Glossary
Minimum Monthly Service Charge
A Minimum Monthly Service Charge is a fee imposed by payment processors or merchant service providers on businesses that use their services. This fee is applied when the total transaction processing fees accrued in a given month fall below a predetermined threshold set by the service provider. Essentially, if a merchant does not generate enough transaction fees (from customer purchases) to meet this minimum amount, the service provider will charge the difference up to the specified minimum.
For example, if a payment processor has a minimum monthly fee requirement of $25 and a merchant only accumulates $15 in processing fees for the month, the merchant will be charged an additional $10 to meet the minimum requirement. This ensures that the payment processor covers its operational costs associated with maintaining the merchant's account, even during periods of low transaction activity.
This type of fee is particularly relevant for small businesses or startups that might not consistently meet the transaction thresholds due to lower sales volumes. Merchants should be aware of these charges when selecting a payment processor and consider their average monthly sales to assess whether they are likely to frequently incur minimum monthly service charges. Understanding and anticipating these costs is crucial for effective financial planning and maintaining cost efficiency in payment processing.