What Is a Merchant Statement and How to Read It?

A merchant statement is a comprehensive monthly report detailing all transactions, sales activity, and processing fees for a business’s credit and debit card processing. Businesses accepting card payments receive this document from their merchant service provider or payment processor. Understanding it is important for financial health and informed decision-making.

What a Merchant Statement Is

A merchant statement serves as a detailed summary of a business’s payment processing activities over a specific period, typically a month. This document is provided by a merchant service provider or payment processor, acting as an intermediary between a business and financial institutions involved in card transactions. Its primary purpose is to outline all processed credit and debit card transactions, associated fees, and other financial adjustments. The statement helps businesses track sales, monitor payment processing costs, and reconcile financial records. It also acts as a record for verifying deposits and expenses related to card payments.

Essential Components of a Merchant Statement

A merchant statement typically includes several key sections providing a comprehensive overview of payment processing activity. The transaction summary details gross sales volume, total transactions, refunds, and chargebacks. Refunds represent money returned to customers, while chargebacks are forced transaction reversals initiated by a cardholder’s bank, often due to disputes or fraud. The net sales figure is calculated by deducting refunds and chargebacks from gross sales.

Processing fees constitute a significant portion of the statement, categorized into three main types. Interchange fees, paid to the cardholder’s issuing bank, represent the largest part of processing costs (70% to 90% of total fees). These fees vary based on card type, transaction method, and industry. Assessment fees are charged by card networks (Visa, Mastercard, American Express, Discover) for using their payment network infrastructure. These are usually a small percentage of total monthly sales (0.12% to 0.15%) and are aggregated rather than charged per transaction.

Processor markups are fees charged by the merchant service provider for their services, added on top of interchange and assessment fees. These markups can include a discount rate (a percentage of each transaction) or a flat per-transaction fee. Other common processor charges include monthly service fees, PCI (Payment Card Industry) compliance fees, gateway fees for online transactions, chargeback fees, retrieval fees, batch fees for daily settlements, and statement fees.

How to Interpret Your Statement

Understanding a merchant statement requires detailed analysis of its various components to gain financial insights. Reconciling transactions involves comparing the statement’s transaction data with internal sales records, such as those from a Point of Sale (POS) system or accounting software. This comparison helps confirm that all expected payments have been received and correctly recorded, accounting for any timing differences between transaction processing and bank deposits.

Analyzing the fee structures on your statement allows you to identify the cost of accepting card payments. Businesses should distinguish between non-negotiable wholesale costs, like interchange and assessment fees, and the potentially negotiable processor markups. Calculating the effective rate (total fees divided by total sales volume) provides a clear percentage of revenue allocated to processing costs. Regularly monitoring this rate can help assess if fees are increasing unexpectedly.

Identifying discrepancies is another aspect of statement interpretation. Businesses should look for unexpected charges, incorrect transaction amounts, or unfamiliar deductions that may indicate errors or unauthorized activity. Addressing these issues promptly with the processor can prevent unnecessary expenses. Monitoring chargeback activity is also important, as the statement details the number and cost of chargebacks, which can signal potential fraud or operational issues. A high chargeback ratio can lead to increased fees and potential account issues.

Spotting trends over time provides insights into business performance and cost management. By comparing current statements with previous months, businesses can track changes in transaction volumes, fee percentages, and chargeback rates. This trend analysis helps identify opportunities for cost savings, such as negotiating better rates with the processor or implementing strategies to reduce chargebacks. It also supports informed decisions about pricing and operational adjustments.

Accessing and Reviewing Statements

Merchant statements are typically issued monthly, providing a consistent overview of payment processing activities. Businesses usually receive these statements through online portals, email, or postal mail.

Regular and thorough review of these statements is important. Consistent review ensures the accuracy of financial records and helps track expenses related to card payment acceptance. This practice allows businesses to promptly detect any potential issues, such as billing errors, unauthorized charges, or unexpected increases in processing fees. By reviewing statements consistently, businesses can maintain better control over their finances and proactively address any discrepancies with their payment processor.