Credit Card Processing Statement Mysteries Solved: How to Read Your Credit Card Merchant Statement

POSTED BY: Rhett Baylies
How to read your credit card processing statement can be confusing.  Learn how and save on the cost to accept credit cards.


Credit card processing statements and the fees that come with them are all too often a confusing mess for most business owners.

  In Part 1 of our discussion we looked at effective rate and why it is the first important step to understanding the cost of being able to accept credit cards.  In part 2 we will look at the other next basic item you need to understand in order to truly take charge of the cost to accept credit cards.  You will learn how to read your credit card statement by finding and understanding the base cost known as Interchange and assessments.

Understand the Cost or Interchange of your credit card processing.

  Interchange is a difficult concept for many business owners and understandably so.  Instead of getting hung up on the intricacy of the hundreds of credit card rate categories and how they are determined, it is sufficient to define Interchange as the Non-negotiable portion of your credit card processing rates.  Interchange Cost is determined by the major card brands and the card issuing banks and will make up a majority of the cost to accept credit cards.  How you will locate the Interchange Cost will depend on how you are being billed for your merchant services so first we must define how you are being billed for your merchant services.  There are many ways in which you could be billed but below we will cover the 3 most utilized.

Tiered Pricing or Bundled Pricing is by far the most utilized billing method.

  There are 2 ways to determine if your business is being billed on a Tiered Pricing or “bundled” pricing structure.  If you see the words Qualified, Mid Qualified, or Non Qualified (or any abbreviations of such like “qual” or “MQual” etc…) like this:
Tiered pricing

Then you are most likely on a tiered pricing structure.  The upside to tiered pricing is that on the surface it is an easy structure for business owners to understand.  The downside is that since there is no regulation on what credit card is considered a “qualified” or “non-qualified” card type, merchant services providers often use this type of billing to hide rates and fees.  Because there is no way to determine which card types are placed into each category it is very difficult, if not impossible, to determine what portion of this rate is interchange cost.  The best thing to do as a business owner who wants to truly understand what they are paying for in this case is to call your processor and ask them to quote your account on an Interchange Plus basis.  This will give you an exact picture of your credit card processor’s mark up.  If they refuse to quote Interchange Plus pricing to you then it is probably time to get a new merchant services provider.

Interchange Plus Pricing.

  If you are on Interchange Plus pricing your bill may appear more confusing but it is actually the only transparent way to understand the cost of your credit card processing.  To identify an Interchange Plus processing statement look for itemized interchange charges for the various card types such as this:
Interchange Plus Pricing

or for a low discount or processing rate section like this:
Interchange Plus Pricing
With Interchange Plus pricing you can simply take the total Interchange and assessment charges and set them to the side because this is the base cost of processing that is not negotiable.  It will include all charges for the card brand assessments (or access fees), Interchange Rate, and Interchange per item charges.  All the remaining fees and rates are what your credit card processor is charging for the their services. 

The Dreaded Bill Back Method.

  Some merchant services providers utilize what is called the Bill Back Method to charge for their merchant services credit card processing.  If you see flat rates across all card brands such as the example below with no other indication of “downgrades” or tiered levels like mid qualified transactions then you may be on the bill back pricing method:
Bill Back Method
This method makes it next to impossible to determine your true rates and fees and rather than trying to explain it lets just say that you are most likely not getting a good deal on your processing.  In short the credit card processor will charge a flat rate like 1.8% for all transactions but to cover the cost of interchange and profit they assess the charges for one month in the following month clumping them into a number of transactions or total volume.  Most processors utilizing the bill back method will code the previous month’s bill back charges with a BB.  It is not uncommon for merchants with credit cards processing accounts that are billed back to have an effective rate north of 4%.  If you are not sure how you are being billed or if you are on the bill back method the Merchant Doctor would be happy to dissect your bill for you so that you can understand what you are being charged to accept credit cards.
If you found this article helpful then please share it on your social media site and you will love our other posts that demystify and empower you to make sure that you are getting a good deal on your credit card processing.  Better yet if you are not happy with the amount you are paying for your credit card processing then simply visit our Get a Quote page so that the Merchant Doctor can show you what we can do for your business with our Low Rate Guarantee.  Join us on FaceBook, Google+, Twitter, or LinkedIn


About the Author: Rhett Baylies

After over 17 years in the service industry not only as an employee but business owner and corporate manager Rhett decided to start his career in the Payment industry with the vision of providing good honest service at a fair price. Rhett now applies his years of service focused business to his daily routine and looks forward to revolutionizing the way you look at your processing statement for many years to come.

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