Do You Understand Your Merchant Services Statement?

Each month, you receive your monthly credit card processing statement from business transacted during the previous month. Of course, when it comes in the mail, you’re anxious to open it up and see all the money you made, aren’t you? Yah right…if you open it at all, you simply cringe at all the charges that have been taken away from your sales. But hey, it is a privilege you know to accept credit cards and pay all those fees….aren’t you thrilled?

Okay, let’s be honest here for a minute. If you weren’t accepting plastic as payment for the goods and services that you sell, you would most certainly be missing out on potential business. So, with that said, let’s just accept the necessity of it all and move on to better understanding what you’re paying for. How does that sound to you?

When I was active in the field, I found that frequently while marketing my services, merchants would hand me their unopened statements with which to do an analysis for them. When presented with a sealed envelope I would always ask if this was an unusual situation or did they simply never look at them. Unfortunately, the latter answer seemed to be the one most often received. Believe me, I understand why this is so because all too often, these darn things are downright complicated.

All right, let me scold you that fall into this category just a bit here. You absolutely must start opening and, more importantly, understanding, these things immediately. So let me see if I can break them down a bit for you here to make the process a bit easier. Most of them are broken down into several categories as follows:

• IMPORTANT NOTICES OR STATEMENT NOTIFICATIONS

Typically, this will be on the first page and will be where your provider will alert you to any changes to your statement such as pricing information changes, industry news. To me, this is one of the most important sections to always READ THOROUGHLY. This is especially important in the months just prior to April and October each year. In each of these two months, Visa and MasterCard adjust interchange rates which have a direct impact on your pricing. So, always be sure to be alert and get answers to anything you see posted there.

• TRANSACTION SUMMARY

In this section, you will typically see a total breakdown by card type of the number of transactions and total dollar volume for each. This is a good place to do a quick analysis to see what your average ticket is on plastic. Simply take your total volume divided by the total number of transactions and there you have it.

• CARD FEE SUMMARY

Not all processors will use the same terminology but, in this section, especially if you are on a tiered pricing structure, you will see a breakdown of total volume/transactions for each tier type like Qualified, Mid-Qualified, Non-Qualified or 1st, 2nd, 3rd, 4th Tier pricing. You’ll see the rate and per item fees listed. If you’re in a Cost Plus pricing model, this section will be much longer, and more revealing as it lists each card and transaction type with appropriate fees.

• DAILY DEPOSIT DETAILS

This section could take up numerous pages and really doesn’t warrant a thorough analysis on your part. It is simply a display of your daily batches per terminal and the numbers you see here, should match up with deposits made to your bank within 48 hours of each batch. If you see any descrepancies, contact your provider.

• SUMMARY OF ALL FEES

This is the section that gives you a great analysis of what you’re REALLY PAYING for this privilege of accepting credit cards. Here you will find totals for Batch Fees, Debit Access Fees, Statement Fees, Merchant Advantage Fees, Equipment/Supplies Fees, PCI FEES, Monthly Service Fees…..FEES, FEES, FEES (some of which you may not even know what they are for so, ASK THE QUESTIONS). Regardless, take the “Total Fees for all Terminals” number and divide that by the total dollar volume that you did for the month and that will give your “Net Effective Rate”. So, for example, if total fees were $1,157.72 and total volume was $41,700.85, the Net Effective Rate is 2.78%. These, by the way, are actual numbers from a statement that a merchant recently handed me saying, “I doubt you can beat my rate….I’m at 1.51% plus $.25” which, of course, is what his provider focused on when originally selling him on the relationship. As you might imagine, after giving this merchant a thorough education on this industry and customizing a proper pricing strategy for him, you know who he is processing with now.

The bottom line here is that I really want to drive home to you is this….READ AND UNDERSTAND YOUR STATEMENT, MONTHLY. Actually, processors know that a majority of merchants simply don’t take the time to do so and quite frankly use this to their advantage and get more deeply into your pocket. Keep more for you and give less to them. Until next time, I wish you a prosperous 2011.