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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.

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Credit card processing fees and statements are usually a mixed up mess of engineered confusion.

  If you think about it 70-100% of your business’ bottom line is effected by your credit card processing rates, so, isn’t it about time you understood what you are being billed for to accept credit cards and where you can cut costs to increase profits?

That is exactly what we will discuss here.

At the end of every month business owners sit down and take on the dreaded task of documenting every penny spent while looking for ways to make their business more efficient and more profitable.

Have you ever picked up your credit card processing statement, looked at the jumble mess of charges, got a sudden headache or just got mad, and rather than try and understand just logged the bottom line as a cost of doing business?  Most merchants have.  Every merchant services provider has their own twist on how to present their charges and as the saying goes there are a lot of ways to skin a cat.  Lets make this month different!

When you pick up your credit card processing statement you should have 3 major goals:

1. What is your Effective Rate of Credit Card Processing
2. Find and understand the base cost known as Interchange and assessments.
3. Separate credit card processing monthly or annual fees

By taking these easy steps you will not only have a better understanding of your credit card processing rates but you will be able to leverage that knowledge to save your business hundreds if not thousands of dollars.

What is the Effective Rate of Credit Card Processing for your business?

  Effective rate is one of the simplest yet most underappreciated ways to look at the true cost enabling your business to accept credit cards.  Let’s face it most merchants simply want to know what their rate is but what good does that do you when a 1.5% rate with one company will yield an effective rate of 2.25% and with another credit card processing company an effective rate of 3%?! 

Effective rate can be defined as your gross, or overall, cost to accept credit cards as a percentage of your credit card sales.  It is very easy to calculate and should always be the first step you take when reconciling your bills at the end of every month because this percentage is a “hard” cost that needs to be worked into your business‘ margins.

To calculate the effective rate of accepting credit cards for your business

  Simply take the total amount of your processing charges and divide it by your total sales and multiply by 100.  For instance if your statement gave you the following numbers:

Total processing fees of $200
Total credit card sales of $8000
Your effective rate would be 2.5%

This rate will vary depending on your business’ average sale amount but for most business should be relatively consistent on a month to month basis.  The only way it will be thrown off is if you suddenly went from making many small transactions to doing fewer but larger transactions OR if your statement contains monthly or quarterly fees.  One thing can be almost certain and that is that if your Effective Rate is more than 3% you need to have a reputable merchant services provider analyze your statement and have your current processor provide details so you can compare the results.  Once you have your effective rate it is time to break the charges out into categories so that you can see what fees are fixed (or non negotiable) and which ones you could negotiate to save money.

Next time on the Processing Point we will look at the next step you need to take in order to understand the true cost of your credit card processing and how to minimize the expense of being able to accept credit cards!

If you found this credit card processing 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 Merchant Doctor 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.

Rhett Baylies's avatar

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