What Is a POS Fee – All You Need to Know

March 12, 2021/ Posted in Fees and Rates

Companies nowadays can only benefit from using point-of-sale systems. If you are choosing a POS system that suits your company, you need to understand what a pos fee is and what you can expect to pay.

There was a time when acquiring a point-of-sale system would cost you several thousand dollars, and servicing cost hundreds of dollars a month. Even though these numbers are much lower today, the price still matters a lot. Understanding the costs associated with a point-of-sale system will prevent you from overpaying for the services you need. It will also help you learn and choose the best features for your company, so you don’t throw away money on those you won’t use.

What Exactly Is a Point-of-Sale System?

A Point-of-Sale system is a combination of hardware and software designed to record and complete transactions for services and products purchased at retail locations. A point-of-sale terminal may include a credit card reader, PIN pad, barcode scanner, cash draw, and receipt printer. These systems accept a variety of payment methods, and that includes checks, cash, store credits, money orders, electronic wallets, and payment cards. To use a Point-of-sale system, you will need to set up a merchant account. If you’re wondering what is a merchant account, it is a type of business bank account that allows a company to accept and process electronic clearance transactions.

A combination of hardware and software to record and complete a transaction

The Cost of a Point-of-Sale System

There are two choices when it comes to acquiring point-of-sale hardware, and it is to buy it or lease the equipment. If you get an offer for free point-of-sale hardware, know that it involves a contract to rent that equipment, which can last from three to five years, is noncancellable, and you will probably end up paying more. These days, small companies usually choose the most common clearance model, and that is a monthly subscription, where you pay a monthly fee to access the Point-of-Sale software in the cloud.

What Are the Types of Point-of-Sale Fees?

When comparing systems and searching for the right one, software and hardware costs aren’t the only things merchants have to pay attention to. There are several other charges to be mindful of, like clearance processing, add-on features, extra hardware, and others.

Using a Point-of-sale system is to your benefit, but pay attention to costs

Common Card Payment Processing Fees for Small Businesses

When your company processes non-cash payments, there will be multiple charges taken out of the total transaction amount. These are average credit card processing fees, and they include transaction charges, which are assessed every time after a transaction, incidental, which may be charged occasionally, and scheduled, which are predictable, flat charges.

Learn your way around unnecessary costs

Transaction Charges

Transaction charges usually make up the biggest portion of the cost of accepting payment cards. There are wholesale transaction charges, which can be interchange and assessment, and markup charges, and that’s the processor’s rate markup.

Wholesale Transaction Fee

  • Interchange fees are charged by the issuing banks for each transaction, and they are the largest expense merchants pay per sale and per month. The exact cost depends mainly on the type of card used (corporate, personal, rewards), and how it’s processed (dipped, swiped, or keyed).
  • Assessments are the ones that the card associations collect for each transaction. They make up a smaller portion of total processing costs than interchange. They are based on a percentage of the total transaction volume for the month.

Markup Transaction Fees

Every processor adds some form of processor’s rate markup to the wholesale interchange rates of processing transactions. It may be blended with interchange or kept separate.

There are certain expenses that accompany every payment

Scheduled Charges

In addition to non-cash transaction charges, you may be charged some flat predictable fees. These are the regularly occurring costs.

Wholesale Scheduled Fees

  • Fixed Acquirer Network fee from Visa, whose exact amount may vary depending on your company type and monthly volume.
  • Merchant location from Mastercard, which is charged $15 per merchant location if you’re a traditional processor user. What may vary is how and when your processor charges you. Merchant locations with less than $200 in Mastercard gross monthly volume, charitable organizations, and religious organizations are exempt from this.
  • PIN debit is not universally accepted by companies and operates on separate, but associated networks to Visa and Mastercard. A PIN debit network fee is currently charged by some of the main networks annually to the processor for each merchant using the network.

Markup Scheduled Fees

These include:

