Your Guide to Navigating Your Merchant Statement​

As a business owner, you’re already wearing many different hats. You’re handling bank runs, interviewing candidates, and solving supply chain issues. Because of this, it’s easy to overlook merchant statements. 

While your merchant processing statement may look like any other bank statement or financial report, its contents are important for your company’s bottom line. This data helps you spot errors, analyze financial trends, track fees, and understand chargebacks. By learning how to read a merchant statement, you can optimize your company’s operations and know when you need to switch payment processing companies.

TL;DR

• Your merchant statement shows all of your fees, sales transactions, chargebacks, refunds, and deposits.
• Analyzing your statement and looking for hidden fees is essential for determining if you are overpaying for payment processing. Often, some of these fees can be negotiated. 
• Periodically review your existing processing fee structure to determine if it makes sense for your volume and needs. For example, there are fee structures available for high-volume companies that are more cost-effective, such as interchange-plus pricing.
• To avoid falling prey to fraud, review your chargebacks. In the United States, 78% of customers report filing a chargeback in a given year.
• Store your merchant number in an accessible, safe location. If you have problems in the future, you’ll need the number in order to talk to your provider.

What Is a Merchant Statement?

Merchant processing refers to the way merchants accept, process, and settle transactions. The merchant processing statement you receive at the end of each statement period represents all of the transactions that were processed in a set amount of time.

Depending on your merchant, this document may be called by different names. It could be labeled as the “Credit Card Processing Statement,” “Merchant Account Statement,” or “Merchant Processing Statement.” 

No matter what it is named, the merchant statement will include key information about your transactions, settlements, fees, adjustments, and chargebacks.

What Type of Fees Are Charged to Merchant Accounts?

While each company is different, there are a few common fees you may be expected to pay. Reading your statement is important because it tells you how much you’re paying for your processing services. Over time, these forgotten fees can make a big difference for your company’s revenue stream.

Although interchange fees, equipment rentals, and similar costs are the major expenses you’ll pay, many providers have additional fees. For example, you may pay a statement fee for paper statements or a PCI compliance fee for your security.

Interchange Fees

Interchange fees are paid to the card-issuing bank. The interchange fee will often include a transaction fee as well as an additional fee worth 1.5% to 3.5% of the transaction total.

Processing Fees

These fees go to your payment service provider to help them cover the costs associated with facilitating each transaction.

Monthly Service Fees

You’ll typically be charged a monthly service fee that covers your ongoing services. Often, multiple fees are rolled into this one cost.

Equipment Rentals

Depending on your provider and your existing setup, you may need to pay to rent card readers, POS systems, or other equipment. In many cases, the equipment is a requirement to use the payment processor’s services.

Authorization Fees

Whenever you swipe a card, information is passed between the acquiring and issuing bank. Even if the customer’s card is declined, an authorization fee is still charged.

Assessment Fees

An assessment fee may be charged to cover the cost of network operations or fraud prevention. If you’re charged a flat rate, the assessment fees are likely rolled into the normal flat rate and the percentage you are charged.

Batch Processing Fees

Often, merchants will wait until the end of the day to process all of the day’s card transactions in one batch. Typically, you’ll pay $0.30 or less per batch, but this cost can add up over time.

Through careful review, you can catch fraudulent chargebacks and hidden fees.

Guide to Understanding Terms on Your Merchant Statement

To make the most of your merchant processing statement, it helps to understand some of the most important terminology.

Term	Meaning
Acquirer	The acquirer or acquiring bank is the financial institution responsible for processing the merchant card transactions.
Address Verification Service (AVS)	AVS is designed to prevent fraud by verifying the cardholder’s address.
Chargeback	Customers can open claims or disputes to reverse transactions. While some of these claims are legitimate, some may be fraudulent.
Discount Rate	This is the amount that the merchant pays the acquiring bank for processing each transaction.
Funding	The merchant’s funding is how much they receive for their settled transactions.
Interchange Fees	When a transaction is processed by the card-issuing bank, interchange fees must be paid.
Merchant Account	Your merchant account is set up so that your business can process transactions from customers.
Merchant Category Code	The merchant category code is made up of four digits that represent the type of business you operate.
Payment Application	This is the software application that processes, stores, and transmits the cardholder information.
Payment Gateway	The payment gateway routes all of the financial transactions to the bank.
Statement Period	Your statement period records all of the transactions that happened in a set time period. Often, statement periods cover a single month of transactions.
Volume	The volume is a figure that represents the total amount of transactions processed. Since this figure is the gross amount of sales, it does not exclude fees.

