Guide to Reading Your Merchant Statement

When you create a merchant account, you’ll receive frequent statements outlining each month’s activities. What the actual statement looks like will vary based on your primary processor, whether that’s PayPal or Stripe. Most merchant statements are available as PDFs or data-rich CSVs, based on preference, and all of them will feature similar information, even if the layouts are slightly different. This information includes:

Sales Summary

Depending on your business model, you may have several summaries for:

Total gross sales volume
Number of transactions
Card deposits by card type
Adjustments and returns

Card Transaction/Interchange Fees

Card transactions are usually broken down by card type. There will be fees associated with each transaction, either labeled as a discount rate, processing fee, merchant service charge, or transaction fee, depending on your primary processor.

There are several fee models, including tiered, interchange-plus, and flat-rate.

Tiered

Qualified: What the processor considers “ideal,” which usually means the transaction was settled quickly, the transaction was card-present, and a standard consumer credit or debit card was used.

Mid-Qualified: These transactions come with higher rates because they didn’t meet all of the processor’s criteria, whether due to transactions having to be keyed in, cards weren’t present during the transaction, or there were rewards or cashbacks that needed to be honored.

Non-Qualified: Reserved for corporate cards, international cards, government cards, or transactions that are missing needed data.

What you need to know: There is no universal criteria, so make sure your processor is transparent. Transactions may be downgraded from qualified to mid- or non- with no clear explanation. Knowing the criteria beforehand helps you understand what to avoid when processing transactions.

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Interchange-Plus

This model is most cost-effective for high-volume businesses because fees are more transparent. It features three sub-fees: interchange (paid to the bank), assessment (paid to the card network,), and processor markup (paid to the processor). The interchange fees still vary based on card type, transaction type, and merchant category, but the processor markup will always remain the same, eliminating fee creep.

Flat Rate

Like the interchange-plus model, flat rate fees won’t change based on the type of card used. Regardless of the transaction type, there is one blended fee for every transaction, such as 2.6% + $0.10. The problem with the flat rate model is that for businesses that process a higher-volume of transactions, it’s easier to overspend. Simple debit cards have low interchange costs (under 0.5%), so if you’re paying 2.6% fees on transactions that would otherwise cost 0.5% under a different model, you’re overspending.

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Other Fees

Business owners expect to see transaction fees, but there are other fees to look out for in your statements, including:

Assessment: Fees from the card brand that are passed through the processor.
Cross-Border/International: May not apply to you, depending on your business. Specifically for transactions involving cards not issued in the United States.
Downgrade: When a qualified transaction is moved to mid- or non- based on the processor’s criteria. Yes, there is a fee associated with that!
Batch Fees: Charged every time a batch is closed or settled, and may also include an authorization or decline fee.
Statement: Some processors may charge you just for generating a monthly statement.
Threshold Fee: Reserved if your processing fees don’t meet the processor’s minimum threshold.
Annual Fee: Not applicable to all processors, but is charged as part of yearly account maintenance.
Account on File: Charges related to storing a customer’s information.

Please view our Hidden Cost of Payment Processing resource for more insight.

How to Avoid Certain Fees

Remember Your Annual PCI Questionnaire: Businesses are required to take a PCI questionnaire, a self-assessment that only takes around 30 minutes to complete. If you don’t submit this questionnaire or are late to provide your submissions, you’ll be charged a monthly non-compliance fee. After you take the self-assessment, your processor may also recommend a quarterly vulnerability scan, and if those aren’t completed, will also result in fees.
Consider Surcharges on Corporate Cards or Other Rewards Cards: Most of these premium cards land in the mid- or non-qualified category, resulting in higher interchange fees. Surcharges can help offset the expense of the higher interchange fees.
Revisit Your Pricing Model: Small or seasonal businesses can benefit from flat-rate pricing but bigger businesses that are processing higher volumes of transactions from different card brand types will save money by switching to an interchange-plus contract.
Understand Your Minimum Threshold: If you’re in a business that has slower, off-season periods, be sure you can hit your minimum processing threshold. Otherwise, you will have to pay the difference any month where you don’t meet that threshold.
Fight Chargebacks: You’re going to get a fee regardless of whether you win or lose a dispute, so always make sure you fight winnable chargebacks, otherwise, you’re just losing revenue.
Key In as a Last Resort: If someone says “You know what, I’ll use another card.” Let them. Don’t respond with “No, no, that’s okay. I can manually key in your card.” Doing this results in a “card not present” transaction, which comes with higher processing fees. Likewise, if you frequently take orders over the phone, don’t categorize your business as a card-present merchant.
Equipment Leases: Are you leasing a terminal? It’s highly possible that you’re already overspending. Terminals only cost a few hundred dollars to purchase and own, but if you’re leasing, you could end up spending thousands of dollars. Before you lease any equipment, understand who you’re leasing it from (it’s not your processor), cancellation policies, the lease terms, and APR rates.

Chargebacks

Most business owners hope to never see chargebacks on their monthly statements, which are transactions being disputed by the cardholder. Chargebacks come with an associated fee per dispute, and can impact your merchant credit rating.

Net Deposit

Net deposit is the amount of money that’s deposited into your bank account following a transaction, and is calculated by subtracting your gross sales and fees. The net deposit will be shown either per day or per batch, depending on your processor.

Pay attention to your net deposit! Doing so will help you catch discrepancies early because processors may increase fees mid-contract with minimal notice, hold funds for businesses in higher-risk categories, or have a rolling reserve in place. It will also help you catch processor errors, including duplicate batches, misapplied chargebacks, or incorrect refund postings.

Tax & Reporting Information

If you have to file a 1099-K, your reportable volume will be available in each monthly statement.