Merchant Service Charges, known as (MSC) are the charges taken on every credit and debit card transaction that the business accepts. The majority of businesses compare merchant accounts this way, however the cheapest rate, does not necessarily mean it is the best deal for your organisation.

Merchant Service providers will usually quote a percentage fee, but you should be aware, that this may not be the same for each type of card.

For example, you may be quoted a different MSC percentage fee, depending on whether it is a debit or a credit card or whether it is a Visa or Mastercard (or another card scheme such as American Express). Equally, business and commercial cards and international cards will be charged separately.

Because, Cardholder not present (CNP) transactions carry the associated risk of fraud, acquirers will tend to charge you a higher rate to process the transaction. This is often referred to as a 'non-secure' transaction rate.​ Another consideration, is that by asking the cardholder to read their details out to you, triggers your PCI DSS requirements to protect them and increases your risk of reputational damage. If you cannot evidence to your acquirer that you are PCI DSS compliant​, you may be charged additional fees each month.

Some providers will offer the business, blended rates. With Blended pricing, the merchant will always pay the same rate on a transaction of a specific card name regardless of how the transaction was accepted. Whilst this might sound attractive, it can often lead the businesses overpaying on certain card types.

It is therefore vital that you understand where and how your customers will be paying you, so you can source the best deal for you. This can often by very complicated, which merchant service statements, littered with acronyms and jargon.

Other potential fees that might occur could be:

1. Set Up Fees
This is normally a fixed fee that some merchant service suppliers charge – for the cost of application and associated paperwork.


2. Minimum Monthly Service Charge (MMSC)
The MMSC applies if your monthly transaction processing fees don’t meet the minimum amount agreed for your account.
If your monthly transaction fees are more than your MMSC, the MMSC for that month won’t apply. For example, if the MMSC for your account is £19.95 and your processing fees for one month are equivalent to £10, you will be billed the minimum monthly charge of £19.95 (MMSC). If your processing fees for the following month are £30, the MMSC will not apply and you will be charged £30.


3. Card Machine Rental
The cost of renting a physical card machine, is normally charge monthly and can vary depending on whether you are choosing a desktop (static), Mobile or GPRS version.

Ordinarily, the longer the contract you sign the cheaper the monthly payment. However, please be aware of potential early termination fees if you want to leave the contract prior to the end date, should your circumstances changed. It should also be noted that if you intend to use your card machine to accept telephone payments, that you should expect to pay higher rates and you will also be liable for chargebacks​should any fraud occur.


4. Virtual Terminal
Another additional cost, could be a Virtual Terminal. A Virtual Terminal is a web based portal that can be accessed through a desktop, tablet or mobile device. Designed for merchants to use when taking mail order or telephone payments to process credit and debit card payments. Access to a Virtual Terminal, normally incurs a monthly cost and then a fixed cost per transaction. In addition, the MSC are also charged.

Businesses need to be aware that these are often promoted as a 'secure' way to process MOTO transactions. In our opinion, this is a little misleading as transactions processed through a Virtual Terminal, may be processed as and charged at a 'non-secure' transaction rate​, by your merchant account provider. Again, the cardholder needs to provide their sensitive card data, typically their long card number, expiry date and the 3 digits on the reserve of the card, to which the business will key in to Virtual Terminal. Additional checks such as 'Address Verification Services' (AVS)​, are often commonplace, however if you use a Virtual Terminal, your business is liable for fraud related chargebacks, should the cardholder challenge the transaction, claiming that they never authenticated the payment. It is therefore suggested that you should only deliver goods or service to the 'registered cardholders address'. PCI DSS requirements​are also triggered, causing additional time, effort and cost.


5. Authorisation Fees
Quite often, the merchant service providers, will charge an authorisation fee for each transaction. This should be factored into any rates being quoted, as depending on the volume of transactions being processed, it can quickly mount up.


6. PCI DSS Compliance Fees
The Payment Card Industry Data Security Standard (PCI DSS) is a global set of requirements intended to optimise the security of card payment transactions and protect cardholders against misuse of their personal information. PCI DSS compliance is a contractual obligation for all businesses that process card payments, irrespective of volume and value.

Most merchant service providers will help to support the merchant to PCI DSS compliance for a monthly fee, however if you do not evidence compliance on an annual basis, you can be charged additional fees, potentially running into hundreds or thousands of pounds.


7. Chargebacks
​Chargebacks are when a cardholder disputes a transaction for some reason and attempts to regain the money they have been charged.

Whilst there are a number of reasons why the cardholder may be trying to obtain a chargeback, often it is because their card data has been compromised and goods or services have been purchased, without their knowledge or authorisation. Last year (2019) in the UK, over £620.6m was lost to fraudulent transactions using UK payment cards. You should be especially careful when processing payments over the telephone. Visit here to understand why. In addition to potentially losing the goods and having the give the cardholder the funds back, you may also be charged an administrative charge by your merchant service provider.

Gala Technology appreciate that there is a lot to take in!

So whilst one provider might look like the cheapest option, we work with a number of leading providers for all the payment solutions you may need, across all channels Is it very important that a business understands the charges associated with a merchant account.

Gala Technology can provide some free and independent advice, cutting through the industry jargon and help you set up the right merchant account for you, with the right partner(s)