Understanding Your Merchant Statement

Any business that accepts credit or debit cards likely receives a merchant statement from their payment processor every month. However, these itemized statements can be overwhelming — especially since the formatting and technical details often vary from one payment processor to another.

This article outlines what merchant statements are and how to read them correctly. It also explains why checking these statements every month is so important.

What Is a Merchant Statement?

Merchant statements are electronic or paper-based invoices that payment processors send to their merchant clients every month. These itemized statements include all the payments processed, fees charged and services provided over the previous 30 days.

Unlike the credit card statements that consumers receive, merchant statements aren’t “bills” that you have to pay. Instead, they are an accounting of the previous month’s activity. Any fees or charges owed have already been deducted by the time you receive your payment processing statement by post or email.

For a quick primer on how your provider handles card-based transactions behind the scenes, be sure to read our free payment processing guide.

How to Read a Merchant Statement

Now comes the hard part — i.e., deciphering the numbers, tables and charts that might appear in a standard merchant statement. Fortunately, most payment processors include detailed itemization plus a broader overview summary.

Let’s look at the main components of a typical merchant statement.

1. Identifying Merchant Number & Personal Information

This section opens most merchant processing statements. In it, you’ll find important identifying information, including:

• The merchant statement date, plus the payment processing month being itemized

• Your payment processor’s name and contact details

• Your business’s name and contact details — note that some businesses use separate names for branding and for payment processing (e.g., Omega Hardware vs. Omega Hardware & Sons, LLC)

• Your unique merchant identification number

• The total deposit amount for the previous month

• The total fees and charges deducted over the prior 30 days

2. Account Activity

The account activity section is the portion of each statement that provides more detailed breakdowns of the money that came in (and left) your account over the past 30 days.

Below are the most important things to scan when analyzing this section:

• Total submitted: This represents the total number of transactions over the previous month. Note, however, that this also includes sales that were submitted but either weren’t processed successfully or were eventually reversed.

• Third party transactions: Some payment processors work with smaller third-party providers. Any sales generated through these independent processors will be included in this section.

• Chargebacks/reversals: This section details all the refunds, chargebacks and transaction reversals that may have occurred over the last 30 days. Even with a great product, refunds and returns are part of doing business.

• Adjustments: This section often goes hand-in-hand with the previous one since it details the dollaramount of chargebacks, reversals and returns from the prior month. Because some of these reversals carry penalties, it’s a good idea to understand the ins and outs of chargeback protection.

• Fees charged: This section outlines the rates, fees and charges over the previous billing period. If you purchase add-ons and additional services from your payment provider, those charges will appear alongside line items such as interchange fees and POS hardware rentals.

Understand Your Pricing Model & Processing Fees

Although most merchant statements include the same basic information, what you’ll ultimately pay depends on the fees and pricing model your processor uses:

• Wholesale fees represent the “interchange” fees attached to every card-based transaction. These are set by the banks and processors and can’t easily be negotiated.

• Markup fees represent the additional charges on top of the standard interchange fee. Think of it as a payment processor’s “profit margin.” These can sometimes be negotiated, depending on the provider.

• Chargeback fees are penalties paid for any sales disputes in which the banks and payment processor sided with the customer (and not you, the merchant).

How these fees are presented depends on the pricing model used:

• Interchange-plus, in which the wholesale and markup costs are combined

• Flat-rate, which uses a fixed percentage for all incoming sales plus a nominal flat fee on top

• Tiered pricing, which uses different levels to represent the potential riskiness of processing certain merchants (e.g., a brick-and-mortar nail salon faces fewer fraud risks than an online gambling site)

Many of these fees and models are negotiable. To make sure you receive the best rates, check out our guide on processing fees and interchange optimization. Moreover, it’s often possible to pass on some of these costs to your customers if you attach credit card surcharge fees to the checkout process.

Reviewing Your Merchant Statement

Pouring over itemized statements every month is not how most merchants would choose to spend their time. However, this analysis is important for several reasons:

• Each merchant statement provides a summarized overview of your business’s financial health. You can use these documents to make better informed decisions moving forward.

• Everyone makes mistakes — even payment processors. The only way to catch potential errors is to carefully analyze each merchant statement as it arrives.

• Monthly reviews provide opportunities to trim some of the fat from your operations. If you’ve moved your entire team over to mobile credit card processing with company-provided smart devices, for example, there’s no need to keep “leasing” those desktop POS terminals you’ve been using.

Growth on the Horizon

Once you understand how to decode them properly, merchant statements provide a wealth of valuable information. In fact, acting on the insights contained in your monthly statements can potentially generate more sales (or fewer costs) than many of the other “growth” strategies that businesses normally use — including advertising and customer engagement.

To learn why our customers enjoy receiving the merchant statements we send, schedule a free consultation with our payment processing team today. We’d be happy to help you identify potential opportunities to take your business to the next level.