Most business owners look at one number on their card processing statement: the total taken out of their deposits. The rest of the statement, often four to ten pages long, goes unread. That is understandable, because statements are hard to follow. But knowing how to read one is the only way to tell whether you are paying a fair price to accept cards.
Here is how to work through a statement, section by section.
Start with the summary
Near the top you will usually find a summary for the month: total card sales (sometimes called gross volume), the number of transactions, any refunds or chargebacks, total fees, and the net amount deposited to your bank.
Write down two figures: total card sales and total fees. Divide fees by sales to get your effective rate. For example, if you processed $40,000 in card sales and paid $1,100 in fees, your effective rate is 2.75 percent. This one number is the easiest way to compare month to month and to compare one processor with another. It will move a little each month as your mix of cards changes, but large jumps deserve a question.
Understand the three layers of cost
Every card transaction carries three kinds of cost. Statements do not always label them clearly, but they are always there.
- Interchange. Paid to the bank that issued your customer’s card. Interchange rates are published by the card networks and depend on the card type (debit, rewards credit, business card), how the card was accepted (tapped, inserted, keyed in, online) and your type of business. Your processor cannot change these rates.
- Card brand assessments and network fees. Small fees charged by Visa, Mastercard, Discover and American Express on volume and transactions. These are also set by the networks, not your processor.
- Processor markup and fees. This is what your processor and any sales agent earn. It can appear as a percentage, a per-transaction fee, a monthly fee, or all three. This is the only layer that is negotiable.
If your statement shows interchange and assessments as separate lines with the processor’s charges listed on their own, you are probably on interchange-plus pricing. If it shows a few broad rates such as “qualified,” “mid-qualified” and “non-qualified,” you are on tiered pricing, which makes it harder to see what the processor is earning. A single flat rate for all cards is flat-rate pricing, common with all-in-one payment apps.
Read the fee section line by line
Look for a section titled something like “Fees,” “Other charges” or “Account fees.” Common items include:
- Monthly service or statement fee. A fixed charge for having an account.
- PCI compliance or non-compliance fee. PCI is the card industry’s security standard. A non-compliance fee usually means a yearly questionnaire was not completed. Completing it often removes the fee.
- Batch or settlement fee. Charged each time the day’s transactions are sent for payment.
- Gateway fee. For online or virtual terminal payments.
- Equipment lease or rental. Leases on card terminals can run for several years and cost more than buying the device outright. Check the lease terms.
- Chargeback fee. Charged when a customer disputes a payment.
- Annual or regulatory fee. Often a once-a-year charge with a vague name.
For each line, ask two questions: what is this for, and did I agree to it? Compare the statement with your original agreement. Fees that appear without explanation, or that started after you signed, are worth raising with your processor.
Check for changes over time
Lay three or four statements side by side. Look for new fee lines, rate changes, or a rising effective rate when your sales mix has not changed. Processors are generally required to notify you of rate changes, but notices are often printed in small type on the statement itself, so read any message boxes as well.
Know your agreement terms
The statement will not tell you everything. Your processing agreement covers contract length, automatic renewal, early termination fees and equipment terms. If you are thinking about switching, know these before you call anyone, because a cancellation fee or a long equipment lease can outweigh small savings on rates.
A simple monthly routine
- Calculate your effective rate and note it in a spreadsheet.
- Scan the fee section for anything new.
- Check chargebacks and refunds for patterns.
- Once a year, compare your costs with at least one alternative quote on the same basis.
Reading your statement once takes some effort. After that, a monthly check takes about fifteen minutes and keeps surprises small.
If you would like a second pair of eyes, our merchant services review breaks a statement down line by line and explains each charge. Evolvetec Inc. is not a payment processor; processing is provided by third-party processors, which set their own pricing and terms.