September 30, 2024
by David Goodale
What Are Visa HBR and Mastercard BRAM fees?
(Slightly edited from video transcript for greater readability)
Key Takeaways
Hello, David here at Merchant-Accounts.ca. Back with another video. Today we're going to tackle the topic of Visa HBR, and Mastercard BRAM fees. Stay tuned. We're going to dig in, in one second.
What are Visa HBR, and Mastercard BRAM fees?
Let's start by talking. What are Visa HBR, and Mastercard BRAM fees?
Visa HBR and Mastercard BRAM are an extra cost that you have to pay if you sell a high-risk product or service online.
Now, some types of businesses have a greater likelihood of being a problem in some way. That doesn't mean that these are bad businesses. It often means that they are more complicated have difficult compliance requirements or just have a greater likelihood of having chargeback disputes with your customers. Think about a bookstore selling educational textbooks for students. Now think about an online casino or an online pharmacy. They have different challenges. The HBR and BRAM registration fees are charged to businesses to help offset the additional costs and risks that are incurred when processing transactions for these types of companies.
Now it's worth pointing out, the processor doesn't get to keep these fees. We don't get any of it. It's assessed by Visa and Mastercard directly, and the fees are a significant upfront cost that you have to pay if your business falls into certain high-risk categories. We'll get into the amounts of the fees in a moment. Let's start by tackling, what can you do if you're being charged Visa HBR, or Mastercard BRAM fees. If you don't think it's fair and you don't think it's right, you might be able to do something about it, but not in all cases. At Merchant-Accounts.ca, we have mostly low-risk clients. One of the ones that have needed to register in the past, I think they sold vapes, that type of thing. We don't do much of that business Merchant-Accounts.ca.
We explained the situation, it wasn't us doing it. They understood and they were receptive. However, you might feel that your business isn't high risk and you shouldn't have to pay these registration fees. If that's the case, you need to look at the merchant classification code also called the MCC code that is being used for your business. If you're being miscategorized, you might be able to do something about it.
What are MCC codes?
For this to make sense, I probably have to tackle the question, what are MCC codes? Now, every merchant that accepts credit cards goes into a certain type of category, like a business category. There are hundreds of them. For example, general merchandise, drug stores and pharmacies, electrical parts and equipment, and eating places and restaurants. Now, in some cases, the MCC code like the classification code isn't always clear.
I'll give you an example of why. You might have a business that sells multiple types of products. For example, a bookstore that also has a music department. Well, which MCC code do you use for music sales, or books? Well, how you would normally do it is if the vast majority of your sales, like chapters, for example, sell more books than music or anything else. Its MCC code would be for the retail of books. Now, in some cases, there are unclear ones. An example of this might be business services not elsewhere classified. Now there are several types of business services each with their own MCC code, but not all business types have a dedicated MCC code. If you're being charged the Visa HBR or Mastercard brand fees and you don't feel that you should be, you should ask what MCC code is being used for your business if you're being miscoded because sometimes it's a gray area, it could be here, it could be there because sometimes it's not clear and they're putting you in the wrong category.
You can ask if they'll put you in the right category. What you're going to argue is the right category. If so, you're out of paying those fees. Now a quick question. Is it true that some Visa HBR fees only apply to businesses that sell across the border into the US? Yes, that is correct. Since this is like, a changing topic, it can be really difficult for me to put a video out on the internet that that stands the test of time. It doesn't make sense for me to list the business categories because they will change for that reason. I think as an example, tobacco products or pharmaceuticals sold across the border are complicated. That's an example of a business that's likely to have HBR and BRAM fees. Some businesses, if they're selling to Canadians only don't need to pay the HBR fees.
On the Visa side, you'll need to talk to your processor on this because it's done on a case-by-case basis. If you're being told that you need to pay these fees and you think maybe it's wrong, you want to look at another processor, a plug for us, consider reaching out to us Merchant-Accounts.ca. What are examples of businesses that need to pay the HBR or the BRAM fees? This list isn't supposed to be authoritative, but I want to give you a point of reference.
Drug sales and pharmacies direct marketing for travel services, outbound direct telemarketing, cigar stores, cigar sales, online dating websites, betting casinos, and lottery. It's just a short list. I don't need to go on and on and on about it.
How much are Visa HBR and Mastercard BRAM fees?
Now you want to know how much are Visa HBR and Mastercard BRAM fees? I'm going to tackle it from a Canadian perspective.
You can probably work out it's an equivalent amount in other countries. You'd have to look up in your region at the time of recording. In September 2024, Visa HBR registration fee is $1,400. Canadian and Mastercard BRAM fee is $740 Canadian.
Can you negotiate for this fee to be lowered?
It's a lot of money, especially for a small business maybe, but I don't see how, because we're not getting to keep the money. It goes back to Visa Mastercard. Now, if you're such a high-volume merchant and you don't want to pay it, maybe as a courtesy you could get your processor to absorb that fee on your behalf. We'd have to be a pretty big merchant to get a Goodwill credit in the $2,000 range because it's coming out of somebody's pocket. Again, the only way to stop it is you have to be in an MCC code that does not require registration with HBR and BRAM.
Conclusion
In summary, Visa HBR and Mastercard BRAM are required. These rules are created and enforced by Visa and Mastercard for certain high-risk businesses. If you feel that you shouldn't have to pay it, you can ask the MCC code that's being used for your business and see if there's a more accurate alternative MCC code where you wouldn't be required to pay that fee. However, if you are just running a business that the card network is considered to be high-risk, you'll have to pay the fee. Now with that, if you ever wanted to get a quote from us or talk to us about your business, please reach out to us at MerchantAccounts.ca. I hope I demystified this a bit. Thanks for watching. Have a nice day. Bye now.
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My name is David Goodale, CEO at Merchant Accounts.ca. I launched our business in 2001 and have over 20 years of expertise in the field of online payments. If you have a payments related question or project, and especially if it relates to multi-currency or international e-commerce don't hesitate to contact me. I'm always happy to help with an honest opinion, and enjoy chatting with folks from interesting businesses.
Toll free: 888-414-7111 ext. 5
Direct: (905) 901-2254
david.goodale@merchant-accounts.ca