BY MARCI GAGNON
The Makings of a Processing Statement
Accepting payments from your customers , like everything else , is a little more expensive these days . By design , most processing statements are overly complicated and confusing because understanding your actual costs is the best way to ensure they remain low and that your company receives the best rates possible . The following three elements comprise the pieces involved for your business to accept and process a credit card sale .
1 . Interchange Interchange is by far the largest expense of the three cost elements on your processing statement . Every transaction maps to an interchange matrix of over 500 possible combinations based on card type , business type , and the method in which a transaction is accepted to determine this base cost . This cost can range from almost nothing to over 3 %.
This expense is controlled by the card brands and the card issuers like Capital One and Citi . It ' s non-negotiable , and all processing companies have the same cost based on the matrix . However , there are software programs and tools that can ensure a business qualifies for the lowest possible cost for a given transaction . Think of this matrix as buckets or cost centers . If a business accepts a specific card in a specific way , it will receive the proper cost bucket ; however , if something is different about the transaction ( for instance a different card type ) the transaction will point to a separate bucket . In essence , the card brands are allowing companies to achieve the best rate every time , but as a business you need to be configured properly to receive the lowest eligible rate . If not , you may downgrade to a more expensive interchange cost because something in the configuration did not allow it to hit the optimal pricing bucket .
2 . Dues and Assessments These costs cover the facilitation of the transaction by the card brand itself . This fee is for using the particular card brand ' s network . This expense is also non-negotiable , but it is a very small portion of the overall cost
3 . Acquirer cost varies The acquirer cost varies by the acquirer itself , the industry category of your business , chargeback rates and the average size of a transaction . This cost includes customer service , industry specific software development and maintenance , reporting , sales costs , chargeback management , gateway usage and the terminal and point-of-sale devices a business operates . The key to understanding how these three elements affect what you ultimately pay begins by closely analyzing your card statements to see exactly where and how your money is being spent through these three payment cost elements .
For example , you might notice that you are paying more for the merchant acquirer portion of the three basic cost elements than necessary . The fact is merchant acquirers — also called processors — are not all built the same , especially when it comes to the fees they charge . It ' s important to research the fee structure and the value a processor brings , with f any processors you are considering .
Processors also differ in their ability to optimize the transaction payment process such that you always pay the lowest amount for which you qualify . IE : If the processor ' s technology is dated it may not allow you to pass the transaction to the most cost-effective pricing bucket . Since interchange is the most expensive part of your processing statement this is an area making sure the pricing is mapped correctly so that all transactions are optimized .
What are the fees associated with a merchant account ? It is essential to understand that as far as merchant account providers go , the type of fees that are charged can differ quite dramatically from one processor to another and many do not charge several of the fees on this list .
Also the exact amount charged for a particular fee can vary quite a bit . One processor might charge a high monthly fee . Another might charge a very low monthly fee . This is why it is so important to closely analyze your credit card statements so you are never paying more than you have to .
Setup Fees Some merchant account providers charge an initial setup fee when you first establish your merchant account . This fee covers the administrative costs of creating your account .
Monthly or Annual Fees Many merchant accounts have ongoing monthly or annual fees . These fees cover the cost of maintaining your account and providing access to payment processing services .
Transaction Fees These fees are charged for each payment processed through your merchant account . There are two basic types : 1 . Per-Transaction Fee — This is a fixed fee charged for each individual transaction regardless of the transaction amount . 2 . Percentage Fee — Also called the Discount Rate , this is a percentage amount that is charged as a fee . For example , if the
28 OCTOBER 2024 | FUEL OIL NEWS | www . fueloilnews . com