How to Read Your Merchant Services Statement: A Merchant’s Guide

How to Read Your Merchant Services Statement: A Merchant’s Guide

Your merchant services statement is more than just a bill—it’s a roadmap to understanding what you’re paying and why. While these statements might seem overwhelming at first glance, breaking them into sections makes it easier to review and uncover opportunities to save.

What Your Statement Includes

Merchant services statements typically have the following sections, which we’ll review in detail below:

1. Summary Section: A high-level overview of your total sales, fees, and net deposits.
2. Sales Activity Breakdown: Details about your transactions, categorized by card type and payment method.
3. Interchange Fees: The fees set by card networks that depend on how transactions are processed.
4. Processor Markup Fees: The charges your payment processor adds to manage your transactions.
5. Assessment Fees: Network fees charged by Visa, MasterCard, and other card brands.
6. Chargeback and Adjustment Details: Information on any chargebacks or adjustments to your account.
7. Miscellaneous Fees: Additional charges like PCI compliance, regulatory fees, or penalties.

By understanding each section, you’ll have a clearer picture of what you’re paying and how you might reduce costs.

Key Sections and Examples

1. Summary Section

The summary section gives a quick snapshot of your account activity for the billing period.

What to look for:

• Total Sales: Your gross revenue for the month.
• Total Fees: The total cost of processing card payments.
• Net Deposits: The amount deposited into your account after fees are deducted.

Example:

• Total Sales: $10,000
• Total Fees: $300
• Net Deposits: $9,700

This summary shows you your effective rate, which is the percentage of your sales paid in fees. To calculate it, divide total fees by total sales. For this example:
$300 ÷ $10,000 = 3%.

2. Sales Activity Breakdown

This section provides a detailed look at your sales, broken down by card type and payment method.

What to look for:

• The volume of sales for each card type.
• Average transaction size.

Example:

• Visa Credit: $4,000 (20 transactions)
• MasterCard Debit: $2,500 (15 transactions)
• AMEX: $3,500 (10 transactions)

Seeing a significant portion of sales from AMEX, for example, might explain higher fees, as their processing costs are typically higher.

3. Interchange Fees

Interchange fees are paid to the cardholder’s issuing bank and are set by the card networks (Visa, MasterCard, etc.). These fees are non-negotiable but can be influenced by how you process payments.

What to look for:

• The rate applied to each transaction.
• Whether passing additional data (e.g., Level 2 or Level 3 data) could reduce fees.

Example:

• Retail transaction with a Visa Rewards card: 1.95% + $0.10 per transaction.
  For a $100 transaction:
• 1.95% of $100 = $1.95
• Add $0.10 = $2.05

4. Processor Markup Fees

These are fees charged by your payment processor to manage and facilitate transactions. Unlike interchange fees, processor markups are negotiable.

What to look for:

• Per-transaction fees.
• Monthly or annual account fees.

Example:

• Per-transaction fee: $0.15
• Monthly account fee: $20

If processor markup fees seem high, it may be worth exploring other providers or renegotiating your rates.

5. Assessment Fees

Assessment fees are charged by the card networks for using their infrastructure. These fees are typically a small percentage of your total sales.

What to look for:

• The percentage applied to sales for each card type.

Example:

• Visa Assessment Fee: 0.14% of total Visa sales.
  For $10,000 in Visa transactions, the fee would be:
• 0.14% of $10,000 = $14

6. Chargeback and Adjustment Details

This section lists any chargebacks, disputes, or adjustments to your account during the billing period.

What to look for:

• The number and reasons for chargebacks.
• Associated fees.

Example:

• Chargeback Fee: $25 per dispute.
  If you had 3 chargebacks in the billing period, you’d pay:
• 3 x $25 = $75

Frequent chargebacks may indicate issues with customer satisfaction or your payment process.

7. Miscellaneous Fees

This section includes less common charges, such as PCI compliance fees, non-compliance penalties, or regulatory fees.

What to look for:

• Any fees with vague descriptions, such as "miscellaneous."
• Charges that seem unexpected or unexplained.

Example:

• PCI Compliance Fee: $10/month.
• Regulatory Fee: $5/month.

Red Flags to Watch For

When reviewing your statement, keep an eye out for:

• Unexpected Fees: Look for charges that aren’t clearly explained in your agreement.
• High Processor Markups: Compare these fees to industry standards to ensure fairness.
• High Effective Rate: If your effective rate exceeds 3%, consider analyzing where your costs are coming from.

Final Thoughts

Understanding your merchant services statement can help you take control of your processing costs and protect your bottom line. By breaking it down into sections and reviewing each carefully, you can ensure you’re paying only what’s necessary while identifying opportunities to optimize your setup. Take the time to review your statement regularly—it’s an investment in your business’s success!