For many businesses, credit card processing is one of the biggest expenses, along with payroll, rent, and cost of goods sold. But understanding where those fees are coming from can be confusing.
A good place to start is your credit card processing statement. Knowing how to read one makes it easier to figure out where your fees are coming from and identify any errors.
Below is a guide to understanding a basic credit card processing statement (or merchant processing statement) based on the ones Gravity provides to its merchants. Yours may look a little different, but it should contain the same basic information.
If you have questions – even if you’re not a Gravity client – please reach out to us at 866-701-4700 and we’ll be happy to help.
Why You Should Read Your Credit Card Processing Statement
There are a few reasons why it is important to read and understand your merchant statement every month.
- Keeping an eye on your processing fees: if there are sudden changes that look unusual, investigate further.
- Identifying hidden fees that were not there before.
- Checking your interchange rates.
The Main Components of a Credit Card Processing Statement
The main components of a merchant processing statement are:
Business Information and Merchant ID Number
The name and address of your business and your merchant ID number appear at the top of your credit card processing statement. This represents how your business shows up in your processor’s system.
When reaching out to your processor with questions, have your merchant ID handy so they can look up your account quickly.
This is a quick overview of the credit card revenue processed and your monthly processing fees. It’s a good snapshot of high-level numbers, but it doesn’t provide detailed data.
Important Information About Your Account
This box is where your processor lets you know of any upcoming changes to your fees or account.
For example, we use this section to inform you about the upcoming fee changes of the major card brands (every six months).
Gravity doesn’t change your fees without notifying you first, so this box is primarily used for other types of notifications.
Summary by Card Type
This section breaks down all of the different card brands used, as well as how many transactions and how much volume was processed for each card type.
You’ll notice two numbers here:
- Total gross sales: the full amount processed in credit card sales that month.
- Total amount you submitted: the total amount minus any refunds.
Your fees are assessed based on total gross sales.
Amounts Funded by Batch
This shows the amount of revenue processed based on when you closed your batch. Note that the date submitted on your merchant processing statement might not match the date the funds appear in your account due to cut off restrictions. You can log into your processor’s portal to match the batches up to your records.
This section shows any revenue that was processed by a party other than your processor. For example, if you process your American Express revenue through the Amex Direct program, you will see these amounts under third-party transactions.
This is the master list of all the fees you were charged, broken down by card brand and type of fee. There are three types of fees on your credit card processing statement:
- Processing fees: these are the fees charged by your processor for the services they provide. On Gravity’s processing statement, these are represented by line items such as Disc 1, POS Auths, Datawire, and CPU Gtwy.
- Interchange: this is the fee charged by the bank that issued the credit card. Interchange makes up the largest portion of your fees. For more on how interchange is assessed, read our blog post on the subject. This fee is represented by the line item “Interchange,” though the final section of your statement will have a more cohesive breakdown of your interchange fees (see below).
- Card brand fees: These are the fees the card brands charge (e.g. Visa, Mastercard, Discover, and American Express). On your Gravity merchant statement, they are listed under the various card brands.
This section breaks down all the interchange fees you were charged.
Banks assess different interchange fees depending on the card brand and card type. For example, a Mastercard rewards card might charge a higher interchange than a Mastercard debit card. Those different rates will be shown here.
How to Tell if You’re Paying Too Much
There are two quick ways to use your credit card processing statement to figure out if you’re paying too much.
First, look at your interchange charges for any error or downgrade codes. These are marked as “standard” (often abbreviated STD or STAN) and indicate any card the bank marked as potentially fraudulent.
Forgetting to close a batch for a few days or a disparity between the amount authorized on a card and the amount settled are a couple of reasons why a bank would flag the cards.
The rate on the “standard” cards may be a lot higher.
If you notice a lot of these downgrade errors, call your processor to see if they can figure out why.
The second way to figure out if you’re paying too much is to calculate your effective rate: the total percentage amount you’re being charged to process credit cards each month.
To calculate your effective rate, divide your total processing fees by total gross sales. For most businesses, the rate should be somewhere between 2% and 3%, though for businesses with lower average transaction sizes, the effective rate may be higher.
If you think your rate is too high, call your processor to find out why.
Can’t get a straight answer? Call Gravity at 866-701-4700 or email [email protected] and we’ll help you out.
By Ashlie Blaske, Business Analyst
This post was adapted from “Credit Card Processing 101: How to Read a Credit Card Statement,” part of the free Gravity Talks webinar program.