How to Read and Understand Merchant Processing Statements

Payment processing statements are packed with information that can help you save money for your business. At the same time, the reports issued by credit card processors aren’t exactly easy to read. 

The information in merchant statements is in small type and spread across many pages. There are abbreviations, notations, and other tools used to fit lots of data into a compact format. These small details can be incredibly confusing if you’re not familiar with the structure and language of these statements.

There’s definitely a learning curve when it comes to understanding merchant processing statements. However, tracking the total credit card processing fees charged, understanding which are negotiable, and identifying your pricing model are crucial for reducing your payment processing costs.

We want to make the process a little easier for you. Keep reading to learn about the information contained in your statements and how to find room for cost savings.

Do you know you need to review your payment processing statements, but find yourself constantly pressed for time? Staitment can turn anyone into a payments expert. Learn more about our automated analysis solution for merchant statement review and try it out yourself for free.

Common Payment Processing Statement Fees

Payment processing is a complex business process, which means there are a wide variety of fees. 

Some of these fees are negotiable, while others aren’t. It’s very valuable to know where you can find room to reduce the total fees charged to your business. As you review your statement, keep in mind that most non-negotiable fees will be found in the interchange section or begin with the name of a credit card brand.

Here some of the most common processing fees:

1. Interchange fees: These fees are set by card issuers and banks to address the cost and risks of processing card payments. In that sense, processors don’t control them. However, unscrupulous processors will engage in interchange padding, hiding their own fees among the legitimate interchange costs.
2. Assessments: Assessments are revenue drivers for credit card companies. These are also non-negotiable because the processor doesn’t set them.
3. Processor markup fees: These are fees charged by your processor, which they need to fund their business and earn a profit. These fees are negotiable, which means they deserve extra attention.

Processor markup fees include flat fees, also called scheduled fees, charged by processors. Examples include equipment rentals (often more expensive on the whole than purchasing the necessary hardware and terminals), statement fees, regulatory fees, and PCI compliance fees. 

Because these are charges originated by the processor instead of another payments stakeholder, there’s often room for negotiating them downward in your favor. Review this comprehensive list, under the flat fees heading, for the full picture.

Determining Effective Rate and Price Structure

Calculating Your Effective Rate

Finding your effective rate is relatively simple and well worth the effort. Because processors apply a broad range of potential fees, it’s not enough to look at per-transaction costs. All of the charges included in your payment processing statement need to be considered for a complete picture of the price your business pays to work with its current processor.

The effective rate formula itself is simple, although it can take a little time to find the needed figures in your statement:

1. Identify the total amount of fees charged by your processor and total revenue before fees. These may be conveniently located near each other or spread out across the statement.
2. Divide the total amount of fees charged by your total revenue before fees.
3. To express the rate as a percentage, you can:

1. Move the decimal point two places to the left, or
2. Multiply the result of the calculation by 100.

That’s everything needed to find your effective rate. If your effective rate is significantly higher than what your credit card processor has quoted you, you have two options to find savings: Negotiate or look for a new provider.

Finding Your Price Structure

Credit card processors use three common models to calculate per-transaction fees for their clients. Here’s a brief review of each:

Flat Rate Pricing

Flat rate is the simplest price structure of the three, although it’s not necessarily the least expensive. Processors charge the same flat rate for all credit and debit card transactions. This single fee covers interchange fees, assessment fees, and other costs. This model makes statements simpler to read but can include and obscure significant markups.

Tiered Pricing

Tiered pricing organizes many different cards into a few different categories. Fraud risk and similar considerations are used to sort cards, and the fees vary based on the category. 

That can make your statement look simpler, but it also hides granular, per-transaction information that can help to identify where your total processing costs come from. Tiered pricing is highly discouraged and generally a sign that you should move to a different price structure.

Interchange Plus Pricing

The Interchange Plus pricing structure includes non-negotiable fees and a clearly defined processor markup. That markup could be a fixed cost, percentage, or both.

This pricing model leads to a statement with separate sections for interchange, assessment, and markup fees. That makes it easier to see where your money goes and determine if negotiable fees are too high. For that reason, we highly recommend Interchange Plus pricing.

Finding the Lowest Costs for Your Business

We hope this guide to debit and credit card processing statement costs and fees can help make this especially complex topic a little clearer — and help your company save money on processing. Refer back to it whenever you need a reminder about which fees are negotiable and which pricing structures are preferred.

At Swipesum, we’re dedicated to serving as your fractional chief payments officer. We are fully independent consultants whose only goal is to find the best solutions and pricing for your business, then monitor the health of your accounts moving forward.

Book a free consultation and try out our no-cost, automated Staitment solution. It can transform anyone into a payments expert, helping you review your payment processing statements and lower your operating costs.