Credit Card Companies: Frequently Asked Questions

Allowing customers to pay by credit is a reality of modern business. Statistics show that trillions of charge card purchases are made each quarter. For businesses, this means that not allowing charge payment equates to losing thousands of sales, or more. Prior to embracing charge payments, most companies wish to know how firms that provide merchant credit accounts operate. Below, we answer some frequently asked questions about credit card payment companies—also referred to as merchant service providers (MSP).

What are the requirements for setting up a merchant credit account?

The basic requirements for setting up a merchant account are: a valid business checking account, a salable product or service that is not restricted, and a physical business location, or a functional website.

How long does it take to activate an account?

The time it takes to activate an account typically depends on (a) a business’ qualifications for a merchant account, and (b) the specific type of credit account (e.g. retail processing, wireless processing, Internet processing, etc.). A well-qualified business can often have a retail processing account up and running within 24 hours.

How are credit payments to a merchant credit account processed?

To operate legally, an MSP must be sponsored to credit card companies by a legitimate bank. This bank, which is known as an acquiring bank, processes the credit payments received through the MSP’s merchant accounts. After the necessary fees are removed, payment funds are transferred to a business’ checking account.

What types of transaction fees are involved in a credit merchant account?

The fees charged for card services vary by MSP, but five standard transaction fees are:

  • discount rate
  • transaction fee
  • monthly gateway fee
  • monthly statement fee
  • monthly minimum fee

The price for these fees depends on several factors, including: the state of financial markets, account type, and the MSP that provides the account.

What are chargeback fees, and when are they assessed?

Credit card companies assess chargeback fees when a purchase is forcibly canceled by the purchaser’s bank. Most card companies allow businesses to experience a certain level of chargeback fees (usually about 1% of their dollar volume) without receiving fines. If a business goes above this percentage however, fines starting in the $5,000-$25,000 range could be assessed.

Are there penalties for canceling a merchant credit account?

There is no penalty for canceling a merchant account after your contract ends. If you cancel before the contract has ended, however, a penalty—known as an early termination fee—is usually assessed. An early termination fee is commonly comprised of three elements: the total value of statement fees left in the contract period, the total value of the monthly minimum requirement left in the contract period, and an estimate of the profit that would have been earned had the account not been canceled.


How is AVP Solutions different from other MSPs?


At AVPS, we have over 25 years experience providing merchant accounts to small businesses, making us uniquely qualified to assist small businesses with account options that support revenue growth. We also strive to offer the lowest transaction fees and broadest account options in the business. To learn more about how a merchant credit account could benefit your business, contact us today.

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