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Reading Merchant Account Statements

Reading and understanding your monthly merchant processing statements can be difficult at first, but being able to read and understand your merchant account processing statements is crucial to maintaining the best merchant account for your business.

This section will explain how to correctly read and understand your merchant processing statements. Each provider has a slightly different layout to their statements, but all statements follow the same general guidelines.

Prior to reading this section you should understand the different qualification rates for VISA and MasterCard transactions and what causes transactions to downgrade. If you have not yet read the section of this guide titled "Merchant Account Rates & Fees" please do so before proceeding.

Some providers offer more detailed statements than others. The more detailed a statement is, the easier it will be to read and decipher. Unfortunately, there is little that you can do (short of switching providers) if your processor provides poorly detailed statements.

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VISA & MasterCard Interchange Qualifications

The first thing to understand before you can accurately interpret your statements is how VISA and MasterCard (the card associations) qualify different transactions. As we've covered in previous sections of this guide, VISA and MasterCard assign different risk levels to different types of transactions and different types of cards. Each risk level is assigned a qualification category that corresponds to a percentage increase over the discount rate that is charged to process a transaction.

Most merchant accounts generalize different qualifications into three basic categories called qualified, mid-qualified, and non-qualified. There are merchant accounts that are set up to pass along the exact percentage increase that VISA and MasterCard charge, but these accounts operate on much thinner margins and are usually reserved for high-volume merchants.

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Merchant Account Statement Layout

Hopefully you still have the Interchange fee schedule open in a new browser window because we will be referring back to it in this section. If you don't have the schedule open please go back and open it now.

Once you understand how merchant statements portray information you'll find them to be an invaluable tool for showing you how your processing charges are being applied. Again, some statements are more detailed than others and we have done our best to generalize the descriptions in this section to match most statement layouts. If you're having trouble deciphering your statements after reading this section you should contact your provider for assistance.

Summary of Card Deposits
The first part of most processing statements consists of a section called something like "Summary of Card Deposits" or "Funding Summary". This section of the statement shows the number of transactions made during the month, the dollar volume of the transactions, the break-down of card types (VISA, MasterCard, American Express, Discover, etc.), general discount charges, and possibly more depending on your provider.

This section of the statement may show the depository information as monthly grand totals or it may break totals down into individual daily settlements. Some providers have a separate section on their statements to show the individual daily deposits, and others combine this information into a single section. Again, this will depend on your provider.

This section of the statement is especially useful if your provider breaks the deposits down into daily amounts because you can cross-reference the information with your depository checking account statements. This section is not very helpful for figuring out how much you've been charged for processing. The sections that follow offer the most detail about actual charges.

Summary of Card Fees - Settlement Discount
The section of your statement titled "Summary of Card Fees" (or something similar) is the section that will tell you how much was charged for qualified transactions. Only qualified rates are deducted from transaction amounts in this section because the qualified discount rate applies to all transactions that are run through the merchant account. Qualified discount fees are often broken down by card types which are then displayed as separate totals.

Some providers will list all of the fee categories (qualified, mid, and non) in the summary of card fees where they will display the gross amount of sales for each card type next to the qualification category that each transaction was processed at.

Surcharges - Discount Qualification Fees
The section of your statements called something like "Surcharges" or "Discount Qualification Fees" is the section where mid and non-qualified transactions are listed. This is the section where you will see the abbreviations and industry terminology found in the Interchange Reimbursement Schedule. This section usually begins by listing the types of transactions run throughout the month. For example, the first entry may read "MERIT III" followed by the number of transactions that ran at that qualification level throughout the month, then by the gross dollar amount of charges, followed by the total fees applied to the balance.

All of the fees listed in this category are in addition to those already noted in the summary of card fees. The reason for this is that only the qualified discount rate is deducted in the summary of cards fees. Any additional charges applied throughout the month due to transactions downgrading are charged above and beyond the qualified rate. In order to realize your total merchant account fees you must add the summary of qualified card fees to the surcharges.

Processing Fees - Transaction Fees
The last section of fees on a statement is usually the section that details all of the fees that are expressed as whole dollar amounts rather than percentages. For example, a monthly statement fee of $10 or a batch header fee of $0.25 would be placed in this section.

Many miscellaneous fees appear in this section such as WATTS fees, AVS fees, help desk fees, and batch header fees. Any chargeback fees and ACH return fees will also be listed in this section. At this point you're ready to total all of your processing fees on the statement. Add the discount fees, the surcharge discounts, and the transaction fees to arrive at the total processing charges for the month. Some providers will total the qualified discounts with the surcharges leaving you to add that total to the transaction fees in order to find the total monthly charges.

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Common Mistakes & Misconceptions about Statements

The most common mistake people make when reading their statement is that they fail to add all charges incurred throughout the month to find their total charge.

Many statements appear to provide a grand total listed next to a heading like "Total Fees". This is misleading because this figure doesn't always represent the total fees charged during the processing period. Total fees only represent surcharges and card fees that were charged during the processing period.

Qualified discount charges are usually subtracted from a transaction prior to it being deposited into a merchant's account. All of the qualified discount charges are not figured in the "Total Card Fees" on a statement. In order to realize total charges for processing, you must add the qualified discount charges taken throughout the month to the card fees and surcharges that are applied at the end of the month.

Some business owners go years without fully understanding exactly how much they're actually paying for merchant processing. If you have any doubts about how to read your merchant account statement, or about how much you are being charged, please contact your provider and have them explain your statement to in detail.

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