The Importance of a Detailed Processing Statement

If you are not receiving a detailed processing statement each month then don’t be surprised if you are paying more than you negotiated

Would you write a check to a vendor based on an invoice that stated the following?

Items Amount
Truckload of stuff $15,425.00

The question may seem ludicrous because no merchant in his right mind would cut a check against an invoice like this.  Nonetheless, this is exactly what a high percentage of merchants are doing when it comes to paying their credit card processing.

Some processing statements are so generic in nature that they do not state anything more than “$45,675.38 was processed and the account was debited $1,918.17.  Merchant has 30 days to dispute the charges.”   How can anyone know if they are paying what they negotiated with this information?

Some statements may seem to provide enough detail by listing certain pass-through fees, processing rates, and other fees.  However, they lack very important information.

Understand that the quality in this industry is poor and that a high percentage of merchants are not receiving the rates and fees negotiated because of order entry errors.  Also, understand that some rates and fees default to the provider’s higher default rates and fees if a salesperson incorrectly completes the merchant application form.   Other providers inflate, surcharge, or hide certain rates and fees which may only be identified with a detailed statement.  Therefore, merchants must insist on a detailed statement that fully itemizes each rate and fee even if the merchant doesn’t understand all the rates and fees.

Fortunately for the merchant a smart salesperson will also want a fully itemized statement so that he can verify he is correctly being paid his commissions.   Uneducated salespeople don’t understand that a “buyers beware” provider who supplies limited information to the merchant may also be a “salespeople beware” provider when it comes to paying the correct commissions.

How do you know if you are receiving the right statement with all rates and fees fully itemized?

There are three components to your processing cost – Interchange, pass-through fees, and provider mark-ups and fees.  All three components must be listed in detail on the statement so they can be verified.

Interchange is the part of your processing cost that goes to the bank that issued the card used by your customer.   If you customer paid with a Chase credit card then Chase receives the interchange.  There are dozens of interchange rates.  However, Visa and MasterCard publish the interchange rates for all to see.  Here are the current links to the Visa and MasterCard U.S. interchange rates.   Note the MasterCard website requires that you click on “Download Interchange Rates” in the orange band to obtain a PDF copy of their current interchange rates.

https://usa.visa.com/dam/VCOM/download/merchants/visa-usa-interchange-reimbursement-fees-2016-april.pdf
https://www.mastercard.us/en-us/about-mastercard/what-we-do/interchange.html

The information on these websites may seem a little daunting.  However, as I’ll explain in this article series, both you and your salesperson will verify that your provider is not surcharging the interchange rates and that you are being charged the published interchange rates only.

Your statement must individually state each interchange rate you were charged..  The statement must also state the number of transactions and the amount of sales charged that interchange rate.  For Example, the statement will list several if not dozens of interchange rates like the two below:

Description # of Trans Sales Volume Interchange Rate Total
Enh Val Merit I 30 $8,765.00 2.04% + $0.10 $181.81
Visa Rewards 2 25 $25,543.00 1.95% + $0.10 $500.59

On page 1 of the MasterCard interchange rate table (7th rows from bottom and second column of rates) it states the interchange rate for Enhanced Value Merit I as 2.04% + $0.10.  Page 8 of the Visa interchange tables states the CPS/Rewards 2 interchange rate is 1.95% + $0.10.  With this detailed information you can do the math to prove that $181.81 and $500.59 are the correct charges so no hidden surcharges are being added.

Pass-through fees are the fees the card companies charge the providers.  Many providers inflate some of these fees before passing them through to the merchant.  Some processors add non-card company fees and label them as pass-through fees.  Therefore, merchants need to verify that they are only paying the actual fees charged by the card companies.

Provider mark-ups and fees must be itemized on the statement to verify that you are only being charged the rates and fees negotiated and that there is no additional cost through surcharges, inflated fees, mistakes, etc.  The statement must clearly state the percentage mark-up on each transaction (say 0.15%), the fee charged on every transaction (say $0.10), plus period fees (say a $5.00 statement fee), and all event fees (say a $15.00 chargeback fee).

Bottom-line, if you are not receiving a detailed statement then you are placing all of your faith in your provider that they are not inflating fees, hiding fees, or have made any order entry mistakes. Without a detailed statement it’s very difficult for a merchant or their salesperson to determine if the merchant is being charged correctly.

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