A Monthly Statement is a printed document and/or an electronic equivalent, displayed on- or off-line, that identifies exactly what fees and charges a merchant pays to a merchant service provider for the use of a merchant bank account.
Merchant bank accounts almost always become active within one business day of an account approval. Once a merchant account is live and active, that merchant is then immediately able to process all credit card transactions and, at the same time, is also responsible for any fees starting on that same date. This means that any monthly fees will be charged for every month the account is open and operating, independently of a merchant’s processing volume and type.
Deciphering the Statement
Monthly merchant account fees are almost always posted to a merchant bank account within the first week of the month following the company’s merchant account activation. These fees continue to be issued each month that the account remains active. A merchant account statement that shows the charges incurred for a merchant’s previous month of processing activity is then issued, and is typically sent to that merchant in the middle of every month. The data may also be available for complete review in the merchant’s online account activity summary.
Most merchant account summary statements are divided into sections with a summary, transaction types, card company codes and the total amount merchants are charged at the end of the month. In the upper summary section of most simple merchant account statements with three-tier pricing, will be a division between MasterCard, Visa or other major credit card issuers. This is where a merchant will see sales totals and credits.
In the same summary section, a merchant will see how much they are being charged for each credit card type. Usually it is a very small percentage for each sales transaction. Then, in the next section of the plan summary, there is the Discount Fee due to the merchant’s processor. This is the vast majority of what a merchant will pay for each month. It is essentially the difference between what a merchant has charged customers and the amount eventually deposited in the company’s merchant bank account. This amount is deducted on a daily basis. This fee is largely paid to Visa, MasterCard or the other major credit card companies, while some of that fee goes directly to the processor.
Right above the summary is the total amount due in fees. In addition to the discount rate, a merchant will pay this fee every single month. An average of two to three percent in overall fees is usual for most common merchant accounts.
A merchant will often see adjustments for refunds and chargebacks itemized on their monthly statement, too, though hopefully that merchant will not receive many, if any, of these, which over time can increase their rate.
There are a few more fees that a merchant will see on their monthly statements, which make up another portion of the total amount due every month:
- Monthly statement fee. This is simply to organize and issue the merchants a summary of what they owe every month. This typically costs about five dollars or so.
- AVS Fee. Address Verification Service is used by online merchants as a means to reduce fraudulent activity. When customer zip codes and addresses are verified, the communication with the credit card company requires a charge that, in this case, can be just a few cents for each one.
- Transaction fee. This fee is for Visa and MasterCard, which can be up to 20¢ for each transaction. It is the price that merchants pay to use a particular card.
- T&E fees. These are what are known as Travel and Entertainment fees. In order to pay for the perks earned by customers who use points cards or corporate rewards cards, the issuing bank charges a merchant payment processor these additional fees.
- Batch header fee. One of the central jobs for a merchant’s processor is gathering up all of a merchant’s transactions for the day, combining them with other merchant’s transactions, figuring out exactly how much each issuing bank owes, ACH’ing (Automatic Clearing House) that much from the issuing bank, figuring out how much of that amount belongs to each of their merchants and then ACH’ing the merchant’s share to the merchant.
- The three tier fees. Most merchants are charged according to what is known as traditional three-tier pricing. That means that each transaction, depending on the circumstances (in-person retail, online, telephone order, etc.), is classified into one of three tiers, which are Qualifying, Mid-Qualifying and Non-Qualifying. The most important thing to recognize is that a merchant gets charged significantly extra for Mid- and Non-Qualifying transactions because those scenarios present greater fraud risk.