Application fees are rates put in place by financial institutions to cover the cost of setting up merchant accounts. Agencies will also charge processing fees to offset the cost of administering and storing data. In most cases, the merchant account provider will require the vendor to pay the application fee in advance. Agents who are looking to acquire customers quickly may raise transaction fees in lieu of charging up-front costs.
It is rare for credit card processing companies to waive their application fee without attempting to recover this loss. The cost of processing one application may seem insignificant, but it is not financially sound to freely process an unrestricted amount. No agency can operate comfortably if their operating costs become too significant to bear. To stay in business, the merchant account provider needs to incorporate this fee as a fail-safe mechanism. Fees are typically no higher than $100, but these prices are very rarely set in stone. From time to time, an agency may need to adjust their prices to keep up with inflation.
If a merchant account provider offers free application processing, they may be running a promotion or trying to expand their customer base. In most cases, the agency will raise the prices on their back-end services to retrieve the losses incurred from this offer. Vendors need to pay several service and maintenance fees if they wish to maintain a credit card processing account. These vendors are usually oblivious to the various fees connected to back-end services. Because of this lack of awareness, the account provider can quietly raise their prices without informing the vendor. If these increased prices are still reasonable, the vendor will pay unreservedly because they received a good deal in the beginning.
Application fees are not put in place to inconvenience the merchant. They actually do a great job of separating serious business owners from indecisive beginners. Maintaining a credit card account is a huge responsibility for both parties, but the processor assumes the bulk of the risk. Whenever a merchant disables an account, the agent needs to find a way to replace this lost revenue immediately. Repeating this process multiple times is not beneficial to the agent in any way. Account providers can only succeed by establishing strong long-term relationships with vendors. The prospects with the most promise will usually pay the application fee without reserve.