Do I Have to Pay My Merchant Fees Every Day?
When you accept a credit card as a method of payment for a product or service, the money you receive is automatically deposited into your business bank account. But that amount changes depending on the funding method used by your merchant service provider (acquirer).
There are two funding methods: net daily discount and gross daily deposit. The funding method used to deposit payments into your account can have a big impact on your day-to-day operations, so if your merchant service provider allows you to choose one method over the other, it’s important to understand the differences between the two.
Let’s take a look at how these two methods work.
The Net Daily Discount Method
With the daily discount method, credit card processing fees are deducted from the day’s receipts first and the remainder (the net settled amount) is then deposited into your bank account. For example, suppose your receipts for the day total $2,000. If your processing fees cost you $40, your net deposit is $1,960. In this scenario, processing fees are subtracted on a daily basis rather than at the end of the month.
The Gross Daily Deposit Method
With the gross daily deposit method, the total amount of the day’s receipts (the gross amount) gets deposited into your bank account without any deduction for processing fees. Using the same example as above, if your day’s total is $2,000, you receive the full amount. In this scenario, processing fees for all the month’s receipts are deducted from your bank account on or about the 1st day of the following month, as per your monthly merchant statement.
If you do not receive your monthly statement from your current provider, reach out to Cartis Payments, we send your monthly statements to your inbox.
Pros and Cons
How do you decide which funding method is best for you? As with so many things in business, the answer is: It depends. But you don’t have to go it alone; when you partner with a full-service payment processor like Cartis Payments, you’ll receive the kind of advice and support you need to help you decide.
Here are some things to be aware of as you consider which funding method to use.
- The net daily discount can help you with cash flow planning because the entire month’s processing fees are already deducted—no need to calculate the amount owed, which can vary from month to month, and pay a separate bill. The great drawback to using the net daily discount method is that your bookkeeper will need to reconcile daily receivables with the amounts actually deposited. They will never agree, because fees are deducted, resulting in bookkeepers having to make scores of additional entries.
- The gross daily deposit enables you to take advantage of the entire amount deposited into your account, thereby maximizing cash flow. This method also helps streamline your reporting and reconciliation processes by enabling you to easily match the total amount deposited into your account against the amount charged in processing fees. The downside to using this method is that you may have a large bill come due at the end of the month. And because the processing fees vary from month to month, it makes expense planning more difficult.
Account Funding Made Easy
The good news is that as part of its suite of payment processing solutions, Cartis Payments offers both these payment deposit methods, giving you the flexibility to choose which method works best for your business.
Choosing a funding method that fits the needs of your business can help you maximize cash flow and reduce overall costs. If you are stuck with a company that forces you into daily discount, know that there are options. With Cartis Payments as your business partner you can be confident in the knowledge that you will receive the best advice and support.
Call today to learn how Cartis Payments can benefit your business.