Deciphering Your Credit Card Statements

I can’t count the number of times that I have been asked to help a merchant decipher their credit card statement. What is worse, is that I have failed to accurately do this several times in the past. Of all areas in the credit card processing industry that needs a touch up, statements rank near the top of my list. Compare your monthly statement to another business. Even if you both process through the same company, chances are that your statements look completely different. Not just in numbers which is expected, but in terms and layout as well.

Merchant Service Providers are the group that is responsible for providing their customers with good support. Unfortunately Merchant Service Providers have no control over how a statement is calculated or laid out. This is entirely up to the processor that the merchant is processing through. Processors seem to try and make the statement as difficult as possible to understand. Processors also like to change the layout of the statements about every 6 months. Just when you think you are starting to understand your statement, they go and change the whole thing.

The key to understanding your statement is to know what fees you should be looking for and how your merchant account is setup. If you remember when you setup your merchant account there were certain fees. These fees should theoretically show up on your monthly statement. If you look for fee trends in your statement that relate to your expected per transaction, processing percentage, statement, and any other listed fees, you should be able to figure out your statement.

There is one of two types of fee structures that your business will fall under, daily discounting or monthly discounting. Knowing which you are setup with will help a great deal in understanding your statement. Ask your provider which you are setup as if you don’t know.

Daily Discounting:
For daily discounting, your discount processing rate fees are taken out before the money ever reaches your bank account. The discount processing rate is your base processing rate, before any potential downgrade charges. At the end of the month, your transaction fees, statement fees, any monthly fees, and downgrade charges will be charged to your account. Expect your end of month bill to be lower for daily discounting than monthly discounting.

Monthly Discounting:
For monthly discounting, all of your fees are charged to your account at the end of the month. This includes all processing fees, transaction fees, statement fees, monthly fees, and downgrade charges. This can make tracking your business finances easier, but expect a higher end of month bill.

When you are setup on monthly discounting, the full transaction amount will appear in your bank account whereas daily discounting, the transaction amount minus the processing fee will appear in your bank account. By looking at your bank statement and comparing it to a batch report, you can discern whether you are on daily or monthly discounting.

Downgrade Charges:
A downgrade charge is a extra processing percentage and, or transaction fee that is charged when a transaction that you process fails to meet certain requirements. There are hundreds of reasons that a charge can downgrade, but the most common reasons for downgrading are keying in transactions on a retail merchant account, failing to use AVS for a keyed account, and taking a business or international credit card. The reason that a charge downgrades is that there is an increased risk of fraud associated with the transaction since certain requirements are not being met. Downgrades are unavoidable, but can be minimized by running transactions the way your account was initially setup, and always using AVS or CVV when prompted.

By comparing your expected fees with your statement’s fees you can usually figure out how much and what you are being charged for. If you are still having problems call your provider and if possible fax them a copy of your statement. It will be much easier for them to break your statement down if they have a copy of it in front of them.