Merchant Account Fees Explained

Mar 29, 2022

The lingo used in the payment processing world can be a mystery to those who aren’t familiar with it. There’s an array of terms, as well as fees, that you might find on your statement and it’s important that as a merchant, you understand what each one means.

Below, you’ll find a comprehensive list of typical merchant account terms and fees, along with detailed explanations of what they are, what fees typically cost and why you might see them on your merchant statement.


There are several terms you might see when it comes to the pricing you’re subject to for payment processing. The most common terms are explained below.

Interchange-Plus Pricing

Interchange-plus pricing determines the cost-per-transaction that you, the merchant, pay. It consists of the interchange fee, which is charged by card networks like Visa and Mastercard, as well as a markup that’s charged by your card processing company.

Qualified Discount

A qualified discount is part of a tiered pricing system. It’s generally the lowest rate of a three-tiered pricing model and in most cases, it’s only applicable to non-reward credit cards or debit cards.

Mid-Qualified Discount

A mid-qualified discount is generally the second tier of a tiered pricing system. Most payment processors apply this rate to swiped and keyed-in reward card transactions, as well as e-commerce and card-not-present transactions.

Non-Qualified Discount

This is generally the highest tier of merchant pricing and in most cases, it applies to commercial and high-level rewards cards.


As a merchant, you’re likely curious about the varying fees and charges that are levied on you when processing credit or debit payments for your customers.

ACH Reject Fee

This fee is charged to the merchant when an ACH payment is processed by a merchant but is later rejected by the customer’s bank.

Annual Fee

Annual fees vary depending on the payment provider as well as the level of service provided. These fees are paid by merchants once per year or broken down into smaller payments due monthly.

Batch Fee

When merchants settle payments at the end of the business day, credit card transactions are batched together and deposited in a lump sum. The nominal fee charged for this convenience is called a batch fee.

Chargeback Fee

Chargeback fees are levied onto merchants when a customer initiates a chargeback for a transaction they deem fraudulent.

Electronic AVS (AVS = Address Verification Service)

Electronic AVS fee is charged when your business utilizes the Address Verification Service to check that the address provided by a cardholder matches the address on file with the credit card company. As of 2018, Mastercard set the AVS card-present fee at $0.005 and the AVS card-not-present fee at $0.01. This method is used to prevent credit card fraud.

Gateway Monthly Fee

A gateway monthly fee is charged to the merchant to cover the cost of using the processor’s payment gateway. In some cases, this charge may cover the cost of transactions or it may be applied in addition to a per-transaction charge.

Gateway Setup Fee

Merchants may be subject to a gateway setup fee, which is a one-time fee that covers the cost of account setup and hardware installation for new merchant accounts.

Gateway Transaction Fee

This fee, usually charged as a small percentage of each transaction or a small per-transaction rate, covers the cost of processing each payment.

Monthly Minimum

Merchants that pay gateway transaction fees may be required to process a minimum number of transactions each month. Those who don’t are generally subject to a monthly minimum fee to cover their processing costs.

Monthly Service

Monthly service fees are charged to the merchant to cover the cost of account administration, as provided by the payment processor.

PCI Annual Fee (PCI = Payment Card Industry)

PCI annual fees cover the cost of security scans and other services to ensure that payments are processed according to federal and state regulations, as well as industry standards.

PCI Non-Compliance (PCI = Payment Card Industry)

Non-compliance fees may be charged in the event that the merchant doesn’t adhere to security and industry standards. These fees are typically charged until accounts are in full compliance.

Retrieval Fee

Retrieval fees are charged when a customer requests a chargeback. These fees are levied as soon as a dispute is filed and cover the costs associated with retrieving transaction details.

Return Transaction

Return transaction fees may be applied when a refund is processed to a customer’s credit or debit card.

Risk Monitoring

Risk monitoring services provided by your payment processing company can include fraud alerts and chargeback alerts. This fee covers the cost of these services.

SPM Monthly Fee (SPM = Secure Processing Module)

Merchants that monitor SPM metrics may pay a monthly fee in order to have their payment gateway directly analyze and report performance metrics.

SPM Setup Fee (SPM = Secure Processing Module)

This fee may be applied when a merchant requests SPM reporting. The fee is levied in exchange for having the payments company set up SPM reporting metrics on terminals that don’t automatically measure this metric.

TIN Mis-Match (TIN = Taxpayer Identification Number)

A TIN mismatch may occur if your tax identification number that’s on file with the IRS doesn’t accurately match what’s provided when you open your payment processing account. When this occurs, you may be subject to a fee, which covers the cost of making corrections to your account and re-filling your sales data with the IRS.

Voice Authorization

Some merchants may utilize voice payments when processing customer transactions. This technology helps to prevent fraud by using voice recognition to ensure the cardholder is authorizing the transaction. This fee is typically only applied on a per-transaction basis when the merchant uses the service.

Voice AVS (AVS = Address Verification Service)

Voice AVS works similarly to voice authorization and utilizes voice recognition technology to confirm the cardholder’s identity. It may be used in cases where the cardholder isn’t present and must authorize a transaction over the phone.

For information about PayDiverse’s solutions for high-risk merchants, contact us today

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