As a merchant, understanding the payment processing fees you pay can be challenging. Add in the need to understand the different pricing strategies like Interchange, Interchange Plus, Tiered, Flat Rate, and a combination of strategies, and it’s a lot to handle.
These variables make it hard to understand or compare your merchant statement and processing rates, but it’s not impossible. In this blog, we’ll explore the best ways to simplify your credit card statement into something you can understand, compare, and easily keep track of.
1) Start with the monthly fees
There are a few different kinds of fees that will be listed on your statement.
Processors are required to charge fees to any merchant who is not PCI compliant. It’s easy to get drawn into the nickel and diming approach when it comes to accruing processing rates. However, with an average non-compliance penalty of $60 per month per location, stores could be losing up to $720 annually — money that could easily stay in their pockets if their stores were compliant.
Non-compliance refers to any merchant who is not PCI compliant. PCI (Payment Card Industry) represents a series of standards meant to protect the cardholder. Because the PCI evaluation process can be difficult for a merchant to understand, many will choose to accept the fees rather than tackle the 130+ questionnaire and quarterly network scans.
Achieving PCI compliance can seem intimidating. But using an end-to-end solution can offer scope reduction to merchants and this means drastically reducing the number of questions needed to become PCI compliant. iQmetrix merchants can qualify for PCI scope reduction with our MSP or Chase Referral plans.
Other recurring fixed fees
Your statement will include recurring fees and those fees should be easily identifiable. Knowing what recurring fees your business is paying can help you understand whether or not they should be factored into your Effective Rate. Some examples of recurring fees include Gateway Fees and Terminal Fees.
2) Review your summary data
On your credit card statement, the summary identifies the total sales count, dollar volume, and total fees for the transactions in that period. For example, the statement could look like this:
|Number of Items||Dollar Amounts||Total Charges & Fees|
The summary lets you easily determine your Effective Rate; the average amount of fees paid per transaction. In the example above, the Effective Rate would be found by dividing fees ($1000) by the transactional dollar amounts ($50,000) and see that the Effective Rate is 2%. This means that for every $100 sold in-store, the retailer retails $98 after transaction fees are paid.
3) Review your actual processing rates
This is where things get fun! Depending on your store’s processing agreement and rates, data can be represented in different ways depending on rates or pricing models.
When reviewing your statement, be on the lookout for:
Interchange is a combination of a flat fee and a percentage. The percentage is referred to in Basis Points, where 1 Basis Point is equal to 1/100 of a percentage, or 0.01%. You can expect six or more different Interchange rates per card brand. Interchange will be broken down by the number of transactions that qualified for that rate, the Interchange rate charged, and the total fees for those transactions.
Payment Network & Associated Fees
Assessments, Network access charges, processing fees are where any additional per-transaction fees are itemized for using the card networks.
Processing Fees: In an Interchange Plus model, processing fees represent the “Plus.” It itemizes any additional processing fees per transaction.
On your statement, this is how these will appear:
In an Interchange Plus model
Interchange Plus means the merchant is paying the actual interchange rates, as well as additional fees for the service. Expect full transparency on the Interchange rates being charged per transaction.
The sample credit card statement below uses this model.
In a Tiered model
Tiered pricing represents an attempt to simplify interchange by grouping similar transactions together under a single rate where you can expect a breakdown of all transactions under each tier. If the breakdown includes the actual Interchange charged, you can use this data to compare how effective the Tiered Pricing is for you.
In a Flat Rate model
Flat rate pricing means “forget interchange, you’ll pay the same per transaction. While this is the easiest statement to read, it’s the hardest to understand the value you’re receiving because it’s harder to understand how your store’s behavior could reduce your processing rates.
4) Review downgrades and chargebacks
At this point you have a sense of what you’re paying and, when it comes to PCI, you may even a way to cut costs. But what else can be done with the data on your statement?
Downgrades are transactions that incur higher processing views as a result of hitting a more expensive Interchange tier than expected. Most commonly seen with e-commerce or manual entry transactions, missing information such as AVS (address) or CVV can increase the fees.
Chargebacks happen when the cardholder has submitted a chargeback claim because the transaction was not represented as intended (they did not authorize the charge or receive the product as expected), shifting the cost and due diligence to the merchant to prove the transaction was authorized.
How can I protect my stores against the above?
Review your processes. Are there scenarios where cards are being keyed when they don’t have to? If a card isn’t processed via a Payment Terminal, Apple Pay, or Google Pay, what steps are taken to confirm the identity of the cardholder?
Review your solutions. If processing transactions outside of a credit card reader is required, consider solutions like Pay Anywhere which allow the cardholder to complete the transaction on their mobile device using a credit card, Apple Pay, and Google Pay.
Understanding your processing statement can be hard, but by knowing what to look for you can gain ownership of your processing and use this new knowledge to reduce fees & streamline processes. iQmetrix payment solutions go beyond the technology and provide retailers with a direct line to payment experts. They’ll help you optimize processes so you can save money more effectively.