Reading a Merchant Processing Statement

October 3, 2009

October 3, 2009



This article originally appeared on, a blog started by one of our founders, Sean, before he started FeeFighters. One of the ways the the processors make their money is by making the fees as difficult to understand as possible. Therefore, it pays to know how to read a processing bill so you can know […]

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This article originally appeared on, a blog started by one of our founders, Sean, before he started FeeFighters.

One of the ways the the processors make their money is by making the fees as difficult to understand as possible. Therefore, it pays to know how to read a processing bill so you can know how much you are being charged and figure out if you are getting a good deal.  Most merchants are pricing according to 3-tier pricing, which this section covers.

1. Depending on how your account is priced, this section will include several categories.  This bill, an example of simple tiered pricing , only divides the transactions into two categories: Visa (V) and Mastercard (M).

2. This section shows how much you are being charged for each transaction in each type. Here Mastercard (M) and Visa (V) transactions are being charged the same amount – $0.00 per transaction and then 2.52% of each transaction’s value. You can calculate the total for each category by multiplying the P/I (per-item, here .000) times the # Sales (here 533 for Visa) plus the % (here 2.52) times the $ Sales (here 116,065.03) to get (533 x 0.000 + 2.52% x 116,065.03) = 2,924.87.

3. Discount Due is the single most important item on your bill because it contains the majority of the amount you are being charged by your processor (however, it is not the total charge). The “Discount” is the difference between what you charged your customers and what was deposited in your bank account. Idit is taken by the processor on a daily basis and you never see it.  Most of the discount is passed on to Visa and Mastercard and some is kept by the processor to cover their costs and generate their profit.

4. Amount is the amount of fees, which are outlined in more detail on the second page of this bill. This is the second part of what you are charged by your provider (in addition to the Discount) and is usually automatically withdrawn from your bank account on a monthly basis. So this merchant paid a total of $5,468 ($773 in fees + $4,694 in discount) to his payment processor in this month, or 2.94% of his sales (5,468 / 186,301).

5. You won’t see these on every bill. These “adjustments” are either refunds that were issued for transactions that occurred the month prior, or they are chargebacks. Usually it is not a good thing to have a lot of refunds or chargebacks, they can impact the rate that you are charged and the size of your reserve account.

6. This is where you get the detail behind the extra $773 that was charged in fees:

Monthly statement fee: $5 – they charge you to get a statement, this is pretty common. One thing to be careful of is, if you switch payment processors and you don’t cancel with your old one they will continue to charge you the monthly statement fee and you may not notice a $5 ACH from your bank account if you have a lot of transactions. I also don’t think you can opt out of this and go without a statement (not that you would want to).

Visa trans fee @ 0.20 – this is really sneaky. The merchant in this case thought that he had negotiated a 0.00 per transaction fee with his processor, which the first page of the bill would seem to verify. However, the processor really just moved the transaction fee to another part of the bill and he is still getting charged $0.20 for each transaction.

AVS trans fee @ 0.05 – mostly AVS (Address Verification Service) is used by online merchants as a means to reducing fraud. Basically you ask the customer their zipcode and street address which is then matched against those on record with their credit card issuer. This method, also used increasingly in grocery store, convenience stores and gas stations, is highly effective because oftentimes someone in possession of a stolen card or card number won’t know this information. However, the communication with the credit card company to verify the address does have a charge, in this case 0.05 / transaction.

MC trans fee @ 0.20 – same as Visa, explained above.

T&E fees – T&E refers to Travel and Entertainment. In order to pay for the perks that people using points cards or corporate rewards cards get, the issuing bank charges your payment processor extra fees. These are a part of that.

Batch Header Fee – One of the main jobs that your processor does is gather up all your transactions for the day, combine them with other merchant’s transactions, figure out how much each issuing bank (like Capital One or MBNA) owes, ACHs that much from the issuing bank, figures out how much of that amount belongs to each of their merchants and then ACHs your share to you. This Batch Header Fee (in this case $0.25 per transaction) is a charge for that service. It can usually be negotiated down to nothing.

Mid Qualified Trans – Earlier in this document I described that most merchants are charged according to three-tier pricing. That means that each transaction, depending on the circumstances of the transaction, are classified into one of 3 buckets or tiers (Qualifying, Mid-Qualifying and Non-Qualifying).  What determines those tiers is complicated, depends on the situation and is covered in the article on tiered pricing.  The most important thing to recognize is that you get charged SIGNIFICANTLY extra for Mid and Non qualifying transactions and this practice of Marking Up The Downgrades is one of the ways that your processor makes most of their money.

Non Qualified Trans – Same story as the Mid Qualified, only for even more expensive kinds of cards. Mostly, foreign-issued cards (including Canada) fall into this category.

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