Merchant processing statements are not easy to understand. With all the fees and markups involved, it is easy to feel overwhelmed and put your statement aside every time you receive one. Here’s a quick guide on understanding your merchant statement and how to best look after your business. 

Merchant statements explained

If you are a merchant, the term ‘merchant statement’ should be familiar to you, because chances are you are receiving one every month. It is a document that contains all the essential details on your business transitions. You can also find information and details on fees charged for each payment and a breakdown of all the fees paid to all parties, known as a deposit summary. Your payment service provider should send you a merchant statement every month that clearly outlines the transactions in the listed period and all fees involved. 

There are two key reasons why reading and understanding a merchant statement is essential. First, a merchant statement can help you monitor your daily transactions. Second,  it can help you understand your incomes and costs to analyze your base costs and markups. These figures are vital because they can determine your bottom line. The better you know your position, the easier you can stay competitive. 

When you use transaction services for your business, credit card-issuing banks will take a margin out of each transaction. Here are the two types of margin deductions:

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Wholesale / Base cost

The wholesale cost is the combination of the interchange fees that go to the card-issuing banks for your transitions and the credit card companies’ assessments. It is a fixed number and is indisputable. 

Here is an example of the interchange breakdown we offer at Payline:



A markup is any change added to the base cost, which is a fee going to your chosen merchant service provider. It is the only part that you can negotiate as a merchant.

The closer you look into your cost structure, the easier it is for you to find patterns and identify rooms for improvement. If you have any questions about this part, contact your service provider for more details. 

At Payline, we show you our fees in the following screenshot as “Service charges” and “Fees”. Anything above that is Interchange.


Pricing models of a merchant statement

There are many ways your payment processing service can charge you, but not all of them are good for your bottom line. Here are the types of pricing models for your merchant statement. 

  • Tiered/bundled

A tiered or bundled pricing is the most common model. It divides your cost into tiers, and you pay according to the tier you are on. This tier is often filled with unpredictable add-ons and usually does not include a fixed percentage. This model often comes with terms like qualified, mid-qualified or non-qualified. When in doubt, ask your service provider what they mean.

  • Interchange plus

For this model, you pay a fixed amount above your interchanger rate. If your business has high transaction volumes, this model can help you save money. But bear in mind that various factors, like business types, can influence the rate. 

  • Flat rate

The flat-rate model is a single fixed rate for your transactions and won’t change regardless of the type of cards or transactions. Flat rates are transparent and straightforward, and they can also be cost-effective for small businesses. 

To determine whether the rate is working for you, you need to calculate your effective rate by dividing your total processing fees by your total sales volume. The lower the percentage, the better your bottom line is. 

Generally speaking, a good effective rate for your credit card processing is around 3-4%. If you encounter a high effective rate, you can determine the reasons behind it by deconstructing your fee models and determine where you are paying the most to. 


How to read a statement properly

At first glance, a merchant statement might look daunting with loads of jargon and figures. But with the correct understanding, you too can get through this and assess your bottom line. 

First, understand the type of charges you are paying. Ideally, you should be able to identify the pricing model clearly from your statement. When in doubt, always speak with your processor’s representatives. Then, you can consider how your processor deducts fees. There are two ways of doing that:


Daily discounts

For daily discounts, the processor charges per settlement together with any other applicable charges per month, including all fees payable throughout the month.

Monthly discounts

For monthly discounts, the processor charges each fee in one lump sum monthly. This method is more transparent than daily discounts. 

If you are in a position to choose, remember to choose monthly discounts. Also, check how much you are paying for your base costs and markups. If you can negotiate for a lower markup, it would be great for your bottom line. You can also use a 3-4% effective rate as your benchmark to see whether your rates are competitive. 

Here is a list of fees that you should be aware of:

  • Authorization and transaction fees from your bank to approve a statement
  • Monthly minimum fee for your merchant payments
  • Annual fee in maintaining your account
  • Early termination fee if you want to end your contract earlier
  • Chargeback-related fees when you encounter a chargeback

In short, understand the different rates you are presented and understand your cost structure. Then find the most suitable option for your business, and see what your provider can provide you. 

At Payline, we have a wide range of mobile solutions for your eCommerce platforms. We offer interchange-plus pricing, and our models are transparent and cost-effective pricing for most businesses.

Our transparent plans are easy to find and clearly outlined on its website. Speak with our representatives if you have any special needs so that we can keep your merchant statements as easy and hassle-free as possible. Speak with us today and see how we can help. 


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