Credit Card Processing

What is a Monthly Minimum Fee?


December 06, 2022

A monthly minimum fee is one of the more confusing credit card processing fees because it’s not really a fee at all. A monthly minimum is more accurately described as a benchmark that may result in a fee, rather than as a fee by itself.

A monthly minimum indicates the minimum amount in fees that a processor will collect in any given month. If actual fees resulting from processing activity don’t meet or exceed the minimum amount, the processor will charge however much is necessary to meet the minimum.

A catch with monthly minimums is that processors determine which fees count toward the minimum and which don’t. For example, one processor may count all discount and credit card transaction fees toward the minimum while another may only count its discount rate.

Very rarely will any processor count fixed monthly or annual fees toward a minimum.

Here are a few examples to illustrate how a monthly minimum fee works and when a business would incur charges as a result of not meeting the minimum.

Example A:

In this example, let’s pretend that Business A is using a processor that counts all but monthly charges toward a $25 monthly minimum fee.

During its first month, Business A processed $3,000 in credit card sales resulting in processing charges of $20. In this case, the processor will charge $20 in fees plus another $5 “out of pocket” to bring Business A‘s total fees up to the $25 monthly minimum fee. In this scenario, Business A did not meet the $25 monthly minimum in processing charges, so it paid another $5 to bring the total to $25. ($20 in processing charges and $5 to equal the difference between the monthly minimum and the processing charges.)

During its second month, Business A processed $6,000 in credit card sales resulting in processing charges of $40. In this case there will be no additional charge because the actual charges of $40 are greater than the $25 monthly minimum.

Example B:

In this example, let’s pretend that a business is using a processor that counts only the net discount fee toward the minimum. The business’ rate is interchange plus 0.25% (twenty-five basis points) with a $20 monthly minimum fee.

If Business B processes $5,000 in credit card sales the resulting discount fee will be $12.50 ($5,000 * .25%). In this case, the processor will charge an additional fee of $7.50 to bring fees to the monthly minimum of $20. The difference between the monthly minimum of $20 and the processing fees of $12.50 is the amount the business has to pay to meet the minimum.

How much is the monthly minimum?

Processors can set the monthly minimum however they choose. In many cases, the monthly minimum is fairly low – between $10 and $25 dollars. However, if your business is seasonal, you’ll want to look for processors with no monthly minimum or those that offer a “seasonal shut down” where you won’t incur charges for the months in which you’re not using your processing account.

Ben Dwyer

BY Ben Dwyer

Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.

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