Your merchant account statement, or credit card processing statement, is a list of the total monthly credit card volume for your business. Similar to a personal credit card statement, it serves as an end-of-the-month recap of all activity pertaining to your account—but that’s about where the similarities end. Basically, your merchant account statement tells you two very important things: how much money you received during the month from customer purchases and… how much you are paying in processing fees. Because no business owner sets out to lose money each month, taking the time to read through your monthly statement is critical to protecting your bottom line.
Of course, reading your merchant account statement and actually understanding what you are reading are two very different things. Sad to say, a lot of payment processing companies are counting on that. The less you understand, the less likely you are to notice when something is out of the ordinary, and pretty soon those rates you thought were so competitive are now dipping deeply into your monthly revenue.
First things first, know what to look for. Keep in mind this may prove more difficult than it sounds, as there is no standard guideline for how merchant account statements should be structured, which means different items may appear in different places depending on which payment processor you use. Still, some key items should stand out. On page one of your merchant account statement you will see some basic information: the processing month, your merchant ID number, your routing and deposit account number, etc. Below that will be a handy summary of your total deposits, third-party transactions, adjustments and/or chargebacks and fees.
Even if you don’t have time to read over the whole statement, be sure to pay attention to the summary and fees listed. If the volume looks accurate and the fees balance, you are probably on the right track. However, if you divide the fees charged by the total volume (minus any third-party charges) and your effective rate seems too high, you may want to start negotiating or shopping around for a better deal.
If you have more than five minutes to glance at your statement, here’s what you’ll see: deposits from customer purchases will be listed individually and should include the purchase date, the transaction amount, and the type of card used (e.g. Mastercard, Visa, Discover). Here is where you will also find those dreaded chargebacks and any returns that were processed. After that, we move on to those processing fees we talked about.
In theory, fees will be grouped into categories that should make them easier to spot. They include transaction fees, monthly fees, and miscellaneous fees (such as government regulatory fees or fees pertaining to PCI compliance).
Make sure you know what pricing model you agreed to. And we say “agreed to” because this information was in that lengthy contract you signed when deciding to do business with your current payment processor. At the end of the day, the price you pay to have a merchant account comes from two things: the rates you pay for each transaction combined with what you pay in fees. That said, it’s important to understand how things are calculated.\
• Tiered (or Bundled) Pricing is easy to spot. Just look for the terms qualified, mid-qualified and non-qualified anywhere on your statement and bingo! Tiered pricing. Basically, tiered pricing means your processor takes all the gazillion rates they could possibly charge you and bundles them up neatly into those three main categories or tiers. Although the most common pricing structure, it is also the least transparent—meaning 1.) hidden charges and fees can easily be concealed within those vaguely titled tiers and 2.) your rates could go up without you even knowing.
• Interchange Plus Pricing is pretty much the opposite of tiered pricing. It lists out the individual charges being paid to the issuing bank and the credit card associations, along with the markups they charge for each transaction. Though far more transparent than tiered pricing, interchange plus pricing makes for a more convoluted merchant account statement that could take longer to decipher. Still, interchange plus pricing rates are typically lower than tiered rates, so a little more reading may be worth it in the long run.
• Flat Rate Pricing is fairly new but growing in popularity. It charges a single fixed flat rate, regardless of transaction volume or card type. Sounds easy-peasy, but the thing to remember with flat-rate pricing is that, similar to tiered pricing, it also bundles individual charges into that one flat rate—which means merchants could be overpaying and not know it. Still, true flat pricing has some advantages; the monthly fee is often much lower (if there is one at all) and processing rates are less likely to fluctuate.
One last thing: Don’t rely on just your merchant account statement. Do yourself and favor and think of your merchant account statement as a handy piece of information rather than something you rely on each month to make sure things are on the up and up.
Your payment processing company likely provided you with an online portal to monitor your account and make sure your daily deposits are what they should be.
We strongly encourage you to use it.
And if anything looks suspicious, don’t hesitate to call your processor and ask questions.
Too busy to think about things like rates, fees, and pricing models? Let us do it for you. Our goal at Merchant Broker is to save you time and maximize your revenue, and we do that by thoroughly analyzing your existing merchant account and payment system to help you lock in the best rates and never have to worry about hidden fees and fines. If you think you might be overpaying or if you noticed something on your recent statement that just doesn’t seem right, contact us today and we’ll help you figure it out. If we see something that doesn’t add up (literally or figuratively), we’ll talk to your payment processor directly and negotiate on your behalf to help you increase your bottom line.