When searching for a Merchant Account Provider, you’ll want to consider your billing cycle options. Sometimes it's personal preference, but more often providers ultimately decide the frequency of your billing cycle for you. It’s important to understand your options and the impact they may have on your business. For your convenience, we compare monthly vs. daily discount.
Monthly vs. Daily Discount
On monthly billing, all processing fees are deducted once, typically after the month has closed. Because you’re at the start of a new processing month when you receive your merchant statement, lining up your batch reports and bank deposits is easy; you enjoy a clear picture of what you’re paying. Plus, you have more money throughout the month.
A minor drawback to monthly billing is that you pay a large sum at the end of the month. This could be a problem for small businesses where money is tight.
‘Daily discount’ is a misleading term. Because batches may not always settle daily, you may not pay processing fees every day, but the frequency of fee deduction is much higher than monthly billing.
Although processing fees are taken from every batch, you’ll still have certain fees due on a monthly basis, such as monthly service fees determined by your provider or pass-through fees charged by major card brands (Visa, MasterCard, Discover and Amex). Although that means fewer fees to pay at the end of the month, it makes bank account reconciliation more difficult.
Reviewing your statements is a tedious task with daily discount. To determine the total fees paid over the course of the month, the fees charged for every batch must be added to the fees applied at the month’s end. However, the fees applied only at the end of the month are listed on the subsequent month’s statement, so you never have all the fees (both applied daily and at month’s end) on one statement. For example, your January statement will list fees applied for every batch in January, but will include December’s month-end fees.
Like we stated earlier, some providers will give you the choice to opt for monthly vs. daily discount, however some providers will require certain businesses to go on daily discount. That could be because the business is high risk, has a history of paying late or failed to pay fees with a previous provider.
Which is Better?
The majority of business owners prefer monthly over daily discount, as charges are easier to decipher and reconciliation is more straightforward. However, the choice may not be up to you, depending on your business type and history.
Given the choice between monthly vs. daily discount, consider how you run your business and which option would better fit your needs.