How to read a credit card processing statement

Credit card processing statements can be confusing. For starters, there are no standards or guidelines that regulate them, so merchant statements can vary from one processor to the next. This lack of regulation enables processing companies to make your statement difficult to read on purpose to hide the (very real) possibility that you’re overpaying them.

For this reason, it’s important to understand how to read your credit card processing statement. Don’t just glance at it and call it day. Really take the time to decipher the details so you can determine how much you’re paying in fees. Doing so can save you hundreds, if not thousands of dollars per month — literally.

To help you accomplish that, let’s take a look the following merchant statement that was sent to us by one of our members. We’ll be walking through the steps we took to understand the numbers, and we recommend you follow along using one of your credit card processing statements.

Step 1: Calculate your effective rate

When you first signed up with your credit card processor, they may have a given you low rate, or a range of rates for processing credit cards. And while those figures can give you a ballpark of how much you’re paying, the most accurate way to determine your fees is to run the real numbers in your business.

We call this step finding your effective rate.

To do that, divide the total dollar amount that you processed by the total fees charged by your processor. Or, follow the formula:

Effective Rate = Total Fees Charged / Total Amount Processed x 100

Let’s look at how this applies to a real merchant, using their statement below.

Using the formula above, we’ve calculated that this merchant’s effective rate is about  2.92%.

$1,506.68 / $51,634.88 = 0.0291795 x 100 = 2.917%

Action step: Run the same calculation on your own credit card processing statement. Find your total fees then divide it by the total amount that you processed, so you can figure out your effective rate.

Once you have that, you can then you’ll be able to see how much of your fees are going to the card issuers (Visa, Mastercard, Discover) and how much you’re paying your processor.

Step 2: Determine your interchange costs.

As we previously discussed, your interchange costs are the fees charged by card issuers. Payment processors do not control these rates, and every merchant is required to pay the interchange.

Go through your own statement and find the section that details your interchange costs. In the case of our client, there are columns in their statement that show the interchange rate and cost per transaction.

You can see below that the rate charged on every card is different and the statement actually DOES show how much is going to Visa/MC/Amex/Disc. On this page, interchange costs were as low as 1.9% and as high as 2.86%. (The statement was over 20 pages long, and on other pages, some cards were charged under 1%.)

Once you find your interchange rates, add up your total interchange costs.

In the case of this merchant, their total interchange fees amounted to $982.33.

Step 3: Deduct your total interchange fees from the total fees charged.

At this stage, you’ve already determine the fees that you’re paying card issuers. The next step is to find the fees that are going to your processor.

This part is pretty simple. Remember the total fees that you’ve identified in step 1? Take that number, and then subtract your interchange fees from that total.

Processor’s Fees = Total Fees Charged – Total Interchange Chargers

Going back to the merchant above, their total fees were $1,506.68, so we deducted the interchange costs of 982.33, leaving us with $524.35.

1,506.68 – 982.33 = $524.35.

Once you’ve found your number, then you’ve essentially figured out the markup of your credit card processor.

Compare your costs with other processors

Now that you know how much you’re paying in fees, it may be time shop around and see if you can lower your rates.

At Payment Depot, for example, we give you access to interchange rates straight from card issuers. Unlike traditional payment processors, we don’t markup that amount. Instead, we only charge a membership fee (starting at $49 per month) plus $0.10 per transaction.

If we were to apply this pricing model to our merchant example, their statement details would look something like this:

Interchange (actual cost to process) – $982.80

Transaction Cost (1488 x $0.10)  – $148.80

Card Brand Assessments- $51,634.88 x .0011 = $56.79 (these are fees passed on to you from Visa, Mastercard, Discover, and Amex)

Total = $1,188.42 (instead of 1,506.68.)

In other words, if the merchant was using Payment Depot, they would’ve save $318.26 just for that month.

Having trouble deciphering your merchant statement?

As we mentioned earlier, credit card processing statements can vary, depending on your provider. If you’re having trouble identifying the information we’ve outlined above, feel free to send us your merchant statement and our payment consultants will analyze it for you.

Get in touch today. We’d love to hear from you!