Understanding your merchant statements is crucial if you want to manage your business expenses effectively. Your merchant statement provides a detailed breakdown of all the fees and charges you’re paying for the privilege of accepting credit card payments. However, the complexity of these statements can often leave business owners confused. Here’s how to read and understand your merchant statement, so you know what you’re really paying for.
Understanding the Basics
Before delving into the specifics, it’s important to understand the basic elements of a merchant statement. Typically, a merchant statement will include:
Account Summary This section provides an overview of your charges for the given period.
Processing Fees Detailed breakdown of fees charged for processing transactions.
Batch Fees Charges for each batch of transactions processed.
Discount Rates Percentages taken from each transaction.
Chargebacks and Refunds Information on any chargebacks or refunds processed during the period.
Familiarize yourself with these sections, as they form the foundation of your statement.
Decoding Processing Fees
Processing fees are usually the most significant component of your merchant statement. These fees can be broken down into:
Interchange Fees Fixed fees set by credit card networks (like Visa, MasterCard) for each transaction.
Assessment Fees Percentages of the monthly sales volume, also set by card networks.
Processor’s Markup Additional fees charged by your payment processor to handle transactions.
Understanding each of these components can help you figure out where most of your money is going.
Batch Fees and Other Costs
Batch fees are typically minor compared to processing fees but can add up. These fees are applied whenever the merchant submits a batch of transactions for processing. The frequency of batching (daily, weekly, etc.) will affect these costs.
Other costs to be aware of include:
Monthly Fees A regular charge for maintaining your merchant account.
PCI Compliance Fees Fees for adhering to payment card industry data security standards.
Equipment Fees Charges for renting or purchasing payment processing equipment.
Chargebacks and Refunds
Chargebacks and refunds are particularly important, as they can erode your revenue. Understand the fees associated with handling disputes and refunds. Monitoring this area can help you implement better fraud prevention measures and customer service policies to minimize occurrences.
How to Analyze Your Statement
Start by comparing different sections of your statement. Look for any inconsistencies or unexpected charges. If you notice anything unusual, don’t hesitate to contact your payment processor for clarification.
Compare Month-to-Month Make a habit of comparing your statements month-to-month. Look for trends, such as increasing fees.
Annual Audit Consider performing an annual audit of your merchant services statement. This can help you identify long-term trends and areas for potential savings.
Take Control of Understanding Your Merchant Statements
By breaking down your merchant statement, identifying key fees, and routinely analyzing your charges, you can ensure you’re not overpaying and can even spot opportunities to negotiate better rates. Knowledge is power, and when it comes to managing your business, knowing what you’re really paying for in your merchant statement is the first step toward financial efficiency.
