How to Read Your Merchant Statement to Understand the Fees You’re Being Charged
Understanding what you are paying for merchant services is a critical aspect of business. Knowing how to read the merchant statement your service provider sends will help you know what fees you are being charged. With this information, you will be able to spot discrepancies, reduce costs, and ensure you’re getting the best value for your payment processing services.
What Is a Merchant Services Statement?
Your merchant services statement is a report provided by your payment processor that details all of the transactions they processed for your business and the fees they charged you. These reports can be quite lengthy depending on how many transactions you handle.
Your merchant statement should show whether you are being charged “cost plus” pricing or by another method such as fixed or tiered fees. Cost plus is generally considered to be the most effective and easiest to understand. MasterCard and Visa publish their rates and your processor simply adds their fees to these costs for every transaction. Other pricing schemes should be avoided as they can overcomplicate the task of determining how much you are actually paying your processor.
Steps to Read and Understand Your Merchant Services Statement
Access and Review the Summary Section
To calculate your effective rate find the summary section of your merchant statement. This section should clearly outline the reporting period, total sales processed, and all fees charged. You should find a line that shows the total volume and transactions and the sum of all fees charged. Use these numbers to find your effective rate.
Calculate Your Effective Rate
To calculate your effective rate divide the total fees by your total sales volume. If this rate is above 2.5% you’re paying too much! Average fees range between 2.0% and 2.5%. Your particular mix of debit and credit cards determines where you land in that range. The more pin-based debit transactions you have, the closer you should be to the lower end of that range.
Understand the Components of Your Merchant Statement
Other sections of your merchant statement can give you valuable data for determining the financial health of your business.
- Deposit Summary: This is your business’s “take-home pay”. It shows the net deposits to your account after all fees are deducted.
- Fee Summary: All of the various fees charged, including interchange fees, processor fees, and any additional service fees will be listed here.
- Chargeback Summary: This section details any chargebacks, including the reason and the associated fees.
Break Down Transaction Fees
Transaction fees comprise the bulk of your merchant services costs. These fees can be categorized into several types:
- Interchange Fees: These are charged by the card networks (e.g., Visa, MasterCard) and passed through by your payment processor.
- Processor Markup Fees: This is what your processor charges to perform their services for you.
- Authorization Fees: The fee charged to authorize every single transaction.
- Chargeback Fees: When a customers dispute a charge and that charge is reversed you get billed this fee.
Understanding whether these fees are flat-rate, percentage-based, or a combination, is vital as it will impact your overall costs.
Verify Deposits and Settlement Timing
You should always check the deposit summary to ensure your processing merchant statement and bank statements match up. The timing of these deposits is critical as delays negatively impact your cash flow. Of course, you should contact your processor and politely ask them to clarify any potential discrepancies.
Identify Chargebacks and Disputes
Carefully review all chargebacks and disputes. Understanding why these happened can help you fix or minimize underlying issues and save you money and hassle in the future. Chargeback fees can add up quickly!
Look for Additional Fees
Your merchant statement may include additional charges such as:
- Monthly Fees: Regular fees for maintaining your account.
- PCI Compliance Fees: Charges related to maintaining Payment Card Industry (PCI) compliance.
- Statement Fees: Costs associated with generating and sending your merchant statement.
These fees can often be profit centers for payment processors. Monitor them closely and make sure you are getting the best deal possible.
The Importance of Partnering with a Payments-Agnostic POS Provider and Solutions Partner
Working with a payments provider isn’t just about fees. Make sure your POS provider and solutions partner are payment agnostic so that your business doesn’t get shoehorned into limited payment services.
What you should look for in a solutions partner is:
Choice and Flexibility
Remove the possibility of you being bound to a single provider. You can find the hardware that fits your business. Additionally, a payment-agnostic provider will allow you to accept the payments your customers want to use such as mobile wallets, contactless and unattended payments.
Cost Efficiency
You can find competitive pricing and reduce transaction costs by comparing different payment processors. A flexible solutions partner which is payment agnostic will support this process and help you select the best options for your business.
Seamless Integration
A versatile solutions partner integrates its system smoothly with a wide range of hardware and payment solutions. This enables you to offer the best technology to your customers, without compatibility concerns.
Enhanced Support
Payment-agnostic solutions partners that offer flexibility typically focus on developing a competitive advantage by providing better, more tailored support that meets your specific needs. These kinds of partnerships are more efficient and effective than those siloed in a single solution.
Are You ready to Choose a Reliable and Flexible Partner?
Partnering with a vendor that understands your needs is essential. Transparency in merchant statements and the flexibility to choose the best payment processing solutions for your business build trust and long-lasting profitable relationships. By taking these steps, you can optimize costs, enhance your service offerings, and build more successful partnerships.
