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How To Better Understand Your Credit Card Processing Statement

As a business owner, you likely know the importance of reviewing your credit card processing statement each month. However, taking the time to review your statements will not do much good without the proper understanding of what you're looking at.

When you review your credit card processing statement without effective practices in place, you run the risk of paying more than you should. If you understand how statements are formatted and the different fees involved, you will be better equipped to find areas for potential savings.

With this in mind, here are three helpful tips to use when reviewing your statements.

1. Questions to Ask Yourself

These questions will help you review your statements purposefully and ensure that you are not paying more than what is necessary.

  • What is the base cost that you are paying?
  • Can your base cost be lowered?
  • What additional markups are you paying?
  • Is there any room for competitive pricing in your markups?

If we were to condense these questions into one statement, it's to know what you are paying, why you are paying it, and if there is any room for improvement.

2. Knowing the Barriers

The first common barrier is a lack of knowledge. Mainly, it's a lack of knowledge in understanding what you are looking at. You will need to understand how the different fees work, and where they are listed at on your statement.

Another barrier to understanding your statements is a lack of consistency. This barrier is a little more difficult to control because it's due to a lack of consistency among merchant services providers in how they format their statements.

Lastly, there is the barrier of a lack of transparency. A lack of transparency in processing statements is another way that merchant services providers make it difficult for you to understand them. Some providers hide base fees in what is called tiered pricing or bill-back pricing.

3. Understanding Your Processing Statements

In order to properly understand your statements, it's helpful to break it down into a couple of steps. Let’s take a look at those steps below.

Understand The Cost Components

There are two main cost components when it comes to credit card processing, the base cost, and markup. Base cost is made up of interchange and assessment fees. The interchange fee is the fee that goes to the card issuing bank, and the assessment fees go to the credit card companies, i.e., Visa and MasterCard.

The other cost component is the markup, and this is where processing companies will get you. The markup includes any additional rates or fees that are added to the base cost.

Although these markups can be a cause of frustration to merchants, they can also be used to your advantage because they are negotiable components of your merchant account.

Understand the Different Pricing Models

There are three different pricing models we want to specifically look at tiered pricing, bill-back pricing, and Cost-Plus pricing.

Tiered pricing can be identified on your monthly statement by looking for the terms Qualified, Mid-Qualified, or Non-Qualified. They may be in the shorthand "Qual", "MQual", or "NQual". This pricing model is neither cost-effective nor transparent, and it will cause your business to overpay in your processing fees substantially. Learn More

Bill-Back pricing can be identified on your monthly statement by looking for the bill-back surcharges. You will see something like JUL BB195 Trans cleared at...

Bill-Back pricing's complete lack of transparency allows payment processors to hide extra fees, which results in businesses paying double or even triple the fees that they should be paying. Learn More

Cost-Plus pricing is the most cost-effective and transparent method for processing credit card payments. It works by passing through your credit card transactions at their respective interchange rates, with only a small markup added. The interchange rates are the wholesale processing rates set by Visa, MasterCard, and Discover for each card type and transaction type. Learn More

To find out how much money your business could be saving each month, contact us today for a no-obligation FREE rate quote.

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