Advice for Navigating Your Merchant Services Statement

By | September 3, 2020

Reading your merchant services statement may seem a lot like a foreign language. If you don’t understand the terms or don’t know what to look for, it can be exhaustingly complicated. If this sounds like you, read this guide to learn how the merchant services fees work.

Tip: Don’t Over Analyze the Statement

It can be tempting to scour through every detail on each statement, but sometimes it’s overkill and downright stressful, especially with Interchange plus pricing. Instead, look at the big picture. If something looks off, ask your merchant services representative. Hopefully they have earned your trust and have a good reputation, but if you’re not sure it never hurts to ask for a second opinion.

You should know before you start accepting credit cards, how much you’ll be paying, or at least a ballpark figure. This helps tremendously. If your statement arrives and it’s way off course, then you know something is wrong and you should go through the statement line-by-line or call your sales representative for help.

If you have to call customer service, make sure you have your merchant service ID handy – you’ll usually find it in the top right corner of your statement. This number is how customer service will identify you if you’re with a large processor that doesn’t have personalized service.

Tip: Know your Effective Rate

Your effective rate tells you a lot. It’s one number, so it’s a lot less overwhelming than looking at individual rates.

Your effective rate is the overall rate you pay for all fees versus your sales. It’s easy to calculate, just take your total fees (you may have to add them up) and divide them by your sales that month. This is your effective rate.

Is it around what you anticipated or is it higher or lower? If it’s higher, you may want to take a closer look at your statement to see where you went wrong. If it’s lower, pat yourself on the back and move on.

If you need a baseline, ‘average’ businesses should be around 2.5 – 3 percent, while high-risk businesses will be around 4.5 – 5 percent.

Tip: Make Sure the Type of Pricing is Right

What type of pricing did you sign up for? If it’s interchange plus, do you understand it? Can you separate the card network fees and bank markups? If not, can you ask? Understanding the breakdown can help you know what to expect and to recognize when things aren’t right.

Are you renting equipment or did you buy it? This could increase your pricing too. As can other pass-through fees. If you aren’t sure what you’re being charged for, ask.

If you don’t have interchange-plus pricing, find out what pricing you have. It will be one of the following:

  • Subscription pricing – Many providers have subscription pricing. You pay a monthly fee rather than markup fees per transaction. It may be easier to decipher fees this way, but make sure it’s the right pricing model for you.
  • Flat-rate pricing – Some providers charge flat-rate pricing, which means they wrap all fees into one percentage, such as 2.75 percent of the transaction. You can’t differentiate between the markup fees charged, but may save money if your average transactions are higher.
  • Tiered pricing – Merchant providers charge different fees for each ‘type’ of credit card. It’s hard to predict these fees since you don’t know which cards fall into which tier. This is the most confusing pricing model when looking at statements.

Tip: Understand How Each Fee is Charged

This can feel impossible, but is important. Are the fees a percentage or a dollar amount? If they are a flat fee, they are easy to predict and understand. If they are percentage fees, you may want to calculate the fees for the first few months to make sure you how understand how they affect your bottom-line.

If you don’t understand a fee, use your resources. Check the guide your merchant services provider gave you when you signed up. If you still don’t understand, get with your sales agent to get more answers. You should understand the ramification of each fee as they affect your bottom line.

You may find that you don’t understand the fee names too. There aren’t regulations regarding what each fee should be called, so you have every right to ask about them. If you don’t understand a name or don’t understand what the fee is for, ask how it’s calculated and what it relates to.

Tip: Watch out for Penalty Fees

Penalty fees can add up without you realizing it. Most are avoidable if you know what to expect. During those first few months talk with your sales agent to see what penalty fees you should watch out for and/or understand.

If you repeatedly pay penalty fees, you may want to find a different plan or talk to your sales agent about restructuring your plan. While each processor has different reasons for penalty fees, some of the most
common include:

  • PCI non-compliance penalty fees
  • EMV technology or non-compliance fees
  • TIN (Tax Identification Number) mismatch fees

Each provider has a specific way they need the process run. If you don’t follow it and/or don’t follow through on PCI compliance, you may pay more fees than you bargained for when you signed up.

Always ask questions if you don’t understand your merchant services statement. Accepting credit cards is necessary to be in business, but that doesn’t mean you have to overpay for the service. Finding a way to make sense of your fees, minimize them, and make the most of your profits will help your company’s bottom line. Most service providers don’t have contracts and/or charge cancelation fees, so if you find that a plan isn’t working for you, it’s okay to look elsewhere. Your credit card processing is a big part of your business so fine-tuning the process is the key to your success.


LouHonickLou Honick is the CEO of Host Merchant Services. Prior to founding Host Merchant Services in 2010, Lou was the founder of and received numerous awards including SBA Young Entrepreneur of the Year, Inc Magazine 30 under 30, and multiple listings on the Inc 500. As a serial entrepreneur, all of his companies have operated on a singular devotion to outstanding customer service and support. Lou is a respected expert on the topics of customer service, payments and fintech, Internet technology, and entrepreneurship.

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