Understanding your statement, what you are being charged and why it is
critical to being an informed shop owner may save you a lot of
money. The place to start is with the common terms that your credit card
processor throws around and that show up on your statement. This can
help you have an informed conversation about your credit and debit card
processing and possibly negotiate a better deal.

Term #1 – Interchange Fees

Interchange fees are the heart of what you pay to have a credit card
transaction processed. In a credit card transaction, there are
typically two banks involved. The first is the Issuing Bank. That is
the organization that issues the credit card to your customer. The
second is the Acquiring Bank or Merchant Bank. That is the bank on the
side of the transaction. If you take credit cards, you have a merchant
account with an ­acquiring bank. When your customer swipes a credit
card, the acquiring bank pays your customer’s issuing bank a
­percentage of the sale amount. The total of the amount paid to the
issuing bank is set by the credit card company’s (VISA or MasterCard)
Interchange ­Reimbursement Fee Schedule. These are public numbers and
can be found online. The rates may also change, which could happen in
April and October. 

Interchange fees are not cut and dry. There are many different rates
depending on the transaction type. For simplicity sake, transactions
where there is a signature will be less ­expensive than a transaction
­inputted into a terminal because the card may not actually be there,
creating a possibility of fraud. There are also different rate
categories for large ­purchases.

Term #2 – Discount Rate

While interchange fees form the basis of what you as a shop owner pay,
it is not the whole picture. Where you will actually find charges on
your statement is under “Discount Rate” or “Merchant Discount.” Do not
be fooled – you are not receiving a discount. This is actually the fee
you are being charged by your payment processing company. The discount
rate is one of the costs of processing each transaction. It is based on
the interchange fee set up by VISA or MasterCard, plus a fee for the
processing company. 

The next time you receive a statement, look closely at the discount
rate.  It may be one lump sum, or a few line items. It may list all the
transactions you had. Ask your payment processing company to explain it
in detail to you. That is where they are making their money, so they
might as well earn it.

If there is room for negotiation, take advantage of it. At the very
least, this section of your statement should show the number of
transactions made ­during the month, the dollar volume of the
transactions, the breakdown of card types (VISA, MasterCard, American
Express, etc.), general discount charges and, possibly, more fees or
charges depending on your provider and the program you have purchased.

Term #3 – Processing Fees

In many cases, there are fees on your statement above and beyond the
interchange fees and discount rate.  These could include (but are not
limited to) a Batch Header Fee, a Statement Fee, WATTS fees, AVS fees
or Help Desk Fees. These are generally flat fees charged by the company
you are paying to process your transactions, unrelated to the volume of
credit card charges you have. The good news is, this is an area prime
for negotiation, which could dramatically lower your monthly charges.
Ask your payment processor to walk you through each of these fees to
make sure they are legitimate and necessary.

Knowing a little bit about your credit card transactions, the important
terms and the fees you are charged can save you a lot of money in the
long-term.  Make sure you are aware of what is happening inside your
shop with your credit card transactions and you can influence what is
happening outside with fees and charges.

This article included some ­common terms you will find on your monthly
credit card statements. There are other important terms and ­issues you
will come across such as Compliance Fees concerning security of data,
as well as other fees called Downgrade Fees, which both play an
important role in the understanding of credit card processes and fees.

Scott Tanker is a business ­development professional with Benchmark
Payment Networks. He works with retailers across the country to save
them money on their payment processing and make it a competitive
advantage. Mr. Tanker can be reached at 609-922-0201 or [email protected].