Understanding your merchant processing statement can be a difficult task, especially if it is your first time. It is one thing to read it but to understand to a full extent, what you’re paying and to whom, is the real trick. To test whether or not you understand your statement, you need to be able to answer the following questions:
• How much am I paying in base cost?
• How much am I paying in markup?
• Can I lower base costs?
• Is my markup competitive?
It’s not hard to take the time to understand, but what is important is that you do take the time so you are not paying outrageous fees and realize it may be time to find a new merchant account provider. Not knowing what to look for is the main barrier to understanding a processing statement. If you know how credit card processing fees work, it will help to decipher charges on a processing statement. Among merchant service providers, the layout and structure of statements can be displayed in many different formats which make it tough to understand charges and also learn how to read the statement. Merchant service statements embody the lack of transparency that is a major systemic issue in the credit card processing industry. Moreover, tiered pricing makes it possible for processors to completely conceal base processing charges.
To start understanding your current statement, look for the separate components of cost, which means separating base/wholesale from markups. The base cost is the same base cost for every processor and is non-negotiable. Markup is any charge above base which is the negotiable area of processing expense. It is important to identify the pricing model that the processor is using to asses fees whether it is a tiered or interchange plus pricing model.
Tiered is the most common form of pricing and is spotted by the terms qualified, mid-qualified or non-qualified listed anywhere on the statement or an abbreviation of it. Interchange plus pricing statements appear more complicated than tiered but they provide more useful information about charges and are more easily identifiable by a consistent low discount rate for all card brands or by itemized interchange charges. Consistent low discount rate will show the processors discount rate as a single low percentage for all card brands.
Credit card processors can charge fees using daily or monthly discount and the discount method used will affect how total fees are calculated on a processing statement. The daily discount is where a processor charges its qualified rate prior to settlement and then charges credit card transactions fees, non-qualified rates and other charges at the end of the month. In order to calculate these charges, fees paid throughout the month must be added to fees charged at the end of the month. Monthly discount is where a processor charges all fees in one lump sum at the end of each month. Statements that are based on monthly discount are much easier to reconcile than statements based on daily discount.
If you find that your monthly statement is too hard to understand or you have any question regarding fees and assessing what you are truly paying, call us here at Leap Payments. Even if you do not have an account with us we would love to help better your understanding and possibly earn your business if you are paying ridiculous amounts now and offer you some of the best rates for credit card processing.