How To Find Your Merchant Statement

Your provider should be able to tell you how to get your merchant statement. To start with, go to your provider’s website or app. In their digital portal, there should be a section where you can check your recent account statements. 

Alternatively, you can call your provider’s customer service line or send them a message requesting a copy of your merchant account statement.

Transaction costs can eat into your revenue figures, which is why reviewing your merchant account is so essential.

Top 7 Tips for Analyzing Your Merchant Processing Statement

To make sure you’re making the best business decisions, it’s essential to carefully read through your merchant processing statement each month. As you go over the statement, consider the following tips and best practices.

1. Always Analyze Your Chargebacks

Around 45% of chargebacks are related to friendly fraud, such as when a shopper has buyer’s remorse. A surprising 78% of American customers report filing a chargeback over the course of a year.

As a business, you can’t afford to overlook the cost of chargebacks on your statement. Disputing friendly fraud and genuine fraudulent transactions can save you money.

2. Understand the Different Types of Processing Fee Structures

While each company is a little different, there are a few general processing fee structures that are used.

Type	How It Works	Advantages	Disadvantages
Flat-Rate Pricing	Also known as blended pricing, this option involves paying a flat fee on top of a percentage of the transaction.	This pricing model is fairly predictable and easy to understand.	Flat-rate pricing can be costly.
Interchange-Plus Pricing	This fee structure charges rates based on the different types of cards, transactions, and card networks involved.	For businesses that have a high transaction volume, this is the cheapest option.	There is a lot of variability in what you’re charged, and the pricing structure can be confusing.
Subscription-Based Pricing	Your company is charged a monthly or annual fee instead of a percentage of your transactions.	This is another option that is fairly inexpensive for high-volume companies.	Subscription-based pricing only makes sense if you consistently have a high enough volume to justify the price.
Tiered Pricing	Rates vary based on the card’s tier. While debit cards are considered qualified cards and pay the least, corporate cards and cards with rewards programs are non-qualified and pay the highest rates.	Your rates vary based on what cards you accept. In general, you’ll pay less than you would with flat-rate pricing.	If you have a high volume, interchange-plus pricing would generally be better.

3. Analyze Your Account Statement

The right payment processor offers advanced payment analytics and high-quality data so that you can easily understand the flow of money. For example, you may spot suspicious trends in your chargebacks. 

To start understanding your account statement, look at the summary section. This will give you a high-level overview and a basic understanding of everything in your statement.

Each merchant is a little different in how they design their statements. Often, you’ll see a color-coded system to show different types of transactions. For instance, there may be different colors for third-party transactions, the amount submitted, fees charged, and adjustments/chargebacks.

Keep in mind that not everything in the chargeback section is always a chargeback. This is also where adjustments go, so it’s important to differentiate between the two options.

4. Correlate Your Merchant Account to Your Bank Statement

As a part of your auditing process, you should correlate transactions on your merchant account to deposits on your bank statement. This simple step will help you prevent fraud and catch errors in a timely way.

5. Check the “Important Information About Your Account” Section

Under the heading for “Important Information About Your Account,” you’ll find fee updates, deadlines, and key details about your merchant account. Often, there will be notices about PCI compliance information, validation dates, and data on major updates.

6. Negotiate Whenever Possible

By gaining a better understanding of the data in your statement, you can figure out which fees are negotiable. Markup fees, which are part of the merchant discounts, are often negotiable and hidden on your statement. At many processors, markup fees make up around 10% to 25% of the bill.

7. Keep Your Account Number Handy

From time to time, you may find an error on your statement or an unexpected fee. If you need help with your merchant account, the customer service representative will need your account number. To make this process easier, keep your merchant account number in a safe, accessible location.

Why Do You Need To Understand Your Merchant Statement?

Depending on who your payment processor is, merchant account fees can be a major expense for your company. Unfortunately, this expense can often go unnoticed. By learning how to read a merchant statement, you can make your costs more transparent and enjoy a few benefits.

• Gain better oversight into your company’s finances.
• Determine if some fees can be renegotiated.
• Spot and reduce chargeback fraud.
• Ensure your tax reporting is accurate.
• Make informed decisions about which provider to work with.
• Use data to figure out the best fee structure.

Final Thoughts

Understanding merchant account statements can seem complex, but it doesn’t have to be. At PayCompass, we’ve helped businesses in countless industries find cost-effective, secure solutions for payment processing and chargeback prevention. We can help you with fraud prevention, chargeback analysis, and convenient dispute management.

Take the next step in maximizing your company’s payment processing by reaching out to our team today.