How to read a merchant statement.

Start with two numbers, not the whole document

A processing statement is usually four to eight pages, and most of it is reconciliation detail you will never need. Two figures tell you almost everything:

• Total card volume for the month — sometimes labelled total sales, gross volume, amount submitted or deposits. Card sales only. If you include cash, the rate you calculate will be flattering and wrong.
• Total fees for the month — every processing charge added together. Not the discount rate line. Everything.

Divide the second by the first, multiply by 100, and you have your effective rate: what you really pay to accept a card, expressed as a percentage. It is almost always higher than the rate you were sold, and the gap between the two is the honest measure of how your pricing is constructed.

Our calculator does this arithmetic and splits the result into the part that is fixed and the part that is not. It asks for no email and stores nothing.

Where processors hide the real total

The single most common mistake is reading the discount rate and stopping. The discount rate describes one line of a bill with a dozen lines on it. Look for a summary box — often called fees charged this month or total amount deducted — and prefer it to any percentage printed in large type.

Watch for three structures that make the total harder to see:

Daily discount. Fees are taken out of each day’s deposit rather than once a month. Your bank statement then shows net deposits, and the processing cost never appears as a single number anywhere. If your deposits look slightly short every day, this is why.

Separate monthly debit. Some processors take card fees daily and equipment, gateway and service fees in a separate month-end charge — so there are two withdrawals, and reading only one understates your cost.

Third-party lines. Gateway, PCI program, equipment lease and software fees are sometimes billed by other companies entirely and never appear on the processing statement at all. A lease in particular can outlast the processing relationship by years.

The two kinds of charge

Every fee on the statement is one of two things, and the distinction is the whole game.

Interchange and assessments go to the bank that issued your customer’s card and to Visa, Mastercard, Discover and Amex. They are published, they are the same for every processor, and nobody can discount them. A provider claiming to beat another provider’s interchange is either confused or counting on you being so.

Markup is everything above that floor. It is the processor’s margin, and it is the only part that moves when you switch. This is why comparing two all-in percentages tells you almost nothing — a florist and a wholesale distributor can pay very different effective rates with identical markups, because their customers carry different cards.

The lines worth checking individually

If a line has an acronym you cannot expand and a number you cannot explain, that is the line to ask about. On most statements there are two or three.

The ten-minute method

1. Find total card volume and total fees for one complete month.
2. Divide, multiply by 100. That’s your effective rate.
3. Check whether interchange appears as its own line. If it does, subtract it from total fees — what remains is your markup, in dollars, exactly.
4. Add up every fixed monthly charge separately. Those are the ones that hurt most in a slow month, because they do not shrink when your volume does.
5. Look at the back pages for anything billed by a company whose name you do not recognize.

Do that and you know more about your processing cost than most business owners ever find out. You also have everything you need to compare two providers honestly — markup against markup, with interchange left out of it, because interchange is the same wherever you go.