How to read a merchant services statement

Start with the only number that matters

Your effective rate is total fees divided by total card volume, expressed as a percentage. That is it. Every quoted rate, every teaser, every 'as low as' is noise next to this one figure.

Find the total volume processed for the month and the total of all fees charged. Divide the second by the first, multiply by 100. If you processed $42,000 and paid $1,470 in fees, your effective rate is 3.5% — regardless of what rate you were sold.

• ·Use the statement's own totals, not a single batch or a single day
• ·Include every fee line, not just the per-transaction discount rate
• ·Do it for three consecutive months — one month can be distorted by a chargeback or an annual fee

The three kinds of cost on your statement

Once you have the effective rate, the useful question is what it is made of. Every line falls into one of three buckets, and only one of them is genuinely negotiable.

• ·Interchange — set by Visa, Mastercard and the other networks, paid to the bank that issued your customer's card. Nobody can discount this. Any processor claiming to beat interchange is not describing interchange.
• ·Assessments — the networks' own smaller cut. Also fixed, also not negotiable.
• ·Processor markup — what your provider adds on top. This is the entire negotiable surface, and it is where the difference between a fair deal and a bad one lives.

Line items worth questioning

These appear on most legacy statements. Some are legitimate cost recovery. Several are close to invented, and a few are charged to businesses that already comply with the thing they are being penalised for.

• ·PCI non-compliance fee — often $20 to $50 a month, charged because a questionnaire was never completed. Completing it usually removes the fee entirely.
• ·Statement fee — a monthly charge for producing the document you are currently reading.
• ·Batch fee — charged each time you settle the day's transactions, so effectively a daily fee with a different name.
• ·Monthly minimum — charged when your processing volume is low, which is precisely when you can least afford it.
• ·Annual fee — easy to miss because it lands in one month and distorts that month's effective rate.
• ·Equipment lease — the most expensive line on many statements. Leases frequently outlast the hardware and are often non-cancellable.

Why your rate went up without a phone call

Most merchant agreements allow the processor to change pricing with notice, and notice usually means a line in a statement nobody reads. A rate that started at 2.6% commonly drifts past 3.4% over a few years through small, individually unremarkable increases.

Interchange itself does change periodically, and processors are entitled to pass that through. What is worth checking is whether the increase you absorbed matches an actual network change, or whether the markup quietly widened at the same time.

What a fair statement looks like

There is no single correct effective rate — it depends heavily on your average ticket, your card mix, and whether cards are present. A coffee shop taking $6 debit payments and a jeweller taking $3,000 credit payments should not expect the same number.

The useful test is not the rate in isolation. It is whether you can account for every line, whether the markup is stated plainly, and whether anyone answers when you ask.

• ·You can explain what each fee is for
• ·The markup is disclosed rather than buried in a blended rate
• ·No fee exists to penalise paperwork you could complete in ten minutes
• ·You own your hardware, or the lease has a defined and reachable end
• ·There is no early termination fee holding you in place

If you would rather not do the arithmetic

Send us last month's statement and we will work out your effective rate and mark up which lines are avoidable. It is free, there is nothing to sign, and if your current deal is fair we will say so — that outcome is common enough that we plan for it.

We are a reseller, so we earn only if you eventually switch and process. That is the bias, stated up front, so you can weigh the analysis knowing where it comes from.