  • Services that are charged monthly, such as call center costs. Usually, most of the phone calls that may come in are caused by mistakes made by merchant account providers, and it makes them the cause of their own charges. Your monthly charge will be significantly higher if you’re on a subscription pricing plan.
  • Annual ones are charged each year to cover the basic use of the provider’s services.
  • Statement fees are charged to cover the expenses of printing and mailing costs for non-cash statements. As a merchant, you can bypass this by using e-statements.
  • Online reporting is charged to merchants who choose to view their statements online as an alternative to statement charges. However, most providers won’t charge this one.
  • A monthly minimum is charged to those merchants who fail to reach a certain transaction volume monthly or annually. Better merchant account providers tend not to impose this fee.
  • Terminal fees are charged to those merchants who have physical locations with terminals where cards are swiped and/or dipped. This is not something that you should worry about if your company is based online. As some providers will try to lock you into a terminal lease contract, we encourage you to buy your own device. This might literally save you thousands of dollars in the long run.
  • If you buy or subscribe to Point of Sale software through your processor, it will be covered by a point-of-sale software fee. But, if the software is included with retail merchant accounts, there will be no additional charges beyond monthly service.
  • A payment gateway is applied to merchants using eCommerce. It is typically charged monthly but may occur occasionally on a transaction.
  • PCI compliance fees are paid to your processor for compliance with standards set by the Payment Card Industry. You pay annually or monthly to the merchant account provider to remain in line with the regulations. Unfortunately, some providers charge for this service without actually providing it, so be careful.
  • IRS reporting is charged by providers in exchange for reporting transactions to the IRS.
Payment gateway or terminal charges may be applied, depending on if you’re using eCommerce or you have a physical location

Incidental Charges

Incidental fees may appear only by an occurrence, and some months you may not be subject to them at all.

Wholesale Incidental Fees

Processing integrity fee is a wholesale incidental charge that is only charged as a penalty when the requirements for authorizing or settling transactions haven’t been met properly. These charges will include “misuse” or “integrity” in their name. Commonly, a handful of these charges are incurred each month. If they become excessive, it’s something to watch out for.

Markup Incidental Fees

Markup incidental fees include several types:

  • The application or setup ones are usually not charged, except for certain high-risk businesses. You should look for a provider that doesn’t charge this or at least negotiate its removal.
  • The early termination fee is the one you should try to avoid and is charged if you cancel your contract early.
  • Account closure is charged if you don’t keep your account open for a specific period of time. Avoid it by keeping your account open for 90 to 180 days before closing it.
  • If you are using eCommerce or telephone orders, every single transaction will be charged with the address verification service, but remember that AVS is an important fraud-fighting tool.
  • It’s relatively uncommon, but you may be rarely required to use voice authorization, by calling a toll-free number to verify certain information.
  • Retrieval request fee is the first step when a customer initiates a dispute on a charge from your company, and the chargeback protocol is set in motion.
  • A chargeback may occur depending on the circumstances after the retrieval request has been sent.
  • A batch header is charged every time you submit a batch of transactions, and it should only happen once or twice a day.
  • Non-sufficient funds or NSF will be assessed if you lack the funds in your banking account to cover your expenses.
  • PCI non-compliance will be charged every month if you do not meet the Payment Card Industry standards. It is, however, possible for you to be charged with the PCI compliance and PCI non-compliance charges at the same time.
PCI non-compliance is charged when you don’t meet PCI standards

What Is a Foreign ATM or POS Fee? Processed Only to Individuals

You may have also heard the phrases POS decline fee and foreign ATM or POS fee. These charges are something that you, as a company owner, don’t need to worry about, as they are charged to an individual. An extra charge may occur under the name of foreign or international transaction fees. It means that the vendor from which you as an individual made a purchase is located outside of the country. You may also be charged extra in the foreign currency by your card issuer.

Your expenses might be higher if the vendor is located outside the country

What Is a POS Decline Fee?

When you make a purchase as an individual, but do not have the funds available in your account for the transaction at hand, a point-of-sale decline fee occurs, and it may be charged by the bank at the time of the transaction. It may depend both on the bank and your account terms. Some banks may offer to sign you up for overdraft protection.

What Does POS Mean on a Bank Statement?

When the term POS or point-of-sale appears on your online transaction history or your bank statements, it usually refers to that you’ve made a purchase with your debit card. It might show the additional charges for using your non-cash options, or show the amount you’ve paid to the merchant. If you are wondering what is a pos fee, it’s probably the transaction you made in person at a retailer.

Point-of-Sale Card Payment Reversal

When a payer makes a purchase, it’s standard practice for a transaction to be pre-authorized. The issuing bank then sends information to both the merchant and the processing company that the payer has sufficient funds or credit available. There is an authorization hold placed on the amount of the said transaction. The payer can no longer use the reserved amount, although the merchant has not yet received the funds. The cleared funds are transferred from the cardholder to the merchant after settling the transaction. It is, however, possible to submit a transaction with incorrect information. If your transaction failed or you detect an error, how long does a POS reversal take? It usually takes 24-48 hours, or 2-4 business days, depending on the bank.

Keeping customers happy is important

Improving Your Business With a POS System and a Merchant Account

If you are a small company owner looking to learn the ways of improving your business, start by informing yourself about merchant services and think about applying for a merchant account. See what merchant services the credit card processing company can recommend, so you can choose the Point-of-sale system that suits you best to improve your customer experience.