Monthly Discount

A monthly discount occurs when fees are assessed once per month. The credit card processor will collect the fees at a recurring time each month and deduct all fees at one time. 
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Fees: Monthly vs. Daily Discounts

Credit card processors charge fees for their services. How and when these fees are collected can vary based on your merchant account.

Knowing the difference between a daily discount and monthly discount can help you decide which method you prefer for your business.

Daily Discount

A daily discount occurs when fees are assessed on a daily basis by the processor. In practice, at the end of each day, fees are assessed from the settled transactions and the net proceeds are deposited into your account.

This may be favorable for the processor as the fees are collected upfront.

For the business owner, however, this may complicate accounting.

From the account holder’s perspective, there will be numerous deductions per month and it may be difficult to reconcile sales. A monthly discount is easier to follow when reviewing transactions and tracking sales.

For example, let’s say you process a $100 sale that is subject to a 3% processing fee. Using the daily discount, this will appear as two transactions on your monthly statement: one for $97 and one for $3 charged by your processor.

This is straightforward when you only have one sale, but when you are reviewing multiple transactions, it can quickly become time consuming and confusing to reconcile.

Another downside of the daily discount is that it conceals the true cost of credit card processing. With smaller deductions spread out, the business owner may never realize the total amount being spent to process payments. A monthly discount allows for more transparency for the merchant.

Monthly Discount

A monthly discount occurs when fees are assessed once per month. The credit card processor will collect the fees at a recurring time each month and deduct all fees at one time.

This would be favorable for most businesses as you can easily distinguish their true sales amounts versus fees. It also creates a positive cash flow for the business to keep more of the sales on hand throughout the month.

For the payment processor, this is not a preferred option, especially in the case of high risk accounts. When you use a monthly discount model, the processor is essentially lending you the processing fees for the month and this can be large sums for high risk accounts.

High Risk Account Discount Schedules

For high risk accounts, many card processors will make a daily discount a requirement of the account. This is one mechanism for payment processors to limit their risk.

Often with high risk accounts, the fees are greater simply because the transactions are of greater dollar values.

Choosing Your Schedule

If you are unsure of which schedule you are following, review your statement. Sometimes, it is a matter of preference for business owners.

While some prefer to keep as much upfront as possible, others prefer to pay fees daily so they can more accurately budget in real-time.

As you can see, there are pros and cons to each method and you should consider your business needs when deciding.

If you’d like to explore this topic further, our team is always ready to help you navigate these decisions.

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