How to Read a Merchant Statement: A Step-by-Step Look

A merchant statement is a monthly document from your payment processor detailing your business’s transaction activity, sales volume, and associated fees. It records how customer payments are processed into your bank account. Understanding these statements is important for financial clarity and effective business management. Reviewing your merchant statement helps track revenue, monitor processing costs, and identify discrepancies, ensuring control over your financial operations.

Core Elements of a Merchant Statement

A typical merchant statement provides an overview of your processing activity, though layouts vary. At the top, you will find basic account information, including your business name, merchant identification number, statement period, and generation date. This header identifies the specific account and timeframe.

Following the header, a summary section offers a quick snapshot of processing activity. This section shows total sales volume, net deposits, and consolidated fees and charges. It also highlights chargebacks and refunds, providing insight into overall performance.

Detailed sections then break down the summary figures. One section itemizes transaction activity, listing individual sales, refunds, and other fund movements. Another section provides a breakdown of all applied fees and charges. Information regarding settlements and funding explains how and when processed funds were deposited into your business bank account, showing the total amount received after fees.

Interpreting Transaction Activity

The transaction activity section provides a detailed record of every processed payment. Here, you will find entries for individual sales, including the transaction date, amount, card type, and often an authorization number. This data allows for precise tracking of each customer card payment.

This section also accounts for other transaction types impacting net revenue. Refunds, which are payments returned to customers, are listed, reducing total sales volume. Chargebacks, initiated when a customer disputes a transaction, also appear with associated costs. Monitoring these helps identify trends or issues with customer satisfaction or fraud.

The statement consolidates these individual entries into broader metrics. Gross sales represent the total value of all transactions before deductions. Net sales reflect the total after accounting for refunds and chargebacks. You will also see totals for transaction count, indicating the number of payments processed, and average ticket size, calculated by dividing total sales by the transaction count. These figures help analyze processing volumes and customer spending patterns.

Demystifying Merchant Fees

Merchant fees are a significant part of processing costs, and understanding their breakdown is important for managing expenses. These fees consist of three main parts: interchange fees, assessment fees, and processor markup. Each component is paid to different entities within the payment processing ecosystem.

Interchange fees are paid to the card-issuing bank. These fees compensate the issuing bank for processing the transaction, managing fraud risk, and funding customer rewards programs. Card networks like Visa and Mastercard set interchange rates, which are not negotiable by the merchant or processor. They vary based on factors such as card type (e.g., credit vs. debit, rewards cards), transaction method (e.g., in-person, online), merchant category, and transaction size. They typically range from 1.5% to 3.5% of the transaction value, plus a fixed amount. Debit card interchange fees in the U.S. are lower, often capped at around $0.21 plus 0.05% of the transaction value for larger banks.

Assessment fees are paid directly to the card networks (e.g., Visa, Mastercard, Discover, American Express) for using their payment network. These fees cover the operational costs of the card networks and are a small, fixed percentage of the gross monthly sales, typically between 0.12% and 0.14%. Like interchange fees, assessment fees are non-negotiable and are passed through to the merchant.

The processor markup is the fee charged by your payment processor for their services. This is the only negotiable portion of the processing fees and varies based on the pricing model used. Common pricing models include interchange-plus, tiered, and flat-rate. Interchange-plus pricing is transparent, itemizing the actual interchange and assessment fees, then adding a separate, fixed markup (e.g., 0.25% + $0.10 per transaction). This transparency allows merchants to see the exact cost components.

Tiered pricing categorizes transactions into different tiers, such as “qualified,” “mid-qualified,” and “non-qualified,” each with its own rate. Transactions considered higher risk or requiring more manual intervention fall into mid-qualified or non-qualified tiers, incurring higher fees. This model can be less transparent because the processor determines which transactions fall into which tier, leading to unpredictable costs. Flat-rate pricing charges a single, consistent percentage for all transactions, simplifying cost prediction but potentially obscuring the underlying interchange and assessment costs. This model may result in paying more for transactions that would otherwise qualify for lower interchange rates.

Beyond these primary components, merchant statements include various other fees. PCI compliance fees ensure your business adheres to Payment Card Industry Data Security Standards. Statement fees apply for generating and delivering your monthly report. Monthly minimum fees are imposed if your processing volume falls below a predetermined threshold. Chargeback fees are levied each time a customer disputes a transaction, typically ranging from $20 to $100 per instance. Gateway fees are charged for using a payment gateway, which facilitates online transactions, often as a per-transaction or monthly fee.

Reconciling and Verifying Statement Information

Reconciling your merchant statement involves comparing its data with your internal business records to ensure accuracy and identify discrepancies. This process begins by gathering all relevant financial documents, including your merchant statement, daily sales records (e.g., point-of-sale reports, e-commerce transaction logs), bank deposit statements, and accounting software entries. Aligning these documents allows for a review of all financial flows.

A primary step is to compare the total sales volume reported on your merchant statement with your internal sales records for the same period. This confirms that all processed transactions are accurately accounted for and that no sales are missing or duplicated. You should also cross-reference the net deposit amounts on your merchant statement with the actual deposits reflected on your bank statements. Timing differences can occur where transactions processed at month-end appear on the bank statement in the following month; these need to be identified.

Reviewing the fee breakdown on the merchant statement against your processing agreement is also important. This verification ensures that the rates and fees charged, such as the processor markup and any additional monthly or incidental fees, align with the terms you agreed upon. If your effective processing rate (total fees divided by total processing volume) seems higher than expected, it warrants further investigation into the individual fee components. Identifying unauthorized charges or incorrect transaction amounts early can prevent financial losses. Consistent reconciliation confirms that all transactions and fees are accurately reflected, supporting sound financial management.