How to Read a Merchant Processing Statement

Why processing statements are hard to read

Processors build statements for their billing systems, so a single month can run six to twelve pages of codes, abbreviations, and subtotals. Two processors will label the same charge differently. One calls it a discount fee, another calls it processing fees, and a third splits it across three lines.

Most of those lines can wait. A handful of numbers tell you what you pay, and they appear on every statement in some form. This guide walks through them in the order that gives you answers fastest.

What to gather before you start

• Three recent monthly statements. One month can mislead you if it had a holiday rush, a large refund, or a slow week.
• A calculator or a spreadsheet. Every step below is simple division.
• Your merchant agreement, if you can find it. It shows the pricing you were promised, which you will compare against what you were charged.

Step 1: Find total sales and total fees

The first page is almost always a summary. Look for the total amount of card sales, which may be labeled amount submitted, gross sales, or total volume. Then find total fees, which may appear as fees charged, total discount, or amount deducted.

Some processors take fees out of each daily deposit. Others take one withdrawal at the start of the next month. If yours deducts daily, the summary usually still shows a monthly total of fees. If it does not, add up the fee lines yourself.

Now divide. A business with $48,200 in card sales and $1,648 in fees has an effective rate of 3.42%. Write that number down for each of your three months. Our guide on calculating your effective rate explains what to include and how to judge the result.

Step 2: Read the card-type breakdown

Most statements include a table that splits your sales by card brand and type: Visa, Mastercard, Discover, American Express, and in many cases credit versus debit. Each row shows a count of transactions and a dollar volume.

Two things in this table matter:

• Your debit share. Debit cards from large banks carry interchange capped by federal rule at 21 cents plus 0.05%, plus one cent for fraud prevention. If a large share of your sales is debit and you still pay close to 3% overall, your pricing is not passing that low cost through to you.
• Your average ticket. Divide volume by transaction count. Per-transaction fees weigh heavily on small sales. A 10 cent fee is 1.25% of an $8 coffee and 0.05% of a $200 repair.

Step 3: Identify your pricing model

The middle of the statement tells you how you are priced. You will see one of three patterns:

• Interchange-plus. Dozens or hundreds of lines with card-network category names, such as Visa CPS Retail or Mastercard Merit, each with its own rate. A separate set of lines shows the processor's markup as a percentage, a per-item fee, or both.
• Tiered. Your sales sorted into buckets named qualified, mid-qualified, and non-qualified, each with one rate.
• Flat rate. One percentage and one per-transaction fee for every card.

Each model shows costs differently, and each hides different things. Our comparison of interchange-plus, tiered, and flat-rate pricing covers how to tell which one serves you.

Step 4: Separate interchange from markup

Interchange is the fee the card-issuing bank receives on each sale. Visa and Mastercard publish the rates, and every processor pays the same ones. Card networks also charge their own network fees, often called assessments, which typically add a little over a tenth of a percent of volume plus small per-transaction charges.

Everything above interchange and network fees is processor revenue. On an interchange-plus statement you can calculate it directly:

1. Add up the interchange lines.
2. Add up the network fee lines, which may be labeled assessments, dues, or pass-through fees.
3. Subtract both from total fees.
4. Divide what remains by total card sales.

In the example above, suppose interchange totals $1,040 and network fees total $72. The remaining $536 is markup and processor fees, which works out to 1.11% of sales. That is a high markup for a business of that size, and it is the number to bring to a negotiation.

Tiered and flat-rate statements fold interchange into their own rates, so you have to estimate it. For a typical in-store mix of credit and debit, interchange and network fees together commonly come to roughly 1.5% to 2% of volume. Online and keyed sales run higher. Published rates for common card types are listed in what interchange fees are.

Step 5: Read the fees at the end

The last section lists everything else. This is where small charges pile up:

Some names point to real card-network charges, such as Visa's fixed acquirer network fee, often shortened to FANF. Others are processor revenue with official-sounding names. Our list of statement fees worth questioning goes through thirteen of them.

Step 6: Compare three months side by side

Put your three months in a row and look for changes. Did a new fee appear? Did your effective rate rise while your card mix stayed the same? Processors announce price changes in a short message box on the first or last page of the statement, and a rate increase can take effect within a month or two of that notice.

A quick checklist

When a second opinion helps

If your pricing detail runs ten pages of codes, the math in step 4 can take an afternoon. A specialist who reads statements every day can do it in about 30 minutes and tell you which lines are worth raising with your processor. You can request a free review and keep your current processor either way.