…and determine your true cost of processing.
Don't be fooled by processing statements and rate quotes that obscure the true cost of processing. Hundreds of Interchange and other rates affect merchant costs. As a result, merchant statements are frequently confusing, and rate quotes are incomplete and misleading.
Simple statements and rate quotes may be easy to read, but they can leave out a lot of important information about how and why you are charged what you pay. Some processors even deliberately omit information from their statements and rate quotes.
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In the meantime, these seven steps will help you determine your true cost of processing and recognize when fees may be hidden.
Teaser rates like 1.39% are common, but what are you really paying? Take the total fees attributable to Mastercard/Visa/Discover processing (don't count anything related to American Express, PIN-debit or EBT), and divide by the total amount of Mastercard/Visa/Discover processed. The result is your effective rate.
Look for a line that says something like, "Total Charge to Your Account." It might be misleading, especially if some of your fees are charged daily. If so, you likely have another line that says something like, "Less Discount Paid." Add that to the Total Charge line to get your real Total Charge.
Authorization fees, transaction fees, Interchange. At the end of the day, you could be paying two or three fees on each transaction. How many transaction fees can you find on your statement?
If you can't tell what the numbers mean, it's going to be difficult to tell what you are being charged. Many processors leave out simple clues like $ and % signs and column headers.
Many statements omit some or all rates, leaving you to do the math -- or not. Can you easily determine from the amount of a fee the rate that is being charged, as either a percentage or cents per transaction?
You may know that your processor surcharges so-called "downgraded" transactions that don't qualify for your base rate, but the math may be either fuzzy or non-existent. Can you easily determine surcharge rates? Also, can you tell if they surcharging the actual difference in cost, or do they "enhance" the difference -- and their profit margins?
It used to be simple. If you swiped the card, you paid one rate. If you manually keyed it, you paid another. But then the card brands came up with debit cards, commercial cards, rewards cards and dozens of Interchange categories, each with its own set of qualifications. But you still pay just two or three rates. How does that work? Do you really know which Interchange categories fall into which rates, and whether the system is fair?
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