What Is A Monthly Minimum For Merchant Accounts?

Launching a new business comes with challenges, including the need for a reliable merchant services provider to accept card payments. This can be daunting due to the complex landscape of payment processing, with numerous providers offering various services, processing rates, and fees.

A particularly confusing and misunderstood fee is the monthly minimum. Rather than a direct fee, it’s the minimum amount in processing fees you’re required to pay your provider monthly. If your processing fees fall short of this minimum, you’re billed the difference; if not, there’s no extra charge.

This article will explain the monthly minimum, its calculation, and its impact on processing costs.

Most importantly, we’ll provide tips on how to avoid it altogether.

Why Providers Charge A Monthly Minimum

The merchant services sector is highly competitive, with providers vying to attract merchants by offering the lowest costs. To mitigate the risk of losses from overly low pricing, providers often enforce a monthly minimum requirement. The monthly minimum ensures your business generates a minimum revenue for the provider each month, preventing losses on your account.

However, many of the best merchant account providers do not charge a monthly minimum.

Alternatives For Low-Volume Merchants

For small business owners aiming to cut processing costs and avoid monthly minimums, choosing a payment service provider (PSP) like Square over a traditional merchant account can be a straightforward solution. This option eliminates concerns about long-term contracts and monthly account fees. However, you will pay higher processing rates, particularly for debit card transactions. The absence of monthly fees and the advantage of pay-as-you-go billing — paying only for what you use — often offset these higher rates for many small businesses (especially seasonal ones).

One downside of PSPs is the increased risk of abrupt account closure due to suspected fraud. For strategies to mitigate this risk, see our guidance on avoiding merchant account holds, freezes, and terminations.

Many providers now offer stable, full-service merchant accounts without a monthly minimum requirement. For businesses with larger, consistent processing volumes, this option can be more cost-effective overall than using a PSP with flat-rate pricing. Providers like Dharma Merchant Services and Helcim cater to small or medium-sized businesses with affordable full-service merchant accounts that include transparent interchange-plus pricing.

How To Avoid Monthly Minimums

Unless you have a high monthly processing volume and can benefit from lower credit card processing rates, we do not recommend accepting a monthly minimum as part of your contract. Be vigilant about this requirement when setting up your merchant account and, if necessary, negotiate to have it reduced or eliminated before you sign up. Our article on negotiating your credit card processing fees offers some useful tips to help you do this.

Be aware that it’s not always easy to determine how high your monthly processing volume would have to be to avoid paying a monthly minimum. Flat-rate and tiered pricing plans blend your interchange fees and your processor’s markup together, making it nearly impossible to determine how your monthly minimum is being applied.

The best way to avoid monthly minimums, however, is to sign up with a provider that doesn’t use them at all. Nearly all of our top-rated credit card processors for small businesses have no monthly minimums (except for some high-risk merchants). Choosing one of these providers will eliminate the need to negotiate a waiver of a monthly minimum, and save you money on your credit card processing costs. Good luck!