Six Keys to Mastering Your Card Processing Statements

Today, most businesses accept electronic payments via credit and debit cards to offer added convenience for their customers and to boost profits by increasing income. However, many business owners who engage in these types of transactions do not fully understand how much they cost.

When a customer swipes a card to pay for goods or services, processing fees for that transaction can eat up a large chunk of your profit. In fact, they may be among the highest expenses your business incurs. But, unlike with overhead costs, you might not be sure what costs are associated with transaction fees. That’s why it is critical to review your monthly processing statements to identify all the rates and fees so you can control them, save money, and increase your business’s profitability.

As you examine your statements, keep in mind these six guidelines:

1. Know what types of cards your customers use. Many processors list Visa or MasterCard in the card type column, but these are card companies, not card types. Visa, MasterCard and their bank issuers offer hundreds of card types with interchange fees that vary according to time to settlement, type of business/organization, type of transaction (online versus swiped, etc.), and other factors. Not identifying the card type allows some processors to charge you more for transactions than they actually cost to process. For example, debit card transactions usually cost less than credit card transactions, but you can be charged the same rate for both, especially if your statement doesn’t identify card types, making it difficult for you to determine your exact costs.

2. “Total card fees” don’t represent your total costs. Don’t rely only on this line item to determine your total costs. Even if your statement lists an amount for it, you must do a little math to find out how much you really pay. Add the “less discount paid” (the fee you pay your processor) to the “total card fees” (the interchange you pay) to arrive at your real bottom-line costs.

3. “Discount rates” are misleading. “Discount rate” is an industry-accepted term for the fee your processor charges. However, they may quote you a low ‘in-the-door’ rate without disclosing that most transactions do not qualify for it. Look at your statement carefully, and you might see transactions charged at much higher rates.

4. Beware of bill-backs and other surcharges. Many processors hide arbitrary fees, classified as “bill-backs” and “surcharges.” They charge a low discount rate on all your transactions—and then add on surcharges. Some appear the same month the transaction occurs, and others appear the following month, making it hard to reconcile charges and calculate your total monthly costs.

5. Note additional fees. Your processor may charge even more fees—from PCI security and per-transaction fees to batching, authorization, annual charges and more. Verify the reason behind each charge. Some might be randomly included and bring you no value.

6. Don’t do it alone. Reviewing monthly statements can be overwhelming. Until you know what to look for and how to identify “red flags,” consider asking your payments processor to help you navigate your statement. Or have your accountant, or even another processor, review it. Some will walk you through your statement, help you uncover hidden fees, and suggest ways to save money—at no cost to you.

Payment processor service fee structures are complex, but they also are negotiable, so speak up if you see something that’s unclear or that raises a red flag. You might get it reduced or removed.

Processors who offer interchange plus pricing plans are supposed to bill bank/card interchange fees at cost. But some do not, and instead gouge merchants. By learning the facts about payments processing practices and which questions to ask, you can often eliminate fees, reduce your out-of-pocket expense on transactions, and apply the savings toward more important things—like operating your business.

To learn more about protecting your business from deceptive pricing practices, contact Chris Danner at Heartland Payment Systems, one of FEMA Services Corp.’s endorsed services providers. Email him at Christopher.Danner@e-hps.com or call him at 314-599-2026.