As a small business owner, maintaining profitability and growth means managing expenses. One area that often goes overlooked is credit card processing fees. These fees can quickly add up, eating into your hard-earned revenue if left unchecked. That’s why it’s important to understand your monthly merchant statement – the detailed breakdown of all the charges associated with accepting card payments.

In this post, we’ll dive deep into merchant statements, demystifying the various fees and terminology. Our goal is to equip you with the knowledge and strategies to keep your extra credit card processing fees below $30 per month – a reasonable threshold for most small businesses.

Decoding your merchant statement may seem daunting at first, but with a little guidance, you’ll soon be able to identify opportunities for cost savings. By taking control of your payment processing expenses, you can redirect those funds towards more productive areas of your business, such as marketing, inventory, or employee development.

What is a Merchant Statement?

A merchant statement, also known as a merchant processing statement or credit card processing statement, is a comprehensive document that details all the transactions, sales activity, and processing fees associated with accepting card payments for a given month.

This itemized statement serves as a record of the payments processed through your merchant account, including crucial information such as:

• Total sales volume and number of transactions
• Breakdown of transactions by card type
• Interchange fees charged by the card-issuing banks
• Assessment fees paid to the card networks (Visa, Mastercard, American Express, Discover, etc.)
• Processor markup fees and other hidden fees charged by your merchant services provider
• Chargebacks, refunds, and reversals initiated by customers or card issuers

The merchant statement essentially acts as an accounting of the previous month’s payment processing activity. It provides transparency into the various costs involved in accepting card payments, allowing you to track your expenses accurately and identify potential areas for cost optimization.

While the format and terminology may vary slightly between different merchant services providers, the core components of a merchant statement remain consistent across the industry. Understanding how to read and interpret this document is vital for managing your payment processing costs effectively.

Breaking Down the Fees

Now that we understand what a merchant statement is, let’s dive into the various transaction fees that contribute to your overall credit card processing costs. By breaking down these fees, you’ll gain a better understanding of where your money is going and how to potentially reduce these expenses.

Interchange Fees

Interchange fees are the largest and most complex component of your credit card processing costs. These fees are charged by the card-issuing banks (such as Chase, Bank of America, or Capital One) to cover the risks and costs associated with facilitating each card transaction.

Interchange fees can vary significantly based on several factors, including:

• Card type (e.g., consumer credit, debit, commercial, etc.)
• Transaction type (e.g., card-present, card-not-present, recurring billing, etc.)
• Processing method (e.g., swiped, keyed, online, etc.)
• Industry or business type (e.g., retail, e-commerce, restaurant, etc.)
• Card brand (Visa, Mastercard, American Express, Discover)

For example, a typical interchange fee for a swiped consumer credit card transaction might be around 1.5% + $0.10, while a keyed e-commerce transaction could be closer to 2.9% + $0.30. These fees are non-negotiable and set by the card networks themselves.

Assessment Fees

In addition to interchange fees, you’ll also see assessment fees on your merchant statement. These fees are charged by the card brands (Visa, Mastercard, American Express, Discover) to cover the costs of operating their respective payment networks.

Assessment fees are typically a fixed percentage of your total sales volume, ranging from 0.13% to 0.15% for most card types. While these fees may seem small, they can add up quickly for businesses with high transaction volumes.

Processor Markup and Other Fees

The final major component of your credit card processing costs is the markup and other fees charged by your merchant services provider or payment processor. These fees can vary significantly depending on the pricing model used by your processor.

Common pricing models include:

1. Flat-rate Pricing: A simple, fixed percentage rate (e.g., 2.9% + $0.30 per transaction) charged for all transactions, regardless of card type or transaction details.
2. Interchange-Plus Pricing: The processor charges you the actual interchange fee plus a fixed markup percentage (e.g., interchange fee + 0.25%).
3. Tiered Pricing: Transactions are grouped into “qualified,” “mid-qualified,” and “non-qualified” tiers, each with a different rate based on various factors.

In addition to the markup, your processor may also charge additional fees, such as monthly account fees, PCI compliance fees, batch fees, monthly statement fees, and more.

By understanding the breakdown of these fees, you’ll be better equipped to identify potential areas for cost savings and negotiate more favorable rates with your merchant services provider.

Strategies to Reduce Fees

Now that you have a solid understanding of the various fees involved in credit card processing, it’s time to explore some strategies to help reduce these costs and keep your total fees (from what you can adjust) below the $30 threshold.

Negotiate with Your Processor

One of the most effective ways to lower your credit card processing fees is to negotiate with your merchant services provider. While interchange fees are non-negotiable, the processor markup and other fees are often open to negotiation, especially for businesses with higher transaction volumes.

Here are some tips for negotiating better rates:

1. Shop Around: Get quotes from multiple processors and use them as leverage when negotiating with your current provider.
2. Leverage Your Volume: If you have a high sales volume, use that as a bargaining chip to request lower rates or waived fees.
3. Ask for Interchange-Plus Pricing: This pricing model is generally more transparent and can result in lower overall costs compared to tiered pricing.
4. Negotiate Fees: Request that certain fees, such as monthly account fees or PCI compliance fees, be waived or reduced.
5. Consider Switching: If your current credit card processor is unwilling to negotiate, be prepared to switch to a more competitive provider.

Optimize Payment Methods

Another way to reduce credit card processor fees is to encourage customers to use lower-cost payment methods. For example, debit card transactions typically have lower interchange fees than credit card transactions.

You can also implement surcharging or cash discounting programs, which allow you to pass on a portion of the processing fees to customers who choose to pay with credit cards (we don’t recommend this). However, it’s essential to ensure compliance with card brand rules and local regulations when implementing these programs.

Improve Processing Efficiency

Streamlining your payment processing operations can also help reduce fees. For instance, minimizing chargebacks and reversals can save you money on associated fees and potential fines.

Maintaining PCI compliance is another crucial aspect of efficient payment processing. By adhering to the Payment Card Industry Data Security Standard (PCI DSS), you can avoid costly non-compliance fees and reduce the risk of data breaches, which can lead to even higher expenses.

Additionally, consider implementing processes to reduce keyed-in transactions, as these typically have higher interchange fees compared to swiped or dipped transactions.

By implementing these strategies, you can take control of your credit card processing costs and ensure that you’re not overpaying for the privilege of accepting card payments. Remember, the total amount of the controllable fees you pay should be less than $30 per month.

LOWER YOUR PROCESSING FEES TODAY