How to Read a Merchant Statement

Knowing how to read a merchant statement for a medical practice or health clinic is essential to understanding how competitive your credit card fees are, and where your money is going. Basically, you are trying to understand:

How much you are paying in base costs
How much you are paying in markups
If you can lower the base costs
If your markup is competitive

By understanding these four issues, you are able to ensure that your credit card processing costs are as low as possible.

The Barriers to Understanding a Merchant Account Statement

Doctors and other healthcare professionals may have a tough time understanding merchant statements due to three barriers:

Lack of knowledge – In order to understand a merchant statement, business owners need to have a grasp of how credit card processing fees work, and how these fees are displayed in the statement.
Lack of consistency – Merchant statements vary in structure and layout across providers. This means that there are several different formats out there, which makes it hard to learn a specific format. By going through some fundamental concepts, we hope to help you understand a wide range of formats.
Transparency – Lack of transparency is a well-known issue in the merchant account industry. By using concepts such as tiered pricing, for example, a credit card processor is able to conceal base processing fees.

Understanding the Statement

The most important aspect when trying to understand the statement and getting as much out of it as possible is to understand what your base cost/wholesale cost is, and what your markups are. Like any other commodity or service, credit card processing has a base price, which covers all the expenses of the manufacturer/service provider, and a markup on top of that, which represents the profit.

The base cost is comprised of two types of fees: the interchange fees, which go to card-issuing banks, and the assessments, which go to the credit card companies themselves. When added together, they represent the base cost of the processing, and it is a non-negotiable cost that is the same all across the board, regardless of your merchant account service provider.

And then you have the markup. This cost is represented by the difference between your monthly bill and the monthly base cost. It is also the negotiable area of the statement.

Figuring Out the Pricing Model

The most common form of pricing for medical practices is tiered/bundled pricing, and it can be easily identified by terms such as “qualified”, “non-qualified” and “mid-qualified” written on your statement. You may also find the terms in their abbreviated forms, so keep an eye out for words such as “qual”, “nqual” or “mqual”. Other indicators include rates that are the same across credit card brands. For example, if your rate for Discover, Visa, and/or Mastercard is 2%, then you are probably under the tiered pricing model. The problem with this type of model is that it obfuscates the markup by mixing it with interchange fees, making it harder to negotiate a better deal or compare fees across different merchant service providers. Flat rate pricing works on a similar model, but the rate does not fluctuate along tier lines.

Interchange plus pricing models have the interchange rates itemized, so it is easy to separate them from the markup. You also have membership subscription models where the markup rates are replaced by a monthly subscription fee. These two models are easier to negotiate and identify, but that does not mean that you cannot get a good deal on a tiered-pricing or flat-fee model. You will definitely want to shop around if your practice is not happy with your current merchant service provider, or if you are currently looking for a merchant account.

If you would like to learn more about your merchant statement or credit card fees, contact Beacon today for assistance! We specialize in practice and clinics payment solutions.