A Deep Dive into Your Merchant Statement Can Bring Up Pearls
A merchant statement is more than just a record, writes Marci Gagnon. It contains valuable insights that can help you optimize your business operations.
Accepting customer payments can be costly and often confusing for merchants. Understanding the actual expenses involved is crucial to managing these costs effectively and ensuring your company gets the best rates.
Your payment processor will send you a merchant statement, sometimes referred to as a merchant processing or credit card processing statement, each month.
The statement offers a detailed overview of your transactions, sales activity, and the payment processing fees you incurred throughout the month. However, it’s more than just a record; it contains valuable insights that can help you optimize your business operations.
One of the most important functions of your payment processing statement is to detail all the fees associated with accepting credit and debit card payments.
To accept and process credit card sales, your business has three key components contributing to your costs.
- Interchange Fees.
Interchange fees are a crucial component of payment processing costs and represent the largest expense category. Card networks set these fees, which are paid to the banks that issue the cards. The interchange rate generally includes a percentage of the transaction amount and a fixed fee for each transaction.
Interchange fees vary based on several factors, including:
- Type of card used (credit or debit)
- Transaction method (card-present or card-not-present)
- Merchant category code
- Size of the transaction
- Type of business and industry
Card brands like Visa and Mastercard enable businesses to secure the best rates for transactions, but it’s crucial for companies to be set up correctly to qualify for the desired interchange rate. If not properly configured, businesses risk being downgraded. A downgrade happens when a transaction fails to meet the criteria for its intended interchange category, resulting in it being processed at a higher rate.
- Dues and Assessments.
Dues and assessments are fees that card networks charge to cover the costs of maintaining their payment networks and brands. Although these fees are often grouped with interchange fees, they are distinct charges that go directly to the card networks. These non-negotiable expenses usually represent a very small percentage of the total processing cost.
- Acquirer Costs.
Acquirer costs refer to the fees the payment acquirer charges to keep the lights on. These fees cover services such as: transaction authorization, fund settlement, fraud prevention, and risk management.
Acquirer costs vary by:
- Transaction volume
- Merchant Industry
- Method of payment (in-person, online, mobile)
- Company size
- Risk factors: The perceived financial and fraud risk associated with the merchant’s business can significantly influence costs.
Recognizing that fees can vary significantly between different merchant account providers is crucial. While some providers may charge all of the following fees, many only impose a select few:
- Setup Fees
- Monthly or Annual Fees
- Transaction Fees – These fees are charged for each payment processed through your merchant account. These may include per-transaction charges for handling each payment and percentage fee or the discount rate.
- Monthly Minimum Fee
- PCI Compliance Fee
- Chargeback Fees
- Gateway Fees – Additional costs for online transaction processing services. Sometimes a third-party company, the payment gateway checks if the customer has sufficient funds or credit to complete the transaction.
- Early Termination Fees
By understanding these components, you can more effectively manage payment processing costs and make informed decisions regarding your payment acceptance strategy. While some fees are non-negotiable, others may be reduced by selecting the right payment processor or implementing cost-saving measures.
How do you know if you are paying the correct fees?
The first step in determining whether you benefit from the interchange rate that offers the most savings is to request a free evaluation of your credit card processing statements. This custom audit will analyze your interchange charges to see if you are overpaying, a process referred to as meeting the target interchange.
Look for a provider that offers this service for free. Once you find one, ensure they can help you set up everything properly, with all the qualifying data needed to comply with the card brands’ rules.
Marci Gagnon is the Vice President of Strategic Alliances for Qualpay and has been in the payments industry for over 15 years with a concentration on recurring billing and the Energy space. Qualpay provides processing solutions to fuel delivery and service businesses with tools designed to provide real-time reconciliation and cost reduction. For additional information contact Marci Gagnon at marci@qualpay.com or visit https://www.qualpay.com/industry/utility-and-energy