deduction of downgraded surcharges and flat fees like statement fees, or convenience fees. Merchants who have the daily set-up must review their monthly statements carefully. Adding daily plus monthly deductions will give the true cost of processing credit cards. Busy merchants can easily overlook this fact.
Whether business owners prefer to have their processing fees deducted daily or monthly is an individual preference. Some merchants may like to hold on to their funds for cash flow reasons. While others prefer to avoid a larger deduction once a month. No matter what the preference, merchants need to be aware of certain providers who charge extra fees for monthly discount costs. This practice can put an additional 5 basis points on the discounted rate, costing a hefty sum for convenience.