Good Wednesday morning everyone. This short article is a response to a question with one of our sales partners. Lets call him “Gavin”. Basically,
the merchant’s monthly minimum is one of those terms that’s pretty much what it sounds like: the minimum dollar amount a merchant processing company charges a merchant for credit card processing within a monthly period. Whether a merchant hits the mark depends totally on their processing volume for any given month.
The monthly minimum is stated on every merchant application. Generally speaking, businesses that process higher volumes of payment card transactions don’t have to worry about the monthly minimum because they are likely to surpass it each month.
Mostly Lower-volume merchants, or merchants whose processing volume is sporadic or seasonal, are more likely to be impacted by the monthly minimum.
Here’s a very simplified example of how the monthly minimum might play out for fictional merchant Akers Co-Op in Raymond MS, whose merchant account has a discount rate of 1.7 percent, a transaction fee of 30 cents and a monthly minimum of $25. This month, Akers co-op processes a gross amount of $1200 in Visa and MasterCard sales in 15 transactions. The fees on his account would be $20.40 (1.7% X $1200), plus an additional $4.50 (.30 X 15) in transaction fees, for a total of $24.90. For this particular month, Akers co-op missed his monthly minimum of $25 by 10 cents, so he will be charged the monthly minimum on his monthly statement for the $25.00.
If Akers co-op processing volume goes up next month, it’s likely that he will meet or exceed his monthly minimum amount and there will be no additional charges.
Not all merchant account fees are included in the monthly minimum amount. Two examples of this are the monthly merchant account statement fee and the customer service fee. To calculate your base merchant account costs for any given month, add your monthly minimum fee to any fees that your merchant processing compmany charges separately. In Aker co-op’s case, if his statement fee is $10 and his customer service fee is $5, that’s $15 in addition to his monthly minimum of $25, for a total of $40 each month.
Hope this help you to understand how the monthly minimum works. Please continue to text or email questions you may want answered.
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