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How to Read Merchant Statements: Negotiate A Great Deal For Your Business

Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Regardless of whether you’re a new or established business, working out how to read merchant statements can often be a battle you’d rather leave to another day. It was hard enough setting up the credit card processing contract, and now there’s more lingo to get to grips with.

But if you’ve refrained from checking your statement throughout the month, it can come as a surprise to see so many charges, and may be confusing working out exactly what you’ve been charged for.

With so many transactions and convoluted costs, you can lose track of how much you’re actually paying.

Luckily we’re here to arm you with the information you need to fully understand your statement, and all the related costs for your merchant services.

We’ll run through how to read merchant statements, covering what the merchant account statement is, what it includes, and how to determine your pricing model and card processing fees.

how to read merchant statements

What is a merchant account statement?

If your first thought here is, “What is a merchant account?”, in its simplest terms, a merchant account is a special type of bank account that can accept payments directly from debit and credit cards.

Whether you accept payments in person with a POS terminal or online through a payment gateway, you will receive a monthly merchant account statement.

This documents every transaction that occurred that month, detailing everything from how many card payments you accepted, to how much your merchant acquirer is charging.

Merchant account statements for a typical SME are usually only around 5 or 6 pages. But it can be tricky working out the specific costs, as each merchant acquirer uses their own terminology and format which complicates comparing debit and credit card payment charges

We’ll go on to explain how you can simplify this, and ensure you’re getting the best deal for your business.


What does my merchant account statement include?

Firstly, you need to know what 3 sections your statement consists of: the Summary Page, the Settlement Page, and the Charges.

The Summary Page shows the overall amount processed and the total charges broken down into transaction charges, terminal charges , “other” charges and VAT.

The Settlement Page contains the amount processed and settled each day, and sometimes will even include the card type.

In an ideal world, the amount processed will always be the same amount settled, but this isn’t always the case. If there’s been a chargeback then this amount will have been deducted by the merchant acquirer, and will show up here on your statement. You can read more about how to reduce chargebacks.

The Charges indicates the amount charged broken down into two subsections: transaction charges, and ‘other’ charges.

  1. Transaction charges -The transaction charges normally show the volume or value, the rate and the charge by each card type processed. Some merchant acquirers will show an all inclusive rate, some show a “standard” rate and separately show “premium charges” whilst others will break the rates down into multiple components.
  2. Other charges - Here you’ll find anything not included in transaction charges, like terminal hire, PCI compliance fees or fines, authorisation charges, set up fees, and minimum monthly service charges.

These can vary however, as high risk merchants are likely to be charged more, and some merchant acquirers may not even impose them. Each merchant acquirer often has “leeway” to charge them or not, so to compare your merchant statements at a basic level, it is important to understand whether you’re being charged these extras.


Understanding the costs

The next step towards understanding how to read merchant statements is to understand the charges. To understand your charges, you need to recognise the base cost from the markup.

The base (or wholesale) cost is a non-negotiable, combined charge made up of the fees to the issuing banks (interchange fees) for any transactional costs, and the fees paid to the credit card companies.

The markup is any additional processing costs above the base fee, and varies depending on the processor.


Identify the pricing method

With the base costs identified, you can then work out the pricing model used. This is key to your understanding of the statement, as this is the method the processor uses to assess the fees for transactions.

The three most common pricing models are Tiered, Interchange Plus, and Flat Rate.


Tiered Pricing

The most popular of the three, Tiered pricing divides your transactions into three groups for fees: Qualified, Mid-Qualified, and Non-Qualified.

  • Fully qualified is the best rate that can apply to transactions, and is the usual rate for most major credit and debit card transactions.
  • Mid-Qualified transactions are those that don't meet the requirements for Fully-Qualified. This is common with the use of reward cards, and can also apply to credit cards that are used in the terminal as opposed to swiped.
  • Non-Qualified transactions don't meet the standards for Fully or Mid-Qualified rates, and fall into the highest rate as a result. These typically occur with payments that have incomplete information.


Interchange Plus

Interchange plus pricing on statements may appear more complicated, but it is the most straightforward method.

With this model, a fixed mark-up is applied directly to the interchange fees depending on the card type. Though this model can be confusing to dissect with each card type having its own rate, it can work out the most cost efficient.


Flat Rate Pricing

Flat rate pricing works exactly how you would expect, with the processor charging one fixed rate for all card types. Though it’s not indicated, bear in mind that this rate still includes the base (wholesale) costs.

Increasingly popular with merchants who take few transactions, this is arguably the easiest for merchants to understand.


Determine Processing Rates

Finally, we have the processing fees, or discount method, which is the rate charged by the bank or processing company.

The rate is often determined based on the pricing method, or agreed between the merchant and payment provider.

The fee is a percentage deducted from each transaction, and can be charged on a daily or monthly basis. With the daily discount, the processor charges the rate before the transaction is settled, and with the monthly discount, it’s charged as a combined amount at the end of the month.

business partners reading bills


Hopefully this has helped you learn how to read merchant statements!

It might not sound like the dream way to spend your afternoon, but regularly checking your merchant account statement is the best way to keep on top of your charges.

With a full understanding of what the charges on your statement are, and where they’re coming from, you’ll be able to calculate your effective rate and easily shop around to ensure that you’re getting the best deal!

If you’re just starting to take different payment methods, check out our article covering everything you need to know about card machine charges.

If you don’t like what you see when you analyse your merchant statement, Cardswitcher is here to help. With our card processing comparison tool, you can save up to 40% of what you currently pay. Give it a try today!


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Written by:
Stephen Hart

Stephen Hart

Founder - Cardswitcher

Former - Chief Financial Officer @ Worldpay

Stephen brings a wealth of experience honed through years in the financial sector, particularly in the card processing payments industry. His illustrious career spans key roles at PwC, Natwest, and the role of CFO at WorldPay, before going on to found card processing comparison site, CardSwitcher. He is passionate about helping growing businesses to understand the card processing landscape so they can make savvy financial decisions.