Your merchant statement arrives every month, and most business owners do one of two things with it. They glance at the total and file it, or they open it, see four pages of codes and abbreviations, and close it again.
I do not blame anyone for the second one. Processing statements are not written to be understood. They are written to be technically accurate, which is a different goal.
But there are only about six things on that statement that matter, and once you know where they are, the whole document takes ten minutes to read. Here is how I go through one.
Start at the bottom, not the top
Find two numbers: your total sales volume for the month, and your total fees for the month. Divide the fees by the volume.
That is your effective rate, and it is the only number worth comparing between processors. If you ran $50,000 in card sales and paid $1,450 in total fees, your effective rate is 2.9%, no matter what rate you were quoted when you signed.
Do this before you read anything else. It tells you whether you have a problem. Everything after this tells you where the problem is.
What are the three parts of a merchant statement?
Statements look different from processor to processor, but nearly all of them have the same three sections in some order.
- The summary. Total volume, total transactions, total fees, and the amount deposited to your bank. This is the page most people look at.
- The deposit or batch detail. Each day’s batch, what was deposited, and when. Useful when a deposit looks wrong.
- The fee detail. The long one with all the codes. This is where the actual story is.
The fee detail is the section worth your ten minutes. Everything else is a receipt.
What are interchange fees?
Interchange is the largest part of what you pay, and none of it goes to your processor.
It is set by Visa, Mastercard, Discover, and American Express, and it is paid to the bank that issued your customer’s card. Every business in the country pays the same interchange for the same card under the same conditions. Nobody negotiates it, including me.
On your statement it usually appears as a long list of category names with rates beside them, things like CPS Retail or EIRF or Commercial Card. Those are card types and qualification categories. You will have dozens of lines, because your customers carried dozens of different cards.
The reason this matters: when someone tells you they got your rate down, interchange is not the part that moved.
What are assessments?
Assessments are the card brands’ own cut, paid to Visa and Mastercard rather than to the issuing bank. They are small, they are usually listed separately near interchange, and like interchange they are the same for everyone.
Interchange and assessments together are the wholesale cost of accepting a card. They are the floor. No processor can go below them and stay in business.
What part of my statement is the processor’s markup?
Everything that is not interchange or assessments is your processor’s pricing. That is the only part that was ever negotiable, and it is the part worth understanding.
How visible it is depends on how your account is priced:
- Interchange plus. The statement shows interchange and assessments at cost, then adds a stated markup. This is the most transparent structure and the easiest to compare.
- Tiered. Transactions are sorted into buckets, usually called qualified, mid-qualified, and non-qualified, each with its own rate. The markup is folded inside those buckets rather than shown on its own line.
- Flat rate. One rate for everything, with interchange invisible underneath it. Simple to read, and the simplicity is what you are paying for.
None of these is dishonest. They are different structures with different tradeoffs. But if you cannot find a line on your statement that shows what your processor earned, you are on one of the last two, and comparing offers gets harder.
Why did my rate go up when nothing changed?
This is the most common question I get, and the answer is almost never that somebody raised your rate.
Your effective rate moves when the mix of cards your customers hand you changes. A rewards card costs more than a plain debit card. A corporate or purchasing card costs more still. If your customer base shifted toward business cards or premium travel cards this quarter, your rate went up without a single thing changing on your account.
The other cause is downgrades. A transaction that does not meet the conditions for its best category falls into a more expensive one. Common reasons:
- The card number was keyed in instead of dipped or tapped, without address verification
- The batch was settled more than 24 hours after the sale
- A business or corporate card was run without the extra data it requires
- A recurring or card-not-present transaction was missing required fields
Downgrades are worth chasing because most of them are fixable. Settling on time and using address verification on keyed transactions will clean up a surprising number of them.
What are the fees that have nothing to do with transactions?
Below the per-transaction charges there is usually a short list of flat monthly fees. Read this section carefully, because it is the one that grows quietly.
Typical entries: monthly statement fee, monthly minimum, batch fee, gateway fee, annual fee, PCI compliance fee, and PCI non-compliance fee.
Most of these are ordinary. Two are worth a second look. A monthly minimum charges you the difference when your processing fees fall short of a set amount, so a slow month costs you extra. And a PCI non-compliance fee is not a real cost of anything. It is a penalty for not having completed your annual PCI questionnaire, it often runs much higher than the compliance fee itself, and it disappears the moment you fill out the form. If you see one, that is free money sitting on the table.
What should I flag on my own statement?
Five things worth a phone call to whoever sold you the account:
- An effective rate above roughly 3.5%, if you are a standard retail or ecommerce business. Outside of high risk it rarely runs higher than that.
- A PCI non-compliance fee appearing month after month
- A monthly minimum you are consistently failing to hit
- Fees that appeared partway through the year without notice
- An equipment lease charge for a terminal you thought you owned
I will tell you what I actually find when I do this. Almost every time, it is one of two things. They are paying a monthly charge for equipment and had no idea it was still on there. Or they are not PCI compliant, they are paying a high non-compliance fee every month because of it, and nobody ever told them. Both are fixable. Both have usually been running for years.
If you cannot get a clear answer to any of those from a human being in one call, that itself is information. Who answers the phone is one of the ten things worth checking before you sign with anyone.
Frequently asked questions
How often should I read my merchant statement?
Calculate your effective rate every month, which takes two minutes. Read the full fee detail once a quarter, and any month the effective rate moves more than about a quarter of a point. That is enough to catch anything that matters without turning it into a job.
Can I negotiate my processing rate?
You can negotiate your processor’s markup. You cannot negotiate interchange or assessments, because those are not your processor’s money. Anyone promising to cut your rate below the wholesale cost of the card is describing something other than what will happen.
Why is my high-risk statement more expensive?
High-risk pricing reflects chargeback exposure and the smaller number of banks willing to underwrite the account. It is not a judgment about your business. Here is what high risk actually means.
What is a rolling reserve, and will it show on my statement?
A reserve is a percentage of your deposits held back against future chargebacks. It usually appears in the deposit section rather than the fee section, because it is not a fee. It is your money, held. If you have one, you should know the percentage, the holding period, and when it gets reviewed for release.
Want somebody to read it with you?
Send me three months of statements and I will tell you what your effective rate actually is, which fees are ordinary and which ones are not, and where your downgrades are coming from. The review is free, and if your setup is already in good shape, I will tell you that too.
Request a free statement review
About the author: Julie Franke is a Certified Payments Professional (CPP) and has led Electronic Merchant Services since 2015. She has worked in payments since 2009 and specializes in helping high-risk and high-ticket businesses get approved, stay approved, and keep their money moving. EMS has served business owners since 2